Years ago real estate inspections in the Minneapolis/St. Paul area were almost non-existent. Now there are inspections for each phase of a real estate transaction.
In pre-owned homes, the first inspection may be a city mandated "point of sale" inspection. This inspection is done before the property is placed on the market and is one of the seller's costs. By making an inspection a condition of the sale, the city exerts some control over the property maintenance in their town. A "point of sale" inspection is done by a city inspector or by an approved representative for the city. Most cities require defects discovered in the inspection be repaired by the seller before the sale is completed. The only city in our area that currently treats their "point of sale" inspection as a disclosure is St. Paul.
When an offer is made on the house, it often is contingent on a buyers' home inspection. The private inspector is selected and hired by the buyer. Many times the buyers' inspector will spend several hours in the property as this inspection is more detailed than the point of sale inspections. A buyer may choose to request repair of defects found in their inspection. The seller has the choice of doing the repairs, refusing the request, or of cancelling the purchase agreement.
Appraisals are not really inspections, but often buyers and sellers place them in that category. An appraisal is required by the buyers' mortgage company to determine that the house is worth the amount of the loan. Even though the appraisal protects the lender's interests, it is still paid for by the buyer. Some types of loans (usually FHA & VA) may also require repairs as a result of the appraisal.
Ultimately both buyers and sellers are protected by the inspection process. Sometimes sellers chafe at the inspections because they could get 3 different lists of requests for repairs. Occasionally buyers complain about the cost of the private inspection and appraisal. However, the more review of the property, the less likely a hidden defect will surface later to cause problems for the buyers, or for the sellers if litigation occurs.
(c) Bonnie Erickson 2006
February 17, 2006 - Response to Maureen
Yes, Maureen, real estate sure is local. The St. Paul point of sale inspection is called "Disclosure Report, Saint Paul Truth-in-Sale of Housing". Unlike the other point of sale inspections in the metro, the Saint Paul report is only a disclosure. St. Paul does NOT require the seller to make any repairs in order to close on their sale. However, a good buyer's agent will review the report with their client and decide if the buyer wants to request any repairs as part of the offer to purchase. St. Paul does make ONE requirement in order to sell: every home must have ONE, only one, hardwired smoke detector in the house. If one is not present at the time of the Truth in Housing inspection that information is forwarded to the fire department and they send a letter requesting compliance.
Minneapolis converted from a Truth in Housing disclosure to a compliance inspection just a few years ago. Now a home purchased in Minneapolis must have a certificate of compliance showing all required repairs on the truth in housing have been completed prior to the closing. A buyer can accept responsiblity for the repairs as well, but that acceptance is made in writing on a city form and must be approved by the city prior to closing.
Who does the inspection varies by community. The suburban areas usually have their own city inspectors do them. Having the city inspectors do the point of sale inspections in Minneapolis and St. Paul would overwhelm the city staff. As a result the two metros have an approved list of private inspectors who do the truth in housings. If required repairs are marked on the Minneapolis inspection, the city inspector is supposed to re-inspect when repairs are done.
Some of the suburban point of sale inspections are pretty tough and can call things like furnaces, torn linoleum floors, leaky faucets, etc. The two metros, however, have a four page checklist with items marked as below minimum requirements, meets minimum, hazardous, comment, and in Minneapolis, required repairs. It has been my experience that the inspections in Minneapolis and St. Paul are less thorough than a buyer's private home inspection.
The suburban inspections do not require the home to be brought to current code condition. For instance, if the home is under a certain square footage it can still have 60 amp electrical service. However, hazardous items are usually required to be repaired. Before I sold my last house, I corrected any "hot buttons" that I was aware of before the inspection, i.e., I had an electrical wire that was too low over a flat roof deck. The former owner had built a wood fence barricade to prevent touching the wire by leaning over the edge. That had passed inspection but was ugly and I had removed it when we moved in 18 years ago. Before we had our point of sale inspection, I re-installed the wood fence barricade so it would not be a required repair for the sale. Often when a hand rail is missing, that will be called. Older homes can pass with only one smoke detector on each floor whereas today's code is to have a smoke detector in each bedroom.
Each suburban area differs in their inspection requirements as well. There are a few that have reputations for being hard. The suburb I moved from 18 months ago, was one of the tough towns. I considered myself fortunate (and my REALTOR experience paid off) to have gotten a clean bill of health from that inspection. Also, not all the suburbs require the inspections. Usually it is the well established older suburbs that are concerned with keeping their community in good repair that require the inspections. There are a few older ones, however, that are grand old dames of suburbia and don't need an inspection to keep the neighborhood up. Peer pressure in those areas, would cause a homeowner to leave if their houses were not maintained.
Posted by: Bonnie Erickson | December 20, 2006 at 10:40 PM
February 17, 2006 - Monkey See Monkey Do...
I blogged about home inspections this AM after reading your blog. Real Estate is so local!
We don't have any city mandated "point of sale" inspection in any towns here...I have had buyers who were subject to them in the the markets they were moving from. You wrote " The only city in our area that currently treats their "point of sale" inspection as a disclosure is St. Paul"... does that mean the seller can disclose a defect and not repair it before selling the house? Other commuinties the y have to repair defects found by the city? Does the city do the inspections themselves or is it private companies?
Posted by: Maureen McCabe | December 20, 2006 at 10:38 PM