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The most critical aspect of any purchase contract is probably the property inspection provision. This allows you to have a certified inspector walk through the property to identify structural issues, and it is an important risk management technique when purchasing income properties.

You will typically have 10 days to arrange the inspection and communicate the results to the selling party. The seller will then have a specific number of days to address the findings as well as your associated demands. I highly recommend shadowing the inspector because it’s a great way to learn the ins and outs of the property. Note that an inspection is generally not necessary if you’re buying a fixer-upper, because: (a) they are always sold “as-is” and (b) by definition you’ll already know it needs work.

The home inspection covers 2 critical functions. First, it will help identify problem properties, ones that may have hidden structural problems. In this case, the best course of action is usually to void the deal (which you will be able to do contractually, with the help of an attorney). Second, the problems uncovered will become negotiating points. For example, you could demand that the seller repair the issues, drop the purchase price, or provide a seller’s concession in the form of cash back at closing.

Although it varies from market to market, a typical single-family home inspection will run about $350, and a triplex or quad will run in the neighborhood of $500. Importantly, try not to get hung up on the price of the inspection. Yes, it’s a lot of money but the last thing you need is to get stuck with an investment property that is disintegrating from the inside out! In a way, the inspection is a form of insurance that will prevent you from getting stuck with a bad deal. When viewed in this manner, it’s definitely money well spent!

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