By William Decker, CRI, CMI
There is a new standard Residential Real Estate Contract, Version 7.0, in Illinois. This contract is the legal document that precedes a real estate closing and defines the various terms of the sale. This document, among other things, gives the buyer the right to have a home inspection of the property. There are two important changes to this new version that directly affect the home inspection.
One of these changes is a clause that requires the seller, or the seller’s agent, to make sure that all the utilities have been turned on for the inspection, something that has not always been done in the past, especially with short sales and foreclosures.
But it is the second change that I have found to be very interesting, bridging the various responsibilities of the inspector, the buyer, the agents and the real estate lawyers for the parties.
Inspecting “flip” houses.
I had a recent inspection in Chicago, a nice little Ranch style house originally built in 1954. The house was a “flip”, a house bought on speculation by a contractor, remodeled, upgraded and re-sold, hoping to make a profit.
Many times, the contractor does not bother to obtain the required building permits to do the work. They see getting a permit as an unnecessary expense, something that would just eat into their profits. That was the case with this house. I always try to check the permit and building department history for houses that I inspect, seeing if they are “flips”.
As part of this remodel, the contractor/seller removed several of the walls in the living room / dining room/ kitchen area. This is common with the new design trend of “open concept”. The hardwood floors, tile, cabinets and countertops were all beautiful. Some of these walls were structural support walls.
Whenever I inspect these type of houses, I try not to be seduced by all the new, bright and shiny upgrades. I “look under the hood”, so to speak.
There was limited access to the house’s foundation and raw systems because the basement was finished. This is always a challenge, but a good, professional home inspector has a big bag of tricks for checking these systems.
But the biggest problem found was right there in the living room. Usually, when structural support walls are removed, the contractor should install a new support beam. In a fancy area, like a kitchen or living room, this beam is enclosed in a beam soffit. This is a boxed in portion of the ceiling that covers a new structural beam that replaces the old support wall.
In this particular house, the contractor was looking for a very clean design. There was no beam soffit in the newly open area, only a flat ceiling. This was a desirable design decision because the whole area appeared open and unobstructed. It was a really beautiful job.
When a support wall is removed and no beam is installed below the ceiling joists there must be a new support beam installed in the attic area, above the joists, to compensate and support the ceiling. So I took a look at the attic.
How roof and ceiling structure work.
The contractor added two beams to support the ceiling joists, and even attached them to the ceiling joists with metal hangers. But in doing so, he cut the joists. These joists not only support the ceiling but also help to tie together the roof structure.
As the roof rafters support the load of the roof, as well as other loads like snow, they push down and try to spread out. The ceiling joists are attached to these rafters at the ends and help to keep the rafters from spreading. The problem with the construction detail in this house is that the new beam cut through the joists. Over time, the rafter tension load will pull the joist ends away from the beam and the ceiling will split open. I thought this construction was a problem, but I am not a structural engineer, so I recommended that the client hire one to further evaluate this condition.
Having a deeper look.
A couple of days later, the client had the engineer come out and look at the beam construction. He confirmed my suspicion. The work had to be repaired, which would involve the engineer to calculate the loads and sizes of the repair, prepare construction drawings and hire a qualified builder to actually do the repairs according to the engineer’s specifications, before the sale closed. This would also require a building permit to be pulled, which would open up a whole new set of problems for the contractor/seller because no permits were obtained for the original work. The estimated costs of these necessary repairs was estimated to be between $10,000 and $15,000. Needless to say, this would mean a great deal of expense and liability for my buyer client. The question was brought up as to whether the seller / contractor would actually do the work before the sale proceeded, and this is where the recent changes to the standard sales contract form comes in.
When the sales contract gets in the way.
The new standard Illinois Real Estate Contract, version 7.0 states in lines 178 – 180:
“Buyer shall not send any portion of the inspection report with the Notice provided under this subparagraph unless such inspection report, or any part thereof, is specifically requested in writing by Seller or Seller’s attorney. “
This verbiage protects the seller from (legally) knowing about any significant problems or defects with the property, specifically problems that the seller would have to disclose to any new potential buyer if the original sale fell through. If the seller is made aware of a significant problem with the house and does not disclose it to the next buyer, that would be a cause for criminal fraud. If the seller is not given, in part or whole, the inspection report, the seller can claim that the were not aware of the problem.
With this inspection, the buyer decided that the cost was too much and backed out of the deal. But what does this mean to the next guy who would buy the house? Unless the next buyer hires a professional and experienced inspector, an inspector who would take the time and have the experience to find this problem, he would be in for a world of hurt and expense.
These points are important:
- Be aware of the details of any purchase contract you sign. What rights and protections are you signing away.
- Make sure that you have an experience and engaged Agent and Lawyer, ones who understand the process and work to protect you.
- Hire a licensed, certified and experienced Home Inspector who will take the time and put in the effort to give you a full account of the house’s condition.
- Read the inspection report, ALL OF IT, and ask questions if there is anything that you don’t understand.
- If your inspector recommends further evaluation of a system or component, take the time and pay the money necessary to have the item further evaluated.
Remember, when buying a house, it is always a case of “Buyer Beware”.