Careers Business Ownership Types of Property Inspections Share PINTEREST Email Print David Sacks/DigitalVision/Getty Images Business Ownership Industries Landlords Retail Small Business Restauranting Real Estate Nonprofit Organizations Import/Export Business Freelancing & Consulting Franchises Food & Beverage Event Planning eBay E-commerce Construction Operations & Success Becoming an Owner Table of Contents Expand Pros of Inspections Cons of Inspections City Inspections State Inspections Construction Inspections Bank Inspections Insurance Inspections General Third-Party Inspections By Erin Eberlin Erin Eberlin Erin Eberlin is a real estate and landlord expert, covering rental management, tenant acquisition, and property investment. She has more than 16 years of experience in real estate. Learn about our Editorial Process Updated on 02/12/20 If you own property, you'll probably have to deal with it being inspected at some point. There are positives and negatives to this process. It can give you peace of mind, but you might also discover things that you're not prepared to deal with. Properties are inspected for many different reasons. It's unlikely that you'll experience all these types of inspections, but it's always beneficial to know what to expect in case you're faced with one or more of them. Pros You can rest easy knowing that your property is up to code. You might find that your home appraises for more value than you thought or expected. Cons An inspection might uncover structural damage, termites, or other expensive issues that you aren't financially prepared to fix. An overly-conservative inspector might find issues where none actually exist. Pros An inspection can confirm that your property is up to code. Inspections are often done to make sure that the property is safe and meets certain building codes. The best case is that it's inspected and no major issues are found. Your property could be worth more than you thought. Certain inspections require an appraisal of your home. A third-party appraiser will inspect the interior and the exterior, then compare your home with similar homes in the area. They'll come up with a price that they think your home is worth. You might learn that the appraiser believes the value of your home is much higher than you originally thought. Cons Serious issues might be found. For example, the inspection might uncover structural cracks in the foundation, elevated levels of radon, or a termite infestation, all of which can cost a bit of money to remedy. Another potential negative of having your property inspected is that you could get an inspector who's just looking to find something wrong with it. They want to justify the expense of being hired to conduct the inspection. A report could include a punch list of items which are easily repairable, such as cracks in a driveway or air duct vents that need to be cleaned. These might be minor, but they have the potential to scare off prospective buyers. They might also be used to try to negotiate the purchase price down. City Inspections Certain inspections can be conducted by the city or municipality where your property is located. A Certificate of Occupancy inspection, also known as a CO, certifies that the property is fit to be lived in. Some municipalities require this certification when you build a new home when you renovate a home, or when you sell an investment property. A Certificate of Habitability makes sure that the building meets certain health and safety codes. It also ensures that it's, therefore, suitable to be lived in. Municipalities can require you to have this inspection done every time you re-rent a home. A fire inspection might also be required when you re-rent a home. This inspection makes sure that you have the appropriate number and placement of carbon monoxide detectors and smoke detectors in your property. They're usually required near bedrooms and internal combustion appliances like furnaces or water heaters. This inspection also makes sure these detectors are in proper working order. State Inspections Some states require that certain types of properties be inspected every few years to make sure they meet habitability standards, in addition to inspections at the city level. For example, properties with at least three units must have a state inspection every five years in New Jersey. Single-family and two-family properties in the state are not required to have this inspection. The inspector will make sure the building and the individual apartments meet all health and safety codes. Construction Inspections Your city or state might require additional construction inspections when work is being done on your property to ensure that all the work is up to code. A building inspection involves any work that isn't plumbing, electrical, or fire-related. This would include issues such as framing, drywall installation, siding, roofing, or a new staircase being installed. Your property might have to pass a plumbing inspection if you're having any of this type of work done. This inspector might review rough plumbing, such as new drain lines or new water lines being run. They could also inspect finish plumbing, such as replacing a kitchen sink or bathroom vanity sink. Another type of construction inspection involves electrical work. You might be required to pass an electrical inspection if you've rewired the house or upgraded electrical service to your home. A fire inspection might be required to ensure that you've used the correct fireproofing between walls, or between walls and ceilings. For example, you might need thicker sheetrock in certain areas, such as the garage ceiling. Bank Inspections The bank might require certain inspections if you're purchasing a home with financing, or if a buyer is purchasing your home with financing. A bank will usually require an appraisal in this case. They'll hire a third-party appraiser to inspect the home, both inside and out, to determine if it's worth the amount of money they're loaning and to ensure that there aren't any glaring issues. An environmental site assessment isn't always required. This type of inspection is more common with commercial properties or larger multi-family homes. It determines whether there are any environmental hazards, such as asbestos, lead, mold, radon, or mercury. A Phase I inspection is usually conducted first. A more detailed Phase II inspection will be conducted if any hazards are found to exist. A bank might also require that one of its representatives conduct a walk-through inspection. This is also done to determine if the bank wants to lend on it. It's more common when analyzing higher-end homes, multi-family residences, and retail or commercial spaces. Insurance Inspections An insurance company might conduct its own set of inspections. They'll usually send out one of their own representatives to do an exterior walk-through, but they might contract a third-party inspector to do the inspection instead. They might also require an internal inspection, depending on the property and the insurance carrier. The purpose of this inspection is to determine the liability risk and to make sure the home is insurable for the type of policy you're buying. For example, the insurer will want to make sure you're not trying to buy homeowners' insurance if the property is actually a nail salon. They also want to examine any potential liability issues, such as cracked sidewalks or ceilings that are falling down. They want to make sure they're not on the hook for future false insurance claims for problems that existed before you purchased the policy and that there aren't any glaring safety issues that could lead to future insurance claims. General Third-Party Inspections Prospective buyers of your property have a legal right request inspections. It's up to the buyer as to how deeply they want to have it looked into. A general home inspection is normally conducted by a jack-of-all-trades home inspector, not an inspector who has a specialty in a certain area. Areas of inspection can include foundation, roof, electrical work, HVAC and heating, chimney, windows, sewer, and plumbing. The inspector will put together a report of findings for the prospective buyer and make recommendations for further action, if necessary. A buyer can choose to have a radon inspection done as well. This usually involves the placement of a canister or a more advanced machine in an enclosed area, such as a basement, for a number of days to test for elevated levels of radon. An environmental inspection will test for contaminants such as asbestos, lead, mercury, mold, or leakage from oil tanks. A termite inspection might be done to check for damage done by termites or other wood-destroying pests. The prospective buyer can bring in a specialist to further inspect areas of concern that were found in a home inspection. This could include calling a roofing specialist for problems with the roof, a certified plumber for problems with the plumbing or sewer line, or an engineer for structural issues. A buyer might do a search to determine whether there are any easements on the property. This could include issues such as a shared driveway, or a public sewer line that runs along the perimeter of the land. An additional search can be done to gather the permit and tax history of the home. A request for this information can usually be placed with the local city or county government. The records will indicate all permits that have been taken out, including those that have been finalized and any that are still outstanding. The yearly taxes, as well as any taxes still owed, can also be uncovered.