Distressed Property Inspections

[Ed DeRousse]

Is anyone familiar with, "Distressed Property Inspections?"

I was just approached by an agent friend of mine who recently took a class with a company handling, "Short-Sale Properties," that are training agents to handle the listings. They have asked him to find an inspector willing to perform these inspections, performed for potential buyers interested in learning more about the properties, before commiting to a contract, rather than paying for a complete home inspection before they have decided to commit to the purchase.

I'm just wondering about what type of Agreement I should use, if using a special report format should be used, and what other people are actually inspecting for in this type of home inspection.



Thanks for your help!

[Gary Fitzgerald]

Hi Ed, I have done several and I just do a detailed inspection as I would any inspection. If they want estimates "Watch out" I charge a little bit more since some properties are a POS the last one I did the report has been viewed about 6 times the agent paid for it.

Hope this helps

[Ed DeRousse]

Hi Gary,

I appreciate your feedback! The way this realtor is talking, the home inspector's doing these particular inspections, are doing just a shorter, modified version of the inspection. Something in the neighborhood of an hour to an hour and a half long, and at a lesser fee. Supposedly their not going through the home as we would during a normal inspection. The way it sounds, their probably just looking at things like the roof, foundation, hvac equipment, breaker box, etc. But I can't really be sure. He's just coming from a class with this company, and I think he's not really sure of what they're asking for either. I'm not sure, I'm just hoping that someone on this forum is familiar with this approach, if it's really something that is being performed right now.

[Gary Fitzgerald]

Ed, In a short sale they are trying to convince the back that the property is not worth what is owed. To do this they usually get at least two estimates from Contractors and  a Inspection report. The Contractors estimates are very detailed "at least mine" so if the Inspection report is not complete the bank may not be convinced that the short sale is warranted. They want you to make the property look as bad as it is, not good. To do a four point inspection will not show all the defects.

[Ed DeRousse]

Thanks Gary! That makes perfect sense! I'll get together with my Agent and show him this information. Have a great day, Sir!

[Bruce Ramsey]

Not sure if VA is a licensed state but you might want to check the legal  ramifications of performing an abbreivated inspection if you are licensed.  In NC, any inspection of 3 or more systems is considered a home inspection and must follow the SOP with regards to inspection and reporting.  Licensed tradespeople are excluded since they are providing quotes for repair, not inspecting the home. 

Have heard of inspectors doing a "Walk N Talk consultation" for investors.  They are hired as "consultants" not home inspectors.  There is no written report.  The "consultant" and buyer walk  through the property together while the consultant points out glaring issues.  Fees are often based on hourly rate vs. flat price per home inspection.

I can see how it could be useful to savy investors but very dangerous for 1st time home buyers trying to get into the flipping market or buying a foreclosure with the intent to save money.  I also see how it could be considered skirting the home inspection laws with possible legal consequences.

[Gary Fitzgerald]

I agree with Bruce, always check SOP and don't fall for the cheap price your inspection is worth full price

[Ed DeRousse]

All good information, thanks! VA is not a licensed state, but I'll abide by sop anyway!   

[Will Handley]

"SLA" - Service Level Agreement.  Make sure you document what you're going to do, look at and be responsible for.  I also include a list of major items I'm specifically not addressing in the SLA as well.  Here in California, if you walk the property, that partial report will no doubt make its way to some unassuming buyer whom you've never met and believes they have all the negative information regarding property condition.  That couldn't be further from the truth.  You'll open yourself up for legal action, even if you win, its a pain in the rear end. 

Any agent who is trying to get the bank to accept a lower figure wants a very thorough inspection, not some limited water'd down version.  What would be the banks incentive to hear about 4-5 negative issues and lower their price when there are 40-50 more issues?

Don't cut your fees Ed, I've done 1000's of distressed property inspections, they take longer to inspect, multiple trips because the utilities are off, and longer to process the reports and you're normally dealing with some very interesting folks. 

Good Luck!

BTW, regarding fees.  I saw on the NACHI board where an inspector is very proud of the fact that he charges $100 for FHA Compliance Final Inspections.  I get $375 and charge $100 for a second trip to the property if necessary.  I perform hundreds of them each year.  No lender cares what fee your charging.  They charge the clients $150 - $175 just for UPS fees for shipping the documents during escrow.  Appraisers charge $100 - $150 for the drive by's and don't get out of the car.  Agents are getting $100 - $150 for performing BPO's which take about 10 minutes.  What is it about the home inspection business that causes all these inspectors to give our services away?  I hear endless complaints about how inspectors can't make a living, NO WONDER!

[Ed DeRousse]

Many good point's Will, thanks for the input! 

[Jay Markanich]

I agree with a lot above, but especially Bruce.  I do a lot of Walk and Talks with investors, and they are as Bruce says, just a verbal with a guy whom I know and who knows me.  We have a trusted relationship.  There is no report.

If there is a report, be very careful of the abbreviated stuff.  I would love to know who these Realtors are who see these "abbreviated" reports as if they are common practice.  AND these inspectors! 

And listen to Will and the SLA agreements.  You don't know to whom your report will eventually go.  You have to make it clear somewhere the level of service you are providing and that you have no responsibility beyond the initial client's requests.  Some bank may even try to sell your report as the definitive "major concerns" report to some other future buyer.

When I do this stuff, Ed, I do my normal inspection for my normal fee.  I never let Realtors try to talk me into a watered-down version.  Forget SOP - do your own SOP!!  If I know you well enough, your SOP is better than anything some bureaucrat can come up with.

[Ed DeRousse]

Yes, I hear you, Jay. I'm hearing all of you, and I appreciate all the input! I have decided to forget about all this partial inspection business and I will continue to perform full inspections as I always have. This guy just threw me for a loop, and with all the strange things going on in this market right now, I never know what to believe REALLY IS GOING ON OUT THERE! That's why I come to you guy's! I'm glad I did! Well done, Guy's! A big THANK YOU, to you all!