Lead-based paint inspection
Lead paint is a health hazard and is common in properties built before 1978. The seller is required to disclose any knowledge of lead paint in the Seller Disclosure Form. Generally, you wouldn’t order a lead inspection unless the first inspection identified it as an issue and recommended a lead-specific inspection. I personally
have never seen one done. In many markets, having a property flagged as having a lead paint issue will make it difficult to sell, so I would avoid having a lead inspection done if possible.
If there is lead-based paint, removing it is done either by wire brushing, handscraping with paint removers, or an electric sander equipped with a highefficiency particulate air (HEPA) filtered vacuum. These measures can add significant expense to your property to make it suitable for habitation.
Sewer inspections
In homes built in the 1950 or earlier, you should consider getting an additional sewer inspection—i.e., the sewer line between the house and the main sewer line in the street. A property inspection only covers the property itself—it does not include the sewer line from the home to the main sewer line in the street. If your sewer cracks and needs to be replaced, it can cost up to $4,000. The contractor will have to tear up the street, dig down to the sewer line, replace it, and then recover and re-pave the street. I had to do this with one of my houses in Kansas City years ago.
Another option is to get a sewer insurance policy for about $10 per month after you purchase the home, and that policy will cover the expense of repairing the sewer line in the event you have a problem. This can save you the $300 to have a sewer inspection done on a property that you aren’t yet sure you’re going to buy yet.
Radon gas
Radon element is a radioactive gas that is present in homes all over the United States and is most commonly found in houses with basements. Long-term exposure to radon gas has proven to contribute to lung cancer deaths every year. For a map
of which parts of the US are more prone to having radon problems, visit the EPA site at https://www.epa.gov/radon/epa-map-radon-zones.
The good news is that most licensed home inspectors are also able to check for radon (for an additional fee) when doing the initial inspection. If your property has a basement and/or is located in one of the areas prone to have radon issues, I recommend you have it done, just for peace of mind. When choosing a home inspector, find out if he’s able to do a radon inspection at the same time he’s doing the general inspection.
Defective Chinese drywall
A lesser-known inspection is one that tests for defective Chinese drywall, manufactured and installed in 2001-2009, which was not made to US specifications. That drywall has high levels of sulfur, which results in a “rotten egg” smell in the house, blackened pipes, breakdown of air conditioners, and health problems such as asthma, coughing, headaches, and sore eyes.
War Story
An investing buddy of mine bought three investment properties in Houston, in which the home builder had sourced drywall from China to save on costs— drywall is drywall, right? His tenants had to evacuate the properties, all the walls had to be ripped out, replaced, and re-painted. He eventually sold all three properties at a loss.
The Chinese drywall issue affected only 100,000 homes in about twenty states, so the odds of running into this is small, but you should be aware of it.
Finding Appraisers and Inspectors
Often, the seller or real estate agent will offer you a list of appraisers and inspectors they’ve worked with in the past, but that can be risky. How do you know that appraiser isn’t the seller’s brother-in-law? You wish to be certain that you’re getting an unbiased appraisal. The same applies to any property inspectors they recommend. Yes, if it turns out they are biasing their reports in
favor of the seller they can lose their license, but that’s very hard to prove.
How to protect yourself: Ask your lender to recommend appraisers and inspectors. Your bank has a vested concern in making sure the appraisal and inspection are accurate, because the bank is using the property as security for the loan. If you can find an appraiser or an inspector who is on both the lender’s list and the seller’s list, then you have the best of both worlds.
War Story
Using the bank’s recommended appraiser has some risks too. Usually, the bank has a database of vendors and when they need one, their software will pick the cheapest vendor who’s available at the time. The “lowest bidder” may not be the most competent vendor.
Some appraisers and inspectors will claim expertise in neighborhoods they know little about, because they want to get more bids. And when they do have to appraise a property out of their area of competence and experience, they’ll often
be conservative and err on the low side. If that house you were planning to buy for $100,000 appraises for only $90,000, the bank may not finance it and you’ll lose the deal.
Like anything else in investing, there’s a balancing act. Most of the time, the bank’s appraisers and inspectors will be fine, but you should be aware of this potential pitfall.
