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What do Home Inspectors Look for?



What do Home Inspectors Look for?

A home inspection is a standard step in the homebuying process. While you may certainly wave this contingency in your offer letter, it’s recommended to have any home you’re looking to buy inspected. And not just anyone can perform the inspection, either. A certified home inspector is a trained professional who walks through the house and completes a thorough inspection of the home’s critical structures and systems to ensure you know as much as you possibly can about the overall condition of the home. 

So, what do home inspectors look for during an inspection? From the roof to the foundation, here are the main things home inspectors look for when inspecting a home:

The roof

A home inspector will look at the overall condition of the roof and how well it will protect the home from weather. A brand new roof with new shingles and underlayment can last up to 25-years with proper installation. However, most pre-existing homes won’t necessarily have a brand new roof and an inspector can give you a good idea of how long the current roof may last before it needs replacing. 

Damage to the roof or shingles can affect the safety of the overall structure. A home inspector will be looking for these signs that may show visible deterioration or the presence of pests:

  • Loss of texture on shingles 
  • Missing or loose shingles
  • Curled shingles
  • Rust on the flashing
  • Excessive algae growth
  • Unevenness or soft spots 
  • Moisture in attic or ceiling

Water damage

An inspector will look carefully at the plumbing, the foundation, the roof, windows, and the area where the outside of the home and inside meet for evidence and sources of water damage. A minor crack in the foundation or siding can allow water to seep in and cause a range of problems, from mold growth to electrical damage, which will only worsen over time. Prevention is key to ensuring any costly surprises in the future, and an inspection can help bring these issues to light – saving you time and money in the future. 

When inspecting for water damage, a home inspector looks for: 

  • Moisture in the attic or ceiling
  • Bubbling or peeling wallpaper or paint
  • Wet insulation
  • Water staining around window frames
  • Water staining on the basement ceiling
  • Water staining on the flooring or discolored wood, tile, or vinyl

Water damage can affect ceilings, walls, and possibly lead to health problems for the buyer. It can also cause structural damage to foundations, which is the next area of concern. 

The foundation

A home inspector will be looking at the structural soundness of the soil around the home. The presence or absence of water can cause changes in the soil around the foundation. When the ground tends to be drier during the summer, the soil contracts and pulls away from the foundation wall. If the ground around the home is not properly graded to slope away from the house, water will flow into the gaps left by dry soil. 

Checking the foundation during the colder months is also critical to catching any significant foundation deterioration. When the ground freezes, it will expand and push against the foundation wall. This constant pressure and moisture can cause walls to shift over time, and even a slight shift, if not remedied, can compromise the structural integrity of the home. 

When inspecting the foundation, the inspector looks for: 

  • Cracks or other evidence of a shift in basement walls
  • Large cracks in interior walls or door frames
  • Bouncy or uneven floors
  • Gaps between walls and floors
  • Gaps around windows or door frames 
  • Nails coming out of the walls
  • Cracks in stonework or bricks
  • Leaning stairs or porch
  • Leaning or cracked chimney

2 What do Home Inspectors Look For

The electrical system

According to the National Fire Protection Association, electrical failures or malfunctions caused 13% of home structure fires between 2012 – 2016. Unfortunately, electrical malfunctions can happen at any time and present a major safety hazard. An inspector will look at the visible wiring to ensure it’s in good condition. And if a home inspector sees an issue that could indicate a significant electrical problem, they may recommend a licensed electrician complete an inspection to ensure the electrical systems are up-to-date.

When inspecting the electrical system, an inspector looks for: 

  • Knob and tube wiring, which is no longer approved for home construction
  • Exposed splicing or wiring
  • Painted outlets
  • Inadequately grounded three-prong plugs
  • Double-tapped circuit breakers
  • Modified electrical panels
  • Aluminum wiring
  • Missing GFCI protection
  • More than one neutral wire in a slot
  • Missing knockouts in panels

The heating and cooling systems

A home’s ventilation and HVAC system have many parts that can break down over time which can affect the home’s indoor air quality. When looking at a home’s HVAC system, a home inspector will run the system through every heating and cooling cycle to ensure there’s proper function and airflow throughout the home. 

When inspecting the heating and cooling system, an inspector looks for:

  • Rust around the furnace or air conditioning unit
  • Dirty air filters
  • Adequate gas flow to the unit
  • Asbestos insulation
  • Open seams in flues or slopes up to chimney connection
  • Cracked ductwork

If an inspector identifies an issue with the heating and cooling system, they’ll recommend bringing in an HVAC professional to assess the damage. 

3 What do Home Inspectors Look For

The plumbing

Water can be a home’s number one enemy. Plumbing issues start out small and largely invisible and can remain unnoticed until a much larger problem becomes apparent. While minor leaks can damage wood, flooring, or drywall and can be easily repaired, rusted pipes and fixtures can be the sign of a much larger plumbing problem.

Visible rust could indicate a clogged pipe, which if left unchecked, can eventually lead to water leaks. When inspecting the plumbing, an inspector looks for: 

  • Rusty or broken pipes
  • Galvanized pipes
  • Clogged sewer line
  • Polybutylene (plastic) piping
  • Running toilets
  • Polyethylene (plastic) piping
  • Hidden leaks
  • Rusted water heater
  • Broken thermostat on the water heater
  • Low or high water pressure
  • Sediment build-up

When plumbing problems are evident, an inspector may recommend calling a licensed plumber for further inspection or repair. 

Pest damage

Home inspectors will also look for signs of pest or rodent infestations. Both insects and rodents can carry diseases and parasites that are harmful to humans, and can also damage property by chewing on wiring and wood.  Homes in areas with high humidity, such as homes in Miami, FL, or Houston, TX, may be more susceptible to damage from carpenter ants, beetles, and termites due to the increased moisture in the environment. These insects destroy wood and can severely damage a home. 

If a home inspector finds signs of active pests or damage caused by a pest infestation, the seller will need to remedy the issue by hiring an exterminator and then assess the extent of the damage and conduct any repairs.

Home inspectors see homes in every condition – even a newly built house can reveal issues during a home inspection. However, keep in mind that not all issues found during an inspection are deal-breakers. The inspector’s report should provide reliable information so that the buyer and seller can negotiate on the home’s purchase price, along with accountability for any necessary repairs before you prepare for closing. Just remember, though your mortgage lender may not require you to get a home inspection, it’s always recommended to get one so you know what you’re buying.

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Real Estate

13 Tips For Real Estate Investors Crafting An Exit Strategy



Photos of featured members.

Real estate investors know that not every purchase they make is going to be a win. In a few cases, you’ll end up with a dud, where a property that looked good at first ends up being more trouble than it’s worth once you’ve bought it.

This is why no investor should go into a property purchase agreement without having at least one clear exit strategy defined. To help avoid a bad purchase before it’s too late, 13 experts from Forbes Real Estate Council share critical steps all real estate investors should consider to craft their exit strategy from the moment they start scoping a property out.

1. Understand The Current Financials

It’s important to understand the current financials of the property. From this you can model a multiyear pro forma focusing on the value enhancements you plan for the property. Based upon that model, you can project a valuation for the property at some point in the future. This process should help clarify the investment potential for the property. – Mark Tiefel, Capital Equity Group, Inc.

2. Set Clear Objectives Before Investing

Know your objective before investing in a property and establish your goals for any property you’re considering. This helps identify what success looks like for a property you want to invest in, which will help map out your exit strategy. Committing to a property without a clear objective and “winging it” after you commit to it typically ends up costing a lot of money and time. – Jim Brooks, The Brooks Team – EXP Realty

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

3. Consider The Future Buyer Persona 

Know your buyer. Always have the future buyer persona in mind when you are buying an asset. If you know your asset will attract syndicators, for example, then make sure to renovate no more than 50% of the property so you can leave meat on the bone. If you buy a larger asset, you can renovate 100% of it and then sell it to an institutional buyer who normally doesn’t like to execute a value-add plan. – Ellie Perlman, Blue Lake Capital LLC

4. Check Tenant Laws And Sale History

I believe that when purchasing any property, investment or not, you should buy with an exit strategy. Real estate is an investment that is used to create wealth. Look at local tenant laws, development in the area and rental rate history. If new inventory is coming, then rents will decrease. Check sale history for the last five years for trends. – Steven Minchen, Minchen Team/Elevated Living Network, Inc

5. Stress-Test The Deal At Purchase

Any good exit plan starts with stress-testing the deal at purchase. There are many factors in stress-testing a deal but here are a few to consider: 1. Never run out of money, so plan accordingly; 2. Increase the vacancy to at least 25% for the duration of hold and verify that the expenses can still be paid; 3. Increase the exit cap rate by at least 10 basis points per year of hold. – Chris Roberts, Sterling Rhino Capital

6. Plan For The Worst-Case Scenario

Always plan for the worst-case scenario when trying to exit. It’s really that simple. After proper planning and extensive research, determine what the worst-case exit strategy is. If you can stomach the worst-case scenario, then move forward and commit to the property. – Ben Grise,

7. Buy A Property That’s Easy To Sell

Buy a property that will be easy to sell. I prefer single family homes over condos because there is more buyer demand. Homeowners Association dues can also go up as condos get older and/or there can be special assessments for repairs which can make a property harder to sell. Assess the location—does it back to a commercial property or a railroad that may make it hard to sell? Does it have a good floor plan? Be picky! – Kristee Leonard, The Leaders Realty, LLC

8. Have A Multipronged Exit Strategy

Commercial real estate is evolving quickly before our eyes. Having a multipronged exit strategy approach to real estate investment is necessary. Don’t follow the headlines but look for the trend lines. Underwrite an asset traditionally but also underwrite the property in a nontraditional way. Look for one to two scenario analyses considering what happens if a market, sector or demand trend changes quickly. – Jacob Bates, CommonGrounds Workplace

9. Have At Least One ‘Weasel’ Clause

A “weasel” clause is a clause that allows you to exit, even when you’ve made the mistake! Resist the temptation to overdue. You need one. My personal favorite is “subject to the approval of the hard money lender.” Only once in 20+ years have I had to exercise this weasel clause to get out of a deal, but when I did, it was literally 10 minutes before closing. – Sherman Ragland, The Realinvestors®️ Academy, LLC

10. Have Multiple Exit Strategies

Having multiple exit strategies helps protect you from losing money on a deal. If you buy a house to flip but cannot get the price you anticipated to make a profit, if you’re able to rent it out instead, you’ll protect your investment. Unfortunately, if you get in a deal with only one exit strategy and that strategy does not work out, you will find yourself in a risky situation. – Chris Bounds, Invested Agents

11. Check Out Average Days On Market

Find out what the average days on market are for comparable properties throughout the year prior to your purchase. You will then have a good indication of when would be the best month of the year to resell the property for its highest and best price and for the shortest amount of time for an effective emergency exit strategy. – Mor Zucker, Team Denver Homes – RE/MAX Professionals

12. Hire A Home Inspector

Hire an excellent home inspector. These professionals are priceless! Sure, they can alert you to big red flags but they can also point out a lot of “minor issues” to consider. An itemized list will let you know exactly when to exit if a particular task takes more resources than you expected. Feedback from a professional inspector can help you “exit well,” minimizing losses and maximizing gains. – Michael McMullen, Prominence Homes and Communities

13. Remove Emotion From The Equation

Always remove emotion from the equation and perform unbiased, clear-headed due diligence without a lot of rosy scenarios. Be conservative with your valuation and repair estimating—often, investors value too high and underestimate renovation costs. Sometimes the best strategy is to walk away from a deal rather than spending the next several months wasting time and resources on a low-margin deal. – Nick Ron, House Buyers of America

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Real Estate

Digital Mortgage Lender Announces Softbank-Backed SPAC And $7 Billion Valuation



SoftBank founder and Chief Executive Masayoshi Son invested in Better during his search for 'fast-growing pre-IPO companies'.

The Softbank-backed digital mortgage lender Better announced yesterday its intention to join a SPAC with The Aurora Acquisition Corp., in order to take Better public. The transaction is expected to close in the latter part of 2021. This merger gives Better an implied equity value of approximately $6.9 billion and a post-money equity value of approximately $7.7 billion, as stated in the announcement. 

A subsidiary of SoftBank Group Corp., SB Management Limited, will bring $1.5 billion private investment in public equity (PIPE) and Novator Capital, the sponsor of Aurora Corp, will invest $200 million through the same method. Activant Capital, an existing investor in Better, will also participate in the PIPE for an undisclosed sum. 

Only a month ago Softbank invested $500 million in Better, leading to a valuation of $6 billion.

Better’s strong financial footing is no doubt a direct consequence of its success due to the covid pandemic’s double influence of sustained low interest rates over the past year and the need for consumers to be able to close on transactions without having to meet in-person. Last March, when the pandemic’s impact began, Better had a 200% increase in applications compared to February and a total of over $1 billion in closed loans during the month, which is more than the four-year-old company closed for both 2017 and 2018 combined. In all of 2020 they funded $24.2 billion in volume, according to the press release announcing the SPAC. 

Better, which has not been without some controversy, was founded in 2016 by Vishal Garg who was frustrated with the mortgage application process after losing out to a cash buyer when he made an offer on a home. He built the all-digital, multi-product platform to lower costs and speed up the process for buyers. Company marketing materials say their online process allows qualified customers to close in as little as two weeks.

The biggest takeaway from this news is how large the demand will be going forward for real estate transactions to take place in a fully digital manner. The pandemic has shown us that the market can continue with limited need for in-person contact and mortgage lenders of every size will have to improve their digital platforms if they want to stay competitive. The news about Better is only the beginning of a much larger trend.

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Real Estate

How Consolidated, Bundled Real Estate Offers Can Serve Homebuyers



Close up hand of man signing signature loan document to home ownership. Mortgage and real estate property investment

Amit Haller is the Co-Founder & CEO of Reali, a high-tech, high-touch real estate company founded in 2016. 

When homebuyers make the largest financial decision of their lives, they want the best options that take the pain out of the real estate process. They’re ready to focus on the details that matter most to them — such as settling into their new home — and desire a simplified and streamlined process to get them there. In recent years, that’s come in the form of bundled real estate products, where consumers are eager to combine several steps into one.

At Reali, we’ve also seen this trend emerge across several industries, not just real estate. Bundles have become highly appealing to customers regardless of the complexity of the buying process, including purchase decisions around insurance, home appliances and video game systems. Bundling often means financial savings for consumers, but it also means less stress and time-consuming interactions with nuanced details. Essentially, bundles save time, money, and stress, and that’s exactly what real estate companies should do for customers.

Here are the top trends we’re seeing in 2021:

1. Consumers want to keep it simple.

Complex decisions take more time, and right now, most of us are stretched too thin to think through all of the details. The pandemic, as well as other personal and social concerns, have stretched our capacity to do everything we want to do, including daily activities such as working or running our household. At the same time, people are eager to move into the next phase of their lives, and we’re seeing them begin to move forward by holding their delayed weddings, buying new appliances or investing in a new home. Anything that makes the process simpler will help that transition.

In real estate, homebuying can be one of the most stressful transactions that people complete. They have to worry about real estate brokers, a mortgage, insurance, escrow, inspection and warranties, and all of that can require different companies and experiences to complete the final tasks. Consumers may get lost along the way or miss a critical detail right now as they begin to move toward a “new normal.” 

In an experiment by our partner agency, Next Step, consumers who saw real estate as complex were nearly three times as likely to say that they wanted a bundled experience. They wanted more ease in the process and a smoother experience to get to their end goal. Essentially, bundling can help people to make a decision sooner rather than later, experience less risk and stress — and actually enjoy the decision-making process of buying a home. Any bundled options that real estate companies can provide to free up customers’ time and stress could reduce the barriers for making a decision.

2. Bundling can increase the perceived value.

Homebuyers want the best purchase for their hard-earned dollars, which has become even more prominent in the past year. People have faced tough financial decisions, and many families are rethinking the priorities that they need in a home-work-school space. They’re looking for more value and an all-in-one solution that makes the financial decisions easier and more transparent.

In the Next Step study, people said that, compared to individual product offers, consolidated bundles seemed more valuable, more popular and more preferred than other options, which plays to our psychological needs for belonging and smart decision-making.

Bundles also decreased costs. On average, people can save nearly 16% by bundling homeowners and automotive insurance policies, according to a 2015 Insurance Quotes study. Those who combined condo and car insurance saved about 11%, and those who bundled car and renters insurance had an 8% discount.

Overall, bundling complementary products can lead to a cost-savings of about 8% for consumers, according to a marketing study from Fordham University. In addition, the researchers found, offers that make sense together can create greater consumer happiness, which is the ultimate goal. For real estate companies, this could mean pairing mortgage options with insurance options or legal services.

3. Consolidated offers can facilitate the decision-making process.

Customers have told us that the decision-making process seems more complex than ever. People have easy access to products and services across the country — even across the world — and that can lead to analysis paralysis when deciding on the best option. We’ve found that bundles can help people make those decisions, particularly in complex service industries.

For instance, in a 2019 Accenture survey of 47,000 consumers, half said they were interested in bundled services in healthcare, home security, car care, personal finance management and homebuying. In real estate in particular, they voiced a need for end-to-end homebuying services, including advice on finding a new home, securing a mortgage, using legal services, buying insurance, and getting help with the moving process.

Ongoing survey data show that this trend has been increasing in recent years and became more popular throughout last year in particular. In the insurance industry, for example, consumers said they were seeking bundles so they could make better decisions and experience greater value from their options.

In fact, a 2020 survey by Deloitte found that consumers said offering non-insurance products was the most important factor when choosing an insurance provider. They said it added value and created an extension of the core products, so consumers wanted to buy them. In real estate, this requires rethinking the conventions around what products to include and creating innovative options.

Ultimately, we need to keep consumers in mind when considering the best ways to serve them in the homebuying experience. Their concerns come out loud and clear, with a need for simpler decisions, a smoother decision-making process and bundled packages that increase the value of their purchasing power. Real estate leaders should step up to provide these consolidated offers to clients and guide them along the successful path to homeownership.

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

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