Is A Home Inspection Worth It? [A Case Study]
Published On: March 29, 2020
Is having a home inspection worth it? This is a common question some buyers might ask themselves before ordering an inspection on the home they are planning to purchase.
Realtors almost always recommend home inspections, but is that just because it is a common practice? Or is it a legitimate negotiation tool? And, do Realtors need the inspection report to request the seller to make corrections to the home?
Some buyers are more construction-savvy than others, where minor defects to the home do not worry them. Other buyers, however, may just want the peace of mind that a detailed home inspection can bring.
At Scott Home Inspection, we see the value of a home inspection firsthand every day at our inspections, and the value it brings to our clients. However, you shouldn’t just take our word for it. Let’s look at the data.
In a world of data-driven technologies and buyer-informed decision making, we decided to crunch the numbers and share them with you.
So, is a home inspection worth it? Can you hope to recoup the cost of the inspection in avoiding costly repairs? Let’s find out for ourselves.
How to determine if a home inspection is really worth it.
So how do we evaluate this? As a long time Home Inspection company, we have access to the reports of the thousands of inspections we have performed, and can run back through the final recommendations of randomly chosen inspections.
For each inspection, we will collect the following information:
- Cost of the inspection (You can see our prices here.).
- Age of home.
- The estimated cost of repair recommendations included in the report that needed immediate action.
- The average cost of the biggest repair item.
For each inspection, we will NOT collect the following information, due to privacy and limitations:
- Address or homeowner information.
- Add-On service data. (We will include extra services into repair cost and total inspection price.)
- Specific repair recommendations.
By doing this, we can take the raw data of the average cost of the inspection, and compare it to the average cost of the recommended repair items.
This study does assume a few things:
First, it assumes that the buyer of the home attempted and was successful in negotiating some or all of the bigger items addressed in the report. This should be a safe assumption because this is typically the main point of a home inspection.
Second, it assumes the repair cost of these items. We will use local averages to compare, but some items may cost more or less than the numbers we use. We also assume that a qualified contractor is performing the repair, which will typically cost more than doing it yourself.
Third, this uses our inspection pricing. Inspection pricing can vary depending on the company. We believe our pricing is fair and competitive, but other companies’ fees may be different.
Last, if there was an item that was called out for further evaluation, like structural issues, EIFS siding, or asbestos, we only added the cost of evaluating the issue, and not the cost of remediation. That way if it didn’t end up needing repair, we did not inflate the repair cost in the study.
To get an accurate result, we will choose 50 homes that we inspected within the last year. This will give us up-to-date information that reflects our most recent pricing at the time this article was written.
Once again, these homes will be randomly selected, and reports from all of our home inspectors will be used.
We believe that by using these rules, we can find a fair and data-driven answer to the age-old question.
Is a home inspection worth it?
How the data was compiled.
One home inspection report was randomly chosen each week for the last 50 weeks.
We created a spreadsheet with all the inspections from the last 12 months and randomly clicked on one inspection within the weekly range.
From there, those 50 homes were consolidated to include inspection cost, age of home, repair total cost, most expensive single repair, and biggest repair category. This allowed us to easily evaluate the data.
Total Cost: As stated above, the total cost of the inspection includes all add-on services. This includes services like radon testing, sewer scope testing, mold testing and so on.
Age of home: The age of the home was recorded so we could analyze the value of inspecting a newer home versus an older home. While it’s typical for newer homes to have fewer issues than older homes, we would still like to know if the repair items exceeded the inspection cost.
Total Repair Cost: The total repair cost was found by going through each report section by section and assigning to each of the actionable defects a repair value. This was the estimated cost of repairing that specific item.
The items were filtered by urgency. In our reports, we combine issues into 3 categories: Maintenance items, Repair Items, and Immediate Action Items.
For this study, we only evaluated immediate action items and repair items. Of these recommendations, we only added a repair value if the repair should be made before the transaction.
You can see in the report example below that out of the 26 issues found within the home, we only considered 12 of them.
This includes items such as safety concerns, electrical issues, plumbing and leaks, major siding and landscaping repairs, roofing repairs/replacements, sewer repairs, radon system installations and repairs, appliance replacements/repairs, and moisture concerns.
This does not include cosmetic items, issues that do not need immediate repair, general landscaping, minor handy-man style repairs, areas to monitor, major systems that are still in use but reaching the end of life, and any other items marked as general maintenance within the report.
Out of the 3 comments below, only the first one would be added into the repair total. It was marked as a repair item, AND the defect calls for repair or replacement at this time.
How the prices were found: We used online sources and internal knowledge bases to find the average repair costs of each repair items. Because most of these sources give you a range, and every repair varies depending on the contractor and the severity of the issue, we typically used a number closer to the lower end of the range.
We tried to use unbiased discretion where possible to ensure we came up with accurate results. It should also be stated that some of the online sources we used may not be correct for our area, but we used Colorado numbers where possible.
While we were adding the total repairs together, we would keep track of the largest costs for each inspection and include the category. This is helpful to show how much of the total was due to one big repair item.
The results! Are Home Inspections Really Worth It?
Coming from a home inspection company… YES!
…but let’s actually look at the data.
Average Home Inspection Cost: $662.76
The average cost of one of our home inspections including the add-on inspections that were ordered is $663. This price changes in the data for each house because our home inspection fee varies by the square footage of the home. You can learn more about our home inspection fees here.
Average Age Of The Home: 32
The average age of the homes we looked at was 32 years old. This is pretty typical of Colorado. The state has a large base of newer homes and mid-century homes. There was only one home older than 100 years, and only a handful of homes less than 3 years old. However, there was a house built in every decade between 1920-2019 (excluding the 1930s, as almost nobody was building houses during the great depression.)
Average Repair Cost Per Inspection: $4,120.41
Yeah, that’s a pretty big number! It might make you think that every house has thousands of dollars worth of problems, but that is not necessarily the case. In fact, if you throw out the 3 houses with more major problems, that number drops all the way down to $3200.
However, as we said earlier, this number is the sum of items that should be repaired now or very soon. That means you can use these to negotiate the price of the home or have them addressed by the seller before you take possession of the house.
So one claim we can make from this comparison is that generally speaking, the average repair costs found during an inspection is greater than the average home inspection costs. This means if negotiations and repairs go according to plan, you are actually saving money in the long run by having an inspection performed on a home you are buying.
This is definitely a blanket statement based on averages, but the odds are that your outcome will be similar. Out of the 50 houses sampled, 7 of the inspections had repair items that did not total to as much as the inspection cost.
While you could look at this as a loss, you could also say that the peace of mind knowing that your future home is in great condition is invaluable. Also, while the repair item total did not exceed the cost of the inspection, in most cases, it came pretty close. So after negotiation, there is a good chance most of the inspection costs will be covered.
Also, if your inspection report only has a few immediate repair items on it, that gives you more liberty to ask the seller to correct some of the smaller/maintenance items that were not included in our repair total.
So Is A Home Inspection Worth It?
- 43 out of 50 homes’ immediate repair item total cost exceeded the inspection cost.
- This is without including cosmetic/maintenance issues found which could add to cost.
- Only 7 homes had repair items less than the inspection cost.
- Of those 7 homes, all had repair costs over 50% of the inspection cost.
- All repairs result in a better home.
Age and Inspection Repair Totals:
You may look at the above table where the defect total was lower and say, “Hey! Those were all newer homes. Maybe I don’t need a home inspection on a newer home.”
While this is a trend we see as well, that might not be the whole story. However, based on the graph below, older homes certainly have a higher total repair cost than newer homes.
While this is a smaller data set, you can still see the trend occurring. I will say, as an inspector, this is true, but we also didn’t get any homes in our data sample that were very old but fully remodeled at one point. I would say this is fairly common as well, and these homes tend to have a lower repair total as well.
But let’s visualize the data in a different way.
Here you see the trend, too, but the interesting thing is that even houses built in the last 15 years have a repair cost average higher than the inspection cost. So while the chances of finding a bunch of repair items are lower (which is really a good thing), the inspection cost is typically worth it.
Besides, we are talking averages here. This typically is a situation where you don’t want to be the outlier – meaning you don’t want to be the buyer that skips the home inspection on a newer home and ends up with a bunch of issues to deal with yourself.
Ultimately the decision is yours to make. Everything in the home inspection process is a risk/reward trade-off. We just want to give you the information to make an informed decision.
Other interesting data points:
While there are many common issues with homes, some issues come with a higher price tag than others. Because of this, we pulled out the most expensive immediate repair item from each report to see the trends.
This data can help you decide what add-on inspections you should consider, and what the “big ticket items” are to keep in mind.
Elevated Radon Levels:
Radon is a harmful gas that is one of the leading causes of lung cancer in America. In Colorado, the radon levels are elevated when compared to other states. When levels are elevated over 4.0 pCi/L, mitigation is recommended.
As you can see, 11 of the 50 houses we looked at had elevated radon levels, and not all of them actually tested for it!
This can be a costly fix, but since this is a health and safety item it is a good thing to ask for in your negotiation process. Testing for radon is good for your health, your family’s health, and it can all be wrapped into your purchase agreement.
Ask your Realtor about negotiating for a radon system if your levels are elevated. If you are interested in our radon testing services, click here.
Roof issues were high on the list as one of the most expensive items. When we find issues with the roof, we will almost always recommend that a roofing specialist evaluate and give a second opinion, and we are pretty confident that they will agree.
Also, if there is roof damage or hail damage to a roof, it can be much harder to find affordable insurance for your home. Your home insurance provider will likely perform their own inspection to determine the condition.
A roof replacement is one of the more expensive repair items. At an average of $7500 for a new roof in Colorado, that is not a bill you want to get stuck with.
These are lumped together but the big-ticket item here is an electrical panel replacement. These also include addressing aluminum wiring and several other electrical issues.
Electrical issues are a great thing to negotiate for, because typically they represent a safety item. Electrical issues can often result in shock or fire hazards in some form or another.
However, the trades in Colorado are getting more and more expensive as demand goes up. Panel replacement is a somewhat common recommendation, since there are some recalled electrical panel types still present in homes. However, a full panel replacement can cost around $1400-$2000!
Sewer Line Issues:
Although not as common, sewer line repairs still came up as one of the largest expenses in the study. 4 of the 50 houses had sewer line repair that needed to be addressed immediately.
These repairs will have a wide range of costs, spanning from $150 for a root cleaning to $15-$20k for the replacement of the sewer line. If you are interested in the common sewer scope issues we find, read our related article here.
The repairs that we added to this list were ones that were likely to have a significant cost to repair, which made them the most expensive repair for the inspection.
As with radon, not every house in the sample ordered a sewer scope inspection. But sewer line issues are usually out of sight and out of mind, until they cause a dreaded sewage backup, which is why we always recommend that a sewer scope inspection be paired with our standard home inspection.
While this was a very detailed and graph-heavy answer to a simple question, we think it is important that you understand why a home inspection is truly worth the money. Now you have the data to prove this, and you don’t just have to simply believe us, your real estate agent, or your friends and family.
If we didn’t provide real value to people, we likely wouldn’t be in business. So it is nice to see the data analysis confirms the usefulness of a home inspection. If you are in the market and are interested in having us inspect your home, and you are now convinced a home inspection is worth it, you can learn more about our inspection services here.
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