Condition inspections have quickly become commonplace, particularly in conjunction with real estate transactions.
The pros of a condition inspection:
- A condition inspection report provides a wealth of information on repair and maintenance requirements related to the aging of a building
- A condition inspection gives indication of potential hazards and risks related to a building as well as defects which can be detected through an external inspection
The cons of a condition inspection:
- A condition inspection will generally not reveal a building's concealed defects. Concealed defects fall within the seller's liability even when a condition inspection has been made
- An inspection carried out without the appropriate expertise may convey a false understanding of the building's condition or result in unnecessary repairs
- A standard condition inspection is done on a sensory basis, without breaking down the structures of the apartment or house. For example, humidity measurements are based on a surface reading, which does not reveal possible humidity damage within structures.
If you commission a condition inspection, make sure you
- find a qualified inspector
- provide the inspector with detailed and accurate information regarding the building
- participate in the inspection yourself
A condition inspection does not free the seller from liability
The cost of commissioning a condition inspection for a single-family house is at least several hundreds of euros and often well in excess of a thousand euros.
Having a condition inspection done does not free the seller from liability regarding possible defects in the property detected after the transaction has been concluded. Rather, it is a way to give the buyer information on the general condition of and potential hazards and risks associated with the property. The concealed defects of an apartment or house may not be revealed in a standard inspection.
Most disputes over real estate transactions are related to such concealed defects. In many such cases, a condition inspection has been done but the defect that is the cause of the dispute was not revealed in the inspection.
A seller should consider whether to commission and pay for a condition inspection routinely as soon as he decides to put an apartment or house up for sale.
- In many cases, it makes sense to wait until there is a serious buyer candidate. The prospective buyer may have experience with single-family houses and be aware of the maintenance and repair needs related to an aging building even without an inspection report.
- A condition inspection should be commissioned at an early stage of selling a home if the seller has little or no knowledge of the property's construction, repair and maintenance history. In such cases, the inspection helps to determine what is being sold and what the appropriate asking price would be.
If a condition inspection is commissioned,
- the seller must truthfully inform the inspector of any aspects related to the condition of the property when being interviewed at the start of the process
- it's a good idea to have the inspection done in the presence of the seller, the buyer candidate and the real estate agent. By having all the parties present, they are informed at the same time and have the opportunity to ask the inspector for more details
- The written condition inspection report should be provided to the parties well in advance of concluding the transaction, as there is a possibility of important details being missed at the time of the inspection. In the event of a dispute, the written report is considered the basis of what information the parties had regarding the property.
A condition inspect does not guarantee that the property is free of defects
A property being advertised as ”condition inspected” should not be interpreted as ”free of defects”. A standard condition inspect does not guarantee that no concealed defects will be detected later on.
For the buyer, a condition inspection done by a qualified inspector commissioned by the seller is beneficial, as it serves to provide information regarding the general condition of and maintenance needs related to the property. If the buyer has experience with single-family houses and an understanding of the maintenance and repair needs related to an aging building, a standard condition inspection may not be necessary.
- Condition reports provide a wealth of general information on e.g. the service life of structures, roof materials and electrical and heating technology. Service life is, however, affected by the individual characteristics of the property and how it has been maintained.
- if necessary, a more detailed condition survey may be commissioned before concluding the sale to survey presumed risk spots such as sanitary facilities. A condition survey involves breaking down structures to discover e.g. concealed humidity damage.
Condition reports should be read with a realistic attitude
The description of various aspects of an aging building in engineering jargon may at first glance make the reader think that the property is fraught with problems. In many cases, however, the property is simply an aging building which has certain aspects that require renovation or improvement.
Even if a condition inspection has been done, the buyer should also inspect the house on his own. After the transaction has been concluded, the buyer may not demand a price adjustment based on reasons which are mentioned in the condition report or should have become apparent in the buyer's own inspection of the property.
he condition inspection report is not a list of defects which the buyer can refer to and expect that the price of the property will automatically come down dramatically. Generally, the age of the building has already been considered in setting the asking price.
It pays to carefully read and become familiar with the condition report. If there is anything unclear or ambiguous about the report, contacting the author of the report is recommended.
Bids may include a resolutive condition
The condition inspection is often only done after a bid has already been made. In such a case, it is a good idea to include a resolutive condition in the bid stating that the bid is cancelled if the condition inspection reveals facts that may affect the sales price of the property.
Choosing a qualified inspector
An inspection carried out without the appropriate expertise may convey a false understanding of the building's condition or result in unnecessary repairs.
Condition inspections may be performed by anyone who has sufficient knowledge of building technology. There are no legal qualifications for acting as an inspector and the services are not regulated by law.
The range of inspectors is rather wide , as inspection services have only been offered for some ten years.
Inspectors who have a degree in performing condition inspections for properties in real estate transactions (AKK Inspectors) have at least a basic engineering education and extensive work experience in the field. Inspections are performed according to set guidelines. A registry of AKK Inspectors is maintained by the Real Estate Education and Training Institute.
Other qualified inspectors include Qualified Condition Assessors (PKA) and Qualified Humidity Measurers (PKM). Condition inspections for houses and apartments are also performed by e.g. goods inspectors authorised by the Central Chamber of Commerce (HTT).
Agreement template for commissioning a condition inspection
A condition inspection contract must always be made in writing. A template is provided for commissioning a condition inspection for a house or apartment.
For those who wish to read more on the subject, the Building Information Foundation RTS sells a set of instructions for condition inspections in real estate transactions:
- LVI 01-10413, KH 90-00393 Condition inspections in real estate transactions. Guidelines for customers.
- LVI 01-10414, KH 90-00394 Condition inspections in real estate transactions. Guidelines for service performance.
- KH 90023 Condition inspections in real estate transactions. Service agreement.
Author: Building Information Foundation RTS Publisher: Building Information Ltd.