EscapeHomes Real Estate Feature
What is it that makes us happy? If you got this book in the self-help aisle, call the stock boy-it's on the wrong shelf! But while we are on the subject of happiness, let's continue. People want to be happy with their home purchase. They want to be happy with their home sale, be happy with their agent, appraiser, lender, lawyer, and even with their home inspector! So how is it that people become happy?
No Good Surprises
Having now been involved in nearly 20,000 real estate transactions, it has come to my attention that there are no good surprises in real estate. Surprisingly enough, not once has a buyer ever called the office to say that, to their great and happy surprise, the home has more bedrooms than what was told to them by their agent! Not once has a buyer called with delight to share that while mowing the lawn for the first time they discovered a crystal clear swimming pool!
And not even once has someone called to announce that upon the first opening of the garage, low and behold, a free Ferrari! Nope, wish as we will, surprises in real estate are always bad. Back to those 20,000 deals. Having observed and pondered at length who is happy and who is sad, I have come to the conclusion that people are happy when things turn out as well or better than expected; not necessarily that they turned out well! People simply hate surprises in real estate. Since it is true that people hate surprises in real estate, then each person involved in the real estate transaction should be given clear specifications of how to avoid surprises!
The first goal of buyers and sellers should be to bring to bear all information about the transaction. Another goal of buyers and sellers should be to involve those professionals along the path of the transaction that will aid in keeping surprise at bay. The goal of each professional participating along the way should be to educate buyers and sellers to minimize the surprise in each and every facet of the transaction. Since houses come in many shapes, sizes, ages, and price ranges, how are we to remove the surprise element? And, by the way, buyers and sellers come in even more varieties than houses! What IS a professional to do?
Managing Expectations
The simplest approach to keeping people happy is to manage their expectations. Manage the expectations of the transaction in its entirety! The expectations of the
Secrets of the Happy Home Inspector home itself are daunting enough, but to then manage the reasonable performance expectations of the various and varied participants in the transaction is truly a challenge. But, peeking at each element individually will bring clarity to the challenge of managing expectations.
Another Thing Mom Never Told You
When someone buys a home, they purchase 100 percent of the home. They seek to use 100 percent of the home 100 percent of the time. They want the entire house to be available to them all of the time. But somehow, there is a denial of the risks associated with home ownership. When you own 100 percent of the home, you also own 100 percent of the risk. Everyone would like to eliminate the risks. While it may be impossible or unduly expensive to eliminate all the risks, a look at some simple risk reduction or elimination tools can greatly help in understanding risk.
Agents as Risk Reducers
The initial risk reduction tool employed by most homebuyers is the use of a real estate agent. In the hands of an experienced professional providing expert guidance, many risks can be exposed or eliminated. The trail is always safer with an experienced trail guide! The real estate agent has traveled the trail many times before and often has a clear picture of the hazards along the way.
Appraise the Risks
Appraisers can also reduce some of the risk. The risk reduction provided by the appraiser is a determination of the home's fair market value. If the homebuyer were to overpay for a property, that overpayment is money at risk. In the event that the property needed to be returned to the market, it is unlikely that it could be sold at a price above the fair market value. The amount of the overpayment would be lost. The appraiser can reduce that risk.
Survey the Risks
The land surveyor can further reduce the homebuyer's risk. The surveyor will confirm that the property is of the size and dimension represented. On a typical survey, all buildings on the property will be depicted, as well as the position of fences, sheds, and driveways. Setbacks and easements that might affect present and future use will be identified, as well as any flood zones. It is amazing how many homeowners have unknowingly built fences, sheds, or driveways on a neighbor's property without problem or issue until one of the properties is sold. The land surveyor can reduce the homebuyer's risk.
Fund the Risks
The lender also reduces the homebuyer's risk. Lenders are absolute experts at reducing their own risk, and in the Wallace J. Conway process, many of the benefits of the lender's risk reduction are transferred to the homebuyer. The mandatory inspections and verifications that the lender requires to reduce the likelihood of the homebuyer defaulting on the mortgage and forcing foreclosure ensure that if the home is destroyed, the homebuyer is also protected. Lenders can reduce the homebuyer's risk.
The Legal Risks
Lawyers can reduce homebuyers' risk. The pile of paper needed to purchase a home can be perplexing and frustrating! It is critical that every document be complete and accurate to ensure that ownership is conveyed correctly to the new owner. A slip in any detail of the paperwork can have untold consequences that might not show themselves for years or decades to come. On occasion, these flaws are not discovered until the homeowner is deceased and the heirs are attempting to clear probate. We may not live forever, but the paper trail is eternal and must be correct. Lawyers can reduce the risk of home ownership.
Title Risks
Title companies can reduce the risk of home ownership. Over the decades, parcels of land may have changed ownership dozens of times. Large parcels are subdivided to make neighborhoods. Often, multiple heirs have had claim to land that has long been forgotten. Mortgage notes and taxes due are sometimes abandoned. But when the property is sold or transferred, old debts and demons often rise. Secrets of the Happy Home Inspector The title company can discover this past and prevent this cloud from hanging over the parcel and the person forever. And for an additional fee, the title company can insure against any missed issue or future claim against your clear title to the property. Title companies can reduce the risk of home ownership.
Insure the Risks
Insurance companies can reduce the risk of home ownership. Principally though the writing of homeowner's insurance policies, insurance companies reduce the financial risk to homeowners. These policies work in two basic areas-peril and liability. Peril would be fire, flood, theft, or similar threats to the property. Liability reduction includes provisions of payment to an injured or otherwise harmed individual when some unfortunate circumstance occurs in or around your home. Insurance companies can reduce the risk of home ownership.
Bond the Risks
Termite bonding companies can reduce the risk of home ownership. Termites do more damage to homes each year then fire and flood combined. In many areas of the country the question is not if your home will have termites, just when. Termite bonding companies will treat affected areas or repair damage to your home should a termite infestation occur. Termite bonding companies can reduce the risk of home ownership.
Warrant the Risks
Home warranty companies can reduce the risk of home ownership. There will always be unforeseen failures of the systems and components of your home. Preparing for many of these unwanted and unpredictable expenses can be done with a home warranty policy. These types of policies act to protect appliance and system failures not typically protected by homeowners' insurance policies. Though home warranties do not cover every eventuality, they can reduce the risk of home ownership.
Inspect the Risks
Home inspections can reduce the risk of home ownership. The role of the home inspector in risk reduction is to search for signs, symptoms, telltales, and clues that would indicate some damage or defect may be located within the home. By ascertaining risk that is discoverable prior to the purchase of the home, issues affecting performance, maintenance, and/or value can be addressed. In some instances, the defects discovered are of sufficient magnitude to eliminate the desire to own the home. Home inspectors can reduce the risk of home ownership.
Inspection Versus Warranty
The choice between having a home inspection and purchasing a home warranty is a question that I frankly do not understand. Each is intended to serve a separate purpose and ideally they work together to protect the homebuyer and reduce the risk of home ownership.
Maybe an analogy will make the matter clear. An individual has just had a complete and thorough physical exam. The results of the exam and all associated lab tests are that the individual appears to free of all disease or illness. This person is presently the picture of health.
Would it be prudent or responsible for the doctor then to recommend to the patient, due to their fine physical condition, that it is a waste of money to continue to pay premiums
for health as well as life insurance? Of course not!
None among us would consider the doctor even sane, let alone responsible, if he or she made such a recommendation. But is that not the same situation as someone feeling no need to purchase a home warranty because they just had a home inspection?
And let's view this same scenario from the opposite direction. Would we expect that our life insurance carrier would recommend to us that we forego the expense of regular physical exams, because, after all, we now have life insurance? Insanity!
The life insurance companies, in fact, feel so strongly that a physical exam is such an important part of risk reduction that one is often required in order to secure a life insurance policy. Or, at the very least, the exam will affect the insurance rate.
If insurance companies want to have you "inspected" prior to assuming the risk of your passing it certainly makes sense for the homebuyer to have the home inspected prior to purchase. Doesn't it, then, also make similar sense to warrant unforeseen failure with the home warranty?
About the Author
Wally Conway is President of Florida HomePro Inspections, and is featured regularly on HGTV's "House Detective". As a speaker, writer, instructor, and host of The Happy Home Inspector radio show every Saturday at 3 PM on WOKV 690, Wally blends the right amount of up-to-date information with just the right amount of humor, insight, motivation, and real-world application.
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