If you see this while shopping for a new home, run

Originally published by CNBC

by Darla Mercado

Your dream home’s beautiful exterior might be hiding a horror show.

Prospective homeowners might think they’ve covered their due diligence by reviewing local schools and crime statistics.

Yet buyers will need to dig below the surface to find the real deal breakers, including shoddy construction and unreported property damage.

Depending on what those homebuyers find, they’ll have to make a choice: Negotiate with the seller to address the problem or walk away from the sale.

“Until you can get a licensed inspector, you can only make a visual inspection,” said Andi DeFelice, president of the National Association of Exclusive Buyer Agents.

“You can try to pull permits at the courthouse, but if you don’t know what you’re looking for, it can be daunting,” she said.

Here are three signs that you may need to cut bait on the home you want to buy.

Pending permits

If the real estate listing advertises a new kitchen or a newly finished basement, make sure those updates were made legally.

Permits generally are required by state and local jurisdictions to ensure that new additions, remodeling jobs and new electric and plumbing work meet building safety codes.

Once the home project is complete, an inspector from your local building authority is supposed to review the work and then “close” the permit if everything is up to code.

The national average cost of obtaining a building permit is $1,036, according to HomeAdvisor.


"We uncovered a fire that led to $250,000 in damages and a septic backup that destroyed the first level of the home." - Douglas Miller, REAL ESTATE ATTORNEY IN MINNEAPOLIS

If the prior owner of your home didn’t obtain the appropriate permits, your dwelling’s new kitchen might be rife with structural problems.

Worse yet, your city’s inspector might make you rip it out and bring the project up to code.

Perhaps you’re buying a house and it has an “open” permit. That means that the work wasn’t inspected by your local authority, so it may not be up to code.

Don’t just ask about the permits, ask about the contractors behind the project and make sure they are licensed in your state and locality, said Douglas Miller, a real estate attorney in Minneapolis.

Licensed contractors typically must pass an exam and pay a licensing fee, and are required to be bonded and insured.

“If they say it’s a licensed professional doing the work, have them prove it,” Miller said. “Shoddy workmanship is something you might not discover until far into the transaction.”

Undisclosed insurance claims

Property disclosure statements, which you can obtain from the seller of the home, spell out certain flaws with the home, including lead-based paint and asbestos.

If you really want to get into the weeds, ask about the Comprehensive Loss Underwriting Exchange, or CLUE, report, which details up to seven years’ worth of home insurance claims for that dwelling.

“We killed a $1.5 million deal after asking for the CLUE report and finding all kinds of problems that the seller didn’t disclose,” said Miller.

“We uncovered a fire that led to $250,000 in damages and a septic backup that destroyed the first level of the home,” he said.

Basement woes

Whether it’s structural problems or bug infestations, the basement of a new home will tell you what you need to know.

“The whole house is built on the foundation,” said Frank Lesh, a retired home inspector and spokesman for the American Society of Home Inspectors. “Anything wrong there must be taken care of or it will create a problem above.”

Be on the lookout for horizontal cracks in the foundation. “This signifies pressure from the outside forcing the walls to bow inward,” said Lesh. “Typically, it’s water from the outside.”

If it’s a finished basement, pay close attention to musty odors and stains on the walls, which may suggest water damage, he said.

Examine the main beam that runs the length of the home.

Wood beams in an older home are especially susceptible to damage from water and insects.

“Carpenter ants and termites love moist wood and can eat away at support beams,” said Lesh. “Steel beams can rust if they’re exposed to water.”

Date : 7/2/2019

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