Advantages of home inspections for buyers and sellers

[ecis2016.org] We examine what a home inspection involves and how it can help buyers, as well as sellers of properties in India

Home inspections are a common phenomenon in the mature real estate markets of the west. However, this concept is gradually finding its way into developing housing markets such as India, following the prolonged slowdown in the residential segment starting 2014, which forced sellers in India to see the merits of home inspections. This trend has gained momentum after the COVID-19 pandemic. How so? As the situation started to worsen amid the Coronavirus-caused economic meltdown, demand in the secondary housing market across India slumped, especially in light of the fact that the eight prime residential markets in India had over 7.32 lakh fresh unsold homes*. As home security becomes a key area of concern for buyers after the Coronavirus outbreak, pre-listing home inspections can help sellers to find a buyer much sooner than they would, if they were to list a property for sale without it.

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What is home inspection?

Home inspection involves seeking the services of specialised agencies or certified individuals, to carry out a thorough inspection of the property to find out any structural and mechanical issues with it. A home inspection would typically expose any significant deficiency, safety issues, dis-functionality and the approaching end of the service life of various parts using which it has been built. The home inspection process will also reveal any broken, defective or hazardous issues with the house and the area surrounding it.

According to home inspection service provider PropCheckup, which has its presence in the Mumbai and Pune markets, home inspection is a complete health and safety check-up of real estate properties, including its walls, ceilings, floors, doors, windows, electrical and plumbing provisions, as well as checks for dampness, seepage and moisture. Professionals from Bangalore-based HomeInspeKtor, for example, perform 100+ checks across eight inspection categories.

Some of the key areas that home inspectors would focus on include:

• Structural issues
• Damages to the roof
• Damaged electrical systems
• Plumbing problems
• Damages caused by water
• Faults in the heating or cooling systems
• Insect and pest infestation
• Examination of woodwork
• Examination of appliances and furniture, etc.

The purpose of home inspection is to help buyers to get a certification on the liability of the property.

What homes inspections do not cover?

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The aim of the home inspection exercise is to reveal issues that could pose risks to the life and safety of the residents. It has nothing to do with any deterioration in the aesthetic beauty of the house or any cosmetic changes it might have undergone, unless it leads to potential safety issues for the house. The peeling-off of paint in the drawing room is not a cause of concern for the inspector, for example and would not find a mention in the report. A faulty switchboard, however, would certainly find a mention in the report. The same is true for leaking or clogged faucets, unclean chimneys and noisy air-conditioners. A home inspection report will have a mention of any faults that might lead to deteriorating health and safety of the property in the long run.

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Are home inspection and home valuation the same?

Home inspections and home valuations are not the same. While home inspections help the owner to find out any potential structural or mechanical defects in the property, home valuations primarily help the sellers to understand the market value of the asset and its potential to command a specific cost in the open market. Both these tools, however, help sellers to find buyers faster and complete the transaction quickly.

Major home inspection service providers in India

As mentioned earlier, home inspection services have yet to gain traction in India. However, a certain number of service providers have entered the market in the past half-a-decade, amid rising awareness about property safety and risk management. Among the service providers currently operating in this category are MACJ India, HomeInspeKtor, CheckMyProp, e-Ghar, Nemmadi, PropCheckup (formerly Measurements), etc. Most of these companies are part of the industry-specific body, Home Inspection Association Companies.

Formed in 2018, with an aim to ‘increase the awareness of the home inspection trade across the country’, Home Inspection Association Companies also prescribe standards that ‘each certified home inspector adheres to, during the home inspection process’.

Cost of home inspection

There are only a handful of players in this segment amid limited demand. Consequently, home inspection costs remain relatively low. Depending on the size of the property, the buyer or the seller might have to spend anywhere between Rs 2,500 and Rs 20,000, for home inspection.

For special inspection of super built-up areas of up to 500 sq ft, for example, e-Ghar charges Rs 3,250. For micro-inspection of super built-up areas between 1,500 and 1,999 sq ft, the company charges Rs 20,000.

Benefits of home inspection for home buyers

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Considering that real estate is a capital-intensive asset, any issues with regard to its structure or mechanics might lead to the buyer spending large amounts of money on a recently acquired asset.

Even though home inspections do increase the property’s acquisition cost, a buyer must get it done before he finalises the deal. In case the report points towards major issues pertaining to the safety of the property, he should certainly reconsider his decision to make the purchase. He could also ask the seller to fix the issues. before proceeding to make the purchase. A home inspection also provides buyers with an opportunity to negotiate on its price. You could get a discount on the final price, if the report indicates even minor drawbacks in the property and the seller is in a hurry to close the deal.

Also, a condition on this front must be mentioned in the agreement to sell document. While carrying out a home inspection is not optional in case of resale home, the buyer must also get the exercise conducted, even if he is buying a fresh unit. This is because there is always scope to gauge the quality of construction through home inspection.

Benefits of home inspection from property sellers

Sellers in India often ignore any suggestions to improve the quality of the assets they plan to sell, if the exercise involves spending money. Nevertheless, with property selling becoming challenging in the present times, owners’ approach is changing.

If the seller has got his home inspected from professionals, he will be able to fix any issues with the property and add this cost to the property’s final price. The final inspection report, along with the receipts of the repairs, would act as a proof that everything is in order. This could act as a unique selling point for your property listing and also save precious time, helping the seller to close the deal faster.

*Data as on September 30, 2020, as available with ecis2016.org.

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