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Nov302012

Buying Houses

Townhouses going up in Houston's Magnolia Grove neighborhood. December 2012.

Houses are the most expensive purchases many people will make in their lifetimes.

So why don't folks research the purchase more?

Many lenders require home inspections and real estate agents typically recommend them. For these reasons, 93 percent of people buying an existing home and 58 percent of people buying new homes hire someone to do a home inspection as part of the purchase process. (These stats come from a pretty interesting report from the United States General Accounting Office: "Home Inspections: Many Buyers Benefit from Inspections, but Mandating Their Use is Questionable").

Yet, let's be honest: Home inspections are cursory, highlights-only reviews. The GAO report referenced above found that 16 percent of people believed inspectors should have caught problems they had in the first year of home ownership.

Going by a single, cursory inspection is awfully trusting when making a six-figure purchase.

People expend more effort researching electronics, home appliances, and cars than they do houses. They check consumer reports, perform Google searches, talk to friends, and order CarFax reports on used cars' histories.

So why, when it comes to purchasing houses, aren't people

  • checking reviews of home builders;
  • looking up builders' business histories, including legal actions;
  • researching the house and the property with city and state government offices, from tax offices to building and permitting offices that show what was constructed when and by whom and give hints as to what damage the house may have sustained;
  • pulling insurance claims made on the property; and
  • knocking on neighbors' doors to ask what living in the neighborhood is like and what they know about the house's builders, how it was maintained by previous owners, and what's happened there.

I've lived in my house for eleven years. I've seen a considerable amount of construction in my area. Often, I'm horrified at how houses are built. (For example, the balconies on one set of new homes slid off twice during the final stages of construction.) In other cases, I'm impressed by the builder's professionalism and craftsmanship. With existing homes, I typically know a bit about who's lived in each over the past decade and what’s happened there.

Yet only once has someone asked me about a home he and his wife considered purchasing.

Might we have a business idea? Looks like a couple companies have given it a go: HouseFix tried something similar to a CarFax for houses, but it didn't get off the ground, and LexisNexis offers C.L.U.E. Home Seller’s Disclosure Reports on a property's insurance claims over the previous five years.

But that's it. Not very comprehensive. Anyone game?

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Reader Comments (5)

Reminds me of a college professor who told us that when she was going to buy a piece of property in College station that she went to the county land office and pulled the contour maps of the county and found that the piece of land she wanted was in a low spot and flooded during rain storms. She eventually settled on a piece of land with good drainage.

Buying a home depends on the company or person guiding you through the process. Most people, specially first time buyers, will use a real estate agent or realtor to guide them along. The better realtors out there will make a conscious effort to represent their client's best interests and not sell junk.

My realtor was a nice old man that knew the neighborhood inside and out and had a network of professionals at his fingertips that included inspectors, building, electrical, and plumbing professionals, and he had contacts within the local neighborhood association.

He was also a fairly good negotiator and eventually got about 25k knocked off the asking price of the house.

A service such as you describe would probably find its market here. Among the realty specialists that take pride in their work.

You would need to incorporate specialists to deal in researching home insurance claims, legal researchers, a construction specialist that keeps up with modern practices and local construction ordinances, and someone with a private investigator mentality that doesn't mind doing a lot of walking and getting a lot of doors slammed in his face.

November 30, 2012 | Unregistered CommenterWilliam Pora

Yeah, it'd be a pretty complex service offering to pull off, Will. Still--I'd pay for it!

My qualm about realtors is that they're paid a commission based on me buying a house--and their commission goes up the more I pay for it. That always makes me question whether they're really on MY side of the equation.

Nonetheless, they recommend home inspections, so why not recommend a broader review?

December 3, 2012 | Registered CommenterLeslie Farnsworth

Oh I'm with you there. It took me six months to choose my last car and a full afternoon of haggling before I settled on it.

I was lucky in one sense when buying this house. Hurricane Ike came along before I made my final decision and let me look at all my choices under bad weather conditions.

December 3, 2012 | Unregistered CommenterWilliam Pora

I've seen enough episodes of Holmes Inspection to know that a home inspection can be total CRAP & it makes me never want to buy a home. If I ever do buy a home, I don't know if I'd ever buy a new one because I've seen over & over again how poorly they are made today. Across from my old apartment a builder built 5 HUGE 3-4 story townhouses, ranging in price from $1M - $1.5M & within the first 3 months, 2 of the homes had to have their entire outer shell of stucco ripped off & completely re-done because it was rotting & falling off. Don't even get me started on the quality of work I saw inside the homes (I'd sneak peeks after the workmen left).

I definitely like the idea of having a sort of CarFax type outlet to research homes. It could save people a lot of money & headaches!

December 5, 2012 | Unregistered CommenterErin

I completely agree, Erin! Teh company could even charge a decent amount for the service, given the size of the purcase price here. Heck, if something like this were available when I bought my house, I would have easily paid $500 for it, if not more, just for the security and peace of mind.

Heck, banks may even roll it into the financing--or pay for it themselves as part of the loan cost.

December 5, 2012 | Registered CommenterLeslie Farnsworth

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