The Top Six Myths About Home Inspections

If you have bought or sold a home, you might have experienced an independent home inspection. This type of home inspection is designed to provide both buyers and sellers with critical information about the health of the home’s systems – heating and cooling, electrical, plumbing, water tightness, roof condition, and safety. This type of inspection is highly detailed and provides a wealth of information on the home. While this type of inspection is not required, it can help buyers avoid a “money pit” and can help sellers understand what things might turn buyers away.

A friend wrote me recently to say that they bought a house and had expected the home inspector to look for termites. After they moved in, they decided to remodel. They discovered that termites had completely eaten the wood structure in 3 walls.

I told them that one of the things home inspectors do not do is inspect for pests, since they are not qualified to identify them. Pest control professionals are qualified to find pest infestations, and should be called in before the purchase. Most of the time your real estate agent will suggest what inspections you should be getting to protect yourself.

This got me thinking about home inspection myths. Here are the top 6 myths.

Home inspectors inspect for termites. Myth! Unfortunately for the couple above who believed this, repairs were very expensive.

You should not attend the inspection on the home you are buying, because it will disturb the inspector. Myth! Inspectors appreciate their clients attending the inspection and know they can fully communicate the issues with them. Sometimes written reports do not explain everything fully. If the clients are out of town and cannot attend the inspection, they should hold a conference call to discuss report items as soon as practical after the report is completed.

The seller is responsible for fixing everything the inspector finds wrong. Myth! Repairs, even serious ones, are negotiable. The sellers may be able to back out of a deal, however, if the inspector discovers serious defects.

New construction requires an independent home inspection to get the Certificate of Occupancy. Myth! New construction does require progressive inspections by the municipal building inspector for safety and code enforcement. If you are moving into a newly constructed home, I personally would recommend an independent home inspection also, as it will catch many loose ends.

If the home’s appraisal is excellent, there can’t be anything wrong with the home and you don’t need another inspection. Myth! A home’s appraisal is based on many factors, including market conditions, location, and materials (HardiePlank and granite countertops, for example) but does not inspect for systems actually working or structural integrity.

A home inspection will take about 30 minutes. Myth! A thorough home inspection should take from 2-5 hours depending upon the size and complexity of the home. There are hundreds of inspection points on a home inspection, including walking the roof and crawling the crawlspace.

Now that you are the home inspection expert, you can try these questions on your friends and see how they do.

Lisa is an aerospace engineer and building contractor residing in Hayesville, North Carolina. Prior to her engineering position, Lisa inspected homes for home buyers, sellers, owners, and mortgage companies.

Lisa loves flying and building aircraft. Lisa is the first woman to build and fly a Pulsar XP 2-person experimental aircraft. She built 2 aircraft and the major portion of a helicopter between 1995 and 2008.

Lisa enjoys writing about flying, home improvement, and goal s

Home Sales – Do You Really Know the Tax Exclusion Rules?

A single person can exclude up to $250,000 of the gain from the sale of their home and a married couple up to $500,000. However, there are qualifications, rules, exceptions to the rules and special situations. This article outlines the major rules and clears up many misunderstandings.

First, you must meet two tests: the ownership test and the use test.

The Ownership Test

This test requires ownership of the property for at least two of the five years prior to the sale. The ownership does not have to be continuous.

The Use Test

The use test requires that you lived in the home as your principal residence for 2 years during the 5 years preceding the sale. Again, the 2 years do not have to continuous. Short temporary absences, such as vacations or spending a couple or months in the summer at the lake, are periods of use. Even if you rent out your home while you are gone, there is no interruption in your period of use.

The periods used to satisfy both of these tests do not have to be the same. In addition, members of the Armed Services or Foreign Services can choose to suspend these tests for any period they or their spouse is on “qualified official extended duty”. If people become mentally or physically unable to care for themselves or have to go into a nursing home, the two-year use requirement shortens to one year. Therefore, it is possible to qualify without actually living in the home for the required two years.

For people who have lost their homes to hurricanes, floods, tornadoes and other natural disasters, or have had them condemned, a special rule applies. They can add the time they lived in the home destroyed or condemned to the time they have lived in the home on which they want to exclude gain.

What is a Home?

A home, for capital gain exclusion purposes, must be your “main” home. It could be a house, houseboat, mobile home, co-op apartment or condominium. Note that if you sell the land on which your home is located, you cannot exclude the gain from the sale of the land. An example would be selling the land on which your mobile home sets, buying another piece of property and moving your mobile home to the new location.

If you own a vacant lot next to your home and sell it as part of your home sale, special rules apply. If you own a home in the city and a cabin in the mountains, the home where you spend the most time is the one where the tax exclusion applies. There are at least nine tests used to determine your main home if you own more than one.

The Exclusion

First, you must meet the ownership and use tests, or fall under one of the exceptions, and have not used the exclusion on the sale of another home within two years of the current sale.

If you are single, you can exclude up to $250,000 of the gain on a sale. If you own the home jointly with someone else, and each of you files single returns, each can exclude up to $250,000 of their interest in the home.

If you are married and file a joint return, you can exclude up to $500,000. However, you must meet one of several conditions. Either you or your spouse must meet the ownership test. Both you and your spouse must meet the use test. During the two years preceding the current sale, neither of you excluded gain from the sale of another home.

If your spouse dies, and you do not remarry before the sale, you can count the time your spouse owned and lived in the home to satisfy the ownership and use tests.

In today’s society, many scenarios require careful adherence to the rules. For example, a single woman sells her home and remarries a man who owns a home. They decide to sell. Another common example: Mary and John are single and each owns a home. They marry and decide to sell each of their homes and buy another. Here is another: Janet receives the home as part of a divorce settlement and later decides to sell.

The Partial Exclusion

Even if you do not meet the ownership and use tests, it still may be possible to claim a partial exclusion under certain circumstances.

If you have to sell your home because of a change in employment, your home sale could qualify under a “safe harbor.” The rules contain many tests to determine if the safe harbor applies.

If the primary reason you have to sell your home is health-related, you could qualify for a partial exclusion. The health issue applies not only to you, but also to a large list of people classified as your extended family.

Unforeseen circumstances also qualify for a partial exclusion. These include an involuntary conversion of your home, man-made or natural disasters, death, unemployment, a change in employment status, divorce and multiple births.

I hope you have seen that applying what you may think the rules are to the sale of your home may not be as simple as you thought. With all the rules and exceptions, it would be prudent to solicit the advice of an accountant, tax attorney or real estate professional prior to listing your home.