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homeinspectionreportNow ask yourself, would you buy a new home on a gut feeling or simply because the guy selling it says it’s a great deal? Probably not. A sensible real estate investor would probably evaluate every aspect of the property; from the foundation to the roof, the plumbing, the electrical, the lot size, the appliances, the paint, and of course the neighborhood. Even more likely, you’d probably pay for a professional home inspector (who sees thousands of homes every year) to come over, take a look, and give you a written report before you would sign the deed.

“A home inspection is perhaps the most important chapter in the home-buying process and can benefit both the buyer in understanding the condition of the house and the seller who wants to provide accurate disclosure information.” – Lynette Wyrick, PC from RE/MAX Equity Group.

Because buying a new home is most likely the single largest investment an individual will make in his or her life, it is difficult to remain completely objective and unemotional about a home that is seemingly perfect. Flaws get overlooked as judgment is affected.
hanselandgretel“Think you’ve found the home of your dreams? So did Hansel and Gretel. The fact is, every property has its dirty little secrets that only the owner knows about. In a perfect world, owners would come clean about the quirks and glitches in the old homestead when they fill out the property condition disclosure form that many states require. But as Hansel and Gretel found out, real estate is fraught with subterfuge.” – Jay MacDonald, Bankrate.com.

For accurate information, it is best to obtain an impartial, third party opinion by a professional in the field of home inspection. From a seller’s perspective, an objective inspection will provide valuable information and the opportunity to make repairs that will make the house more attractive to prospective buyers. A third-party objective inspection is therefore beneficial to both parties.

What’s interesting is that in some markets it’s standard for the seller to provide a detailed third party inspection to prospective buyers, while in other markets the buyer is the one who needs to invest in the inspection if they want to remove contingencies in their offer letter. The responsibility of who pays for the inspection tends to shift to the side of the market that has the upper hand at that particular moment. In the recent housing boom it was the sellers who got to push buyers with a “take it or leave it” attitude, today sellers are doing everything they can to make their property more attractive and they are now shouldering all sorts of costs, effort, and concessions that weren’t even on the table two years ago. What does that mean for raising investment capital? In today’s investing market the available capital is constricting while at the same time the pool of available deals is expanding. Will this shift some pressure (and costs) onto the sell side of the venture market like it has in the real estate market?

Note; one other insight that can be pulled from the real estate market is the standardization of deal documents and terms. The liquidity of real estate hinges upon the simplicity of the standardized paperwork. Just imagine the efficiencies that could be gained from standardized deal terms in early stage venture investing…

Key takeaway; neither entrepreneur nor investor are well-served by spending time and money focused on a new venture (or new home) that has bad DNA.

Excerpt taken from Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital.

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