The Truth About Inspections

Welcome Back to Powerful Homes Housing Literacy - the Mindset and Tactics to empower your dreams through real estate.

As discussed in prior episodes of Housing Literacy, the real estate purchasing process for a buyer is similar to taking an option to buy stock. The entire process is controlled by the Buyer subject to series of contingencies and key moments in the transaction: inspection, title, appraisal and loan approval.

One of the most important moments and the one we will review today is the property inspection. Today’s title is the TRUTH about property inspections because there are lots of industry norms that may not be the best and most effective way to create a win-win situation for everyone and - most importantly – an effective and empowering situation for buyers AND sellers.

Housing Literacy is all about: creating winning outcomes through full transparency focused on practical education using real life stories and values-based tactics. The entire real estate industry is in a state of disruption like many industries including medicine, law, accounting and financial services. The main reason is that technology is creating direct access to all of the data as well as the reduction in the friction in executing transactions. Very simply: the consumer now has the information to get things done that used to be completed by many players in the game. But how?

Today, we will talk about the 5 keys to executing well the one of the most important milestones in any real estate transaction: the inspection process.

The quote that summarizes a healthy mindset to adopt in this process is based on the Ronald Reagan quote: Trust but verify. We can expand it to say:

Trust your intuition, verify your assumptions.

As always, feel free to reach out to Matt directly with any questions - 303-885-1644

Episode Transcript:

Welcome to the Housing Literacy Podcast with host Matt Guarino, founder of Powerful Homes. That's mission is to empower dreams through home ownership. We're here to help. We're going to do this together and now Matt Guarino.

Hey guys, my name is Matt Guarino and I'm the founder of Powerful Homes. Our vision is to empower dreams through real estate. And our mission is to help 10,000 people in the next 10 years purchase their first home or their first investment property through a process called housing literacy, which is basically the mindset and tactics, the rubber meets the road way that you're going to do that. And I'm so excited to do this, I wrote a book last year called Powerful Homes. And basically what it does is it summarize my learnings over 25 years of buying and selling land and multifamily and houses all over the country. And I realized that I did have kind of a mindset set of tactics that I used over that period of time. And I want to share it with people mainly because I didn't, I don't think that there was a book out there like that.

I think there's some incredible websites. There's incredible, some incredible companies that show you some tactics. But a lot of them are very similar and some of them are just very entertaining, but they don't help you with, what do you do when it hits the fan? What do you do when there's something, you know, something you don't know how to do. And so that's basically it. And I think it is the mindset and the tactics that helped me prevail throughout that time. I started with nothing and I didn't really have anybody to talk to about it. Didn't have a book like that, so I wrote one. So glad you're here. If it's for the first time, welcome if you're coming back glad you're back. A couple of things, couple of ground rules is that this is a judgment free zone. The JFC where I'm just sharing with you, ripping off the mask and just sharing with you some real things that I've experienced, hopefully that will bring you some value.

I'm not trying to push anything on you, my religious beliefs, my political beliefs or anything else. I'm not trying to sell you anything. I'm just putting it out there and so you can take or leave, whatever works for you. I also think it's not the end all be all, you know, we don't have it all figured out for sure and I also think that having stock and bonds and a balanced portfolio and other things other than real estate is a really good idea. So real estate could be one way to create stability in your life and empower your dreams, but there are many others as well. So take or leave it but again, really happy you're here.

So today's topic in housing. Literacy is basically the truth, the T R U T H, which is five things, the truth about property inspections. So at this point in the process of buying a home, we're assuming that you have selected the right home, in the right location, for the right price, with the right terms, for the right reason. And so now you're under contract and you're going through one of the contingency items is to do an inspection, do some due diligence. So we're assuming you're all the way to that point. But I would like to just quickly cover this moment is probably the most, one of the most misunderstood. If you're a new first time home buyer listening to this, or even an experienced investor people get this wrong. When people say that they've sold their house, the seller says that they sold their house. Often they don't understand that they have not basically they've given the right to buy it to a buyer, subject, to a series of contingencies that they control.

If someone says they bought a house by putting under contract, it's not that either they have to get through these things, which they control based on their subjective opinion, I've had people say, well, how do I get out of it? What if nothing's wrong with the house? It doesn't have to be anything wrong at this moment about the property inspection you can, based on your subjective opinion, just get out and say, if you had to say anything under a sky, I don't like properties under a sky, right? So it's subjective and that's a really important thing to know. So you're here at the inspection, the buyer controls the inspection, they control the appraisal moment, the title of the survey, and then the loan conditions. And they can get out at any of those times.

So, one other thing about that crazy times today, where people are putting things under contract for more than the purchase price, expecting to push back on the seller. I think our whole program is about empowerment. It's about how can you use real estate to turbocharge your life, create a foundation and really learn. Something gets activated when you're the owner, you really pay attention closer. Just like you don't wash a rental car before you take it back. When it's your house and you own it, it's different. So, basically the idea is that not to put something under contract falsely, don't do anything falsely throughout this whole process. That's one of the housing literacy things is be your best self, be your most authentic self, keep it real. Don't try to posture and you know, I experienced so many times in this moment, brokers, if they're representing think their job is to be tough and beat up the other side and just be aggressive and nasty. I don't see the world moving forward, acting like that. I don't, I think maybe 30 years ago it worked 20 years ago. It might've worked, but now it doesn't in this moment. I say in the inspection process, be your authentic self-show up that way and interact with the other party either if you're the buyer or the seller.

So before I get into it, the one quote, I would say the governing quote for this is basically the Ronald Reagan quote from the eighties is to trust, but verify. We're trusting our instincts, but we're verifying assumptions. Trust but verify. So all of these T R U T H all of these five steps are about verifying in a very deep way. It's a very serious thing buying a house. So you want to make sure you do it in a way that you feel very comfortable. And then finally, before we get into the first one is, we have an ethic, you know, we talk about values-based mindset and tactics is to treat people like family, right? It's very basic for us. Would I be happy? I bought this home in five years now, or would I be happy or the seller or the buyer be happy that I sold it to them. So all of these things trusting with verifying, you're trying to make sure that you're really comfortable with buying it and feeling like you got a good deal from the seller. So that's where we are.

So the first T is to talk to the right people. So don't simply just read documents and do online research, interact with people and listen to their answers to things like you know, talking to the neighbors on the block. Hey, how is this block? How is 123 Main Street, this house, any issues going on there for the last 20 years that you've lived here? This is also saying, you know, we're to the point where you, in a prior episode, I've talked about how to hire and have a great relationship with your contractor. So you're going to hire great vendors, like an inspector, you have a plumber, electrician, roofer, foundation person, all the specialty trades with the bones of the house. And in the show notes of this episode, we can give you great references for things like that. But talk with your contractors, be at the inspection, if you can, to listen to what he's saying about the foundation or the roof or the windows. So talk with them.

Also you can talk to local police and firemen. You know, go to the firehouse, go to the police station, ask them, Hey, what is it like on that block? What is it like in that subdivision? Do you see many calls there? And listen to what they say. Go to the nearby school, talk to the walk in there, you know, do it safely. You go and walk in there and set an appointment and talk to them for a few minutes. How is the community, how's the interaction with the school? Are they huge supportive? And it's a wonderful thing. Just get you get to know it. Talk to local public utilities, talk to the transportation department in the area about, are there any plans to widen streets or what is the plan? Right. So it's all about, this is a serious decision you want to trust, but verify, but talking to people, not just looking on the internet, right?

So one of the things I'll give you housing literacy moment where it's mindset and tactics. I was buying a property across the street called Inca in Denver, City and County of Denver. And I went to the local police station and I said, Hey, what is first Inca like, it was between 100 block and 200 block of Inca. He said, well, you know about the Inca boys, right? I said, no, I don't. And he said, well, it was one of the biggest gangs in the country. And in the seventies and eighties, it was the Incas and the GKIs, gangsters killing. And he goes, can't even make this stuff up? And, and I'm sitting here horrified, I'm under contract. And he said, Oh, don't worry. That's all been resolved, but there's a documentary about it, about this block that I was buying on. All that of that came from talking to the local police. So I felt comforted to know that it was resolved, but it was also cool to know and understand that that's what had happened 40 years ago. So talk to people, don't just do research online.

So the second one is the other side of that to research deeply. So read thoroughly, all the documentation regarding the property, go to the local zoning department and the county office. Look on the website of the home builder that may have built it and see if they have any issues or things like that with the soil, or anything with their build out in that subdivision. Has there been any articles about it? Google, the subdivision, the city and the County for any ongoing issues. Review chain of title, that's a big thing, really read the title documents. Understand if you don't ask your closer, ask the title company. Really, really read it thoroughly you know, go to the library for any, if your house is really old, I went to the Denver library one time for a property on Cherokee street, third and Cherokee, and it was super old.

It was very old. I went to the library and I don't know if you know this, but if you've heard of little pink houses, you get these old insurance maps from the librarian and you kind of lay them out on the table. I've found that the property I was buying at Third and Cherokee was very historic. We think that it might've been the original schoolhouse, one of my original first projects. Super cool, so that was really good to know. Again, thoroughly researching, looking at the documentation, having fun with it, don't feel like it's a big burden, but do your homework, right?

So T R and then U is to understand the biggest issues and create a plan to mitigate. Not everything is a deal breaker, you know, and you can use coaches and guides. We have Powerful Homes Realty, if you have any questions, we'd love to help you out on that. But don't panic, if you have some issues. A ripped screen is not a deal breaker, a couple of broken window panes are not a deal breaker. A foundation problem may be something you need to dig into more, but basically the idea is to understand the issues and to create a plan to mitigate. Don't panic. Don't think immediately it's over. Everything can be solved and for all, you know, the seller might give you a credit. Right now under contract with a property in Colorado Springs that has a foundation problem. I didn't know it when I went down there and now I'm sending my structural engineer to go look at it next Tuesday or Wednesday.

So, he's going to go look at it and he's going to give me a plan to mitigate. And it might just be something, a $20,000 thing that the seller may be willing to do. So don't prioritize, what's going on, line it up with your goals again, you know, look at your goals. My goal is to live in this neighborhood and this kind of home, not all things are deal breakers, some are. Other ones that you really have to look at are title issues. If there's a boundary issue with your neighbors, if there's something in the back with the alley. Really understand those things, dig deeply. Any kind of EPA issue. I would say that during the first go around when you're hiring the right folks, you know, look at a lead based paint somebody out there and have somebody test for that. Have somebody test for radon. Have somebody test for all the EPA issues that you might have. And really look at that and see if you have to mitigate that. Again, it's not something to panic about, it's just understanding and you're trusting and you're verifying.

So the fourth one is to take your time; T R U T as in truth. Take your time. So part of the biggest stress of buying a home for the first time, or even multiple times is that you have a compressed timeframe to make a decision, and you don't do this every day. We all have our jobs and our skills that come naturally to us, buying a big ticket item, like a home isn't something anybody usually does every day. And then put on top of that, the pressure to make in two weeks, a bunch of decisions to take in this information and to make pressurized decisions. So know that you can always ask for more time. Take your time. So if you needed more time ask for it. You can also push back for more information and then they'll need the seller will maybe more time. You can also request that the seller execute some of these things; investigate the boundary issue, investigate the foundation thing. It's not this thing that you have to absorb because you've found something and you have to do it, and you have to get all stressed out about it. So take your time.

The final thing is you could put, you know, say $10,000 down and take an option. You know, I've purchased an option that in one year from now, I can come back to you and buy it, right? That's just another thing that might be mind-blowing. But if you need more time, get it. I don't think that anybody, whether it's buying a house or anything should feel the pressure, if you're feeling something in your gut, that you just need a little more time to solve it or process it or talk to someone, get the time. You'd be surprised how many times people will give it to you. Remember how we talked about, you know, you want this whole thing is the truth about property inspections, creating a positive outcome for everybody, including the seller. Asking yourself what story do I want to tell five years from now about this moment.

Well taking more time it's always a good idea for buyer and seller to have a full complement of the information. Nobody really wants to screw somebody. I think there's this kind of folklore in the industry that you have to be rough and tough and bully people or hurry people to negotiate. I think if you're honest with people, they can smell it on you. If you're sincere and you want to buy something and you're the right buyer, and they're the right seller, you can figure it out. But doing it, having like a KG boxing match, I think never rarely produces an outcome that you're proud of when you look back and say, wow, I really like how that story played out. So get more time.

The last thing is just to have a positive attitude, just because it's a new experience dealing with unknown people and uncertainties doesn't mean it has to be the most stressful thing you've ever done. Everything when you go through the first time, it's harder. The second time is easier. The third times easier than that. So anytime you do something for the first time, there's some things called growing pains. So I would say that you can, you can find the humor in the moments, right? Having a sense of humor is the fastest way to connect with people. I can't even tell you how many times I've interacted with brokers or interacted with a seller. And I had some funky news that I found out with the seller, about something that they didn't know about the property they've owned for 30 years. My experience has been housing literacy, is to bring kind of a light touch to that. Everything doesn't have to be life or death. You don't have to make somebody wrong to get your point across. You don't have to beat somebody up to win a $10,000 credit and especially bringing some humor to it, to some levity. It just loosens things up and it makes a hard, stressful moment, less stressful.

And remember always that this is a choice, you know, buying this property. If you're under contract, it's a choice and you could choose to terminate. You do it for the right reason. You do it if you're trying to trust, but verify. When you verify something that just makes you comfortable, it's okay. One of the things we say all the time is that the deal of the century comes around every week. There'll be another property. Don't feel that you have to do this. That's when bad decisions are made, when you feel like you have to do something, you don't have to do anything, you know? And likewise, if you're selling a property and somebody's beating you up and it just feels so hard, maybe it's time to step away. So know that the last thing is to try to bring a positive attitude to it, bring some lightness, bring some humor. I think it'll make things go much smoother.

So there you have it, those are the truth to the property inspection process. Hopefully you found some value in that. My cell phone, if you have any questions, texting is always the best way to get ahold of me. Now it's (303) 885-1644. Love to talk to you, love to hear about the experiences that you've had and maybe how some of this might resonate with you. If you're interested, I'd love for you to subscribe to our channel and look forward to seeing you next time.

Thank you for listening to another episode of the housing literacy podcast. Don't forget to like comment and hit that subscribe button and stay connected with Matt Guarino by visiting www.powerfulhomes.org 

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