Suppose you bought a house and later discovered, to your dismay, that the stucco exterior concealed a nasty case of dry rot. Or suppose that when you fired up the furnace in the winter, you discovered a cracked heat exchanger leaking gas into your home. The best way to avoid unpleasant surprises like these is to arrange for a home inspection before you buy.

Home Inspections Help You Avoid Unpleasant Surprises

A good home inspection is an objective, top-to-bottom examination of a home and everything that comes with it. The standard inspection report includes a review of the home’s heating and air-conditioning systems; plumbing and wiring; roof, attic, walls, ceilings, floors, windows, doors, foundation and basement.

Getting a professional inspection is crucial for older homes because age often takes its toll on the roof and other hard-to-reach areas. Problems can also be the result of neglect or hazardous repair work, such as a past owner’s failed attempt to install lights and an outlet in a linen closet.

A home inspection is also a wise investment when buying a new home. In fact, new homes frequently have defects, whether caused by an oversight during construction or simply human error.

Getting an Inspector

Real estate agents can usually recommend an experienced home inspector. Make sure to get an unbiased inspector. You can find one through word-of-mouth referrals, or look in the Yellow Pages or online under “Building Inspection” or “Home Inspection.”

Home inspections cost about a few hundred dollars, depending on the size of the house and location. Inspection fees tend to be higher in urban areas than in rural areas. You may find the cost of inspection high, but it is money well spent. Think of it as an investment in your investment – your future home.

Some builders may try to dissuade you from getting a home inspection on a home they’ve built. They may not necessarily be trying to hide anything because most builders guarantee their work and will fix any problems in your new home before you move in. Some builders, in fact, will offer to do their own inspections. But it’s best to have an objective professional appraisal – insist on a third-party inspector.

An Inspection Will Educate You about Your House

Education is another good reason for getting an inspection. Most buyers want to learn as much as they can about their purchase so they can protect their investment. An examination by an impartial home inspector helps in this learning process.

Ask if you can follow the home inspector on his or her rounds. Most inspectors are glad to share their knowledge, and you’ll be able to ask plenty of questions.

Inspection Timing and Results

Homebuyers usually arrange for an inspection after signing a contract or purchase agreement with the seller. The results may be available immediately or within a few days. The home inspector will review his or her findings with you and alert you to any costly or potentially hazardous conditions. In some cases, you may be advised not to buy the home unless such problems are remedied.

You could include a clause in your purchase agreement that makes your purchase contingent upon satisfactory inspection results. If major problems are found, you can back out of the deal. If costly repairs are warranted, the seller may be willing to adjust the home’s price or the contract’s terms. But when only minor repairs are needed, the buyer and seller can usually work out an agreement that won’t affect the sale price.

1. Earnest Money
2. Home Inspection
3. Home-owner’s Insurance
4. Balance at closing

Let me explain these in detail.
1. Earnest Money. Earnest money is like a deposit.  Unlike putting a deposit down on an apartment, however, where you get your deposit back when you move out, you get your earnest money deposit on a home purchase back when you move in.  Here’s how it works:  When you write an offer on a home, and your offer is accepted, your buyer agent gives your earnest money check to the seller’s real estate company.  The seller’s real estate company then puts your check into their “trust account”.  That check is then cashed, but by law they cannot do anything with your money except leave it in their trust account.  At closing, your earnest money is credited to your final costs.  A typical earnest money check in the Des Moines Realty market is $500.00, though it can be more or less depending on the situation and the price of the home you are buying.  It really doesn’t matter how much it is, though, because it’s not extra money to you.  You get it all back at the closing.
2. Home Inspection. This is a totally optional fee, but I think everyone should get a home inspection.  Most home inspectors in the Des Moines Realty market charge anywhere from $225 to $275.  The home inspector that I recommend charges $264.  The idea behind a home inspection is to know that you are buying a good home with no major problems.  If there are problems, and your buyer’s agent wrote your offer subject to a home inspection, then you and your agent can negotiate with the seller to fix the problems.  If the seller will not work with you on this, you then have the option of not buying the home.  As I mentioned, this is an optional cost, but I strongly feel that every home buyer — regardless of price range and age of the home they are buying — should hire a home inspector.
3. Home-Owner’s Insurance. Everyone has to have home-owner’s insurance, of course.  But people are sometimes confused about when and how they are paying for it.  Typically no later than a week or so before closing, you will want to have purchased home-owner’s insurance.  We will remind you when to do this.  You can shop around and choose any company you like.  Most home-owner’s insurance companies will want you to pre-pay the first 12 months.  Rates vary, but $600 a year is probably a good average.  The confusing part is that when you make your mortgage payments on your new home, part of that payment is also going to home-owner’s insurance (if you are like most people and have an escrow account).  The reason is simple: When you make your mortgage payment, your bank is setting aside the insurance portion of your payment to pay for the next 12 months.  So once you pay your for your insurance the first time, you really never have to think about it again (unless you need to make a claim, or switch insurance companies).
4. Balance At Closing. That sounds pretty vague, doesn’t it?  But that’s because this figure really depends on what kind of home loan you are getting, and whether your buyer’s agent wrote for the seller to pay your closing costs in the offer (which I usually do).  For example, if you are getting a zero down loan (also known as 100% financing) and your agent had the seller pay all of your closing costs, you might have to bring just a couple of hundred dollars to closing — or no money at all.  Or, as is sometimes the case with our clients, you actually receive a check back at closing!  Or, you could be putting 10% or 20% down, and paying your own closing costs.  It just depends on your situation.  Of course, regardless of what kind of home loan you are getting, your earnest money deposit is credited back to you at this time.

So, to sum up, here are the checks you will usually need to write when buying a home in the Des Moines real estate market:

1. Earnest money, usually $500
2. Home inspection, $225 to $275 (optional, but highly recommended)
3. Home-owner’s insurance, average $600
4. Balance at closing, anywhere from you receiving money back to thousands of dollars, depending on the kind of home loan you have.

1. Your REALTOR® can help you determine your buying power - that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders – banks and mortgage companies – offer limited choices.
2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.
3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning, schools, etc. There are two things you’ll want to know: First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
4. Your REALTOR® can help you with negotiations and inspections. There are many negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or appliances. The purchase agreement should allow time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Your REALTOR® provides due diligence during the property evaluation. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports.
You will also want to see a preliminary report on the property title. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title search company or attorney can help you resolve issues that might cause problems at a later date.
6. Your REALTOR® can help you understand different financing options and identify qualified lenders.
7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.