Buyer clients of mine were advised this week by their lender that they did not need to do a pre-offer home inspection on a foreclosure listing because, since they are getting a VA loan, the inspection is automatically part of what they get. Voila! Save money!

Bad lender!! Unfortunately, he doesn't quite have the whole picture.

When you get either a VA or FHA mortgage, as part of the appraisal, there is something of an inspection done. What these entities are doing is making sure there are no significant issues with the home that will cause the buyer to have to come up with money for repairs in the first year or two of home ownership. It's a worthy goal. But the inspection has gotten increasingly cursory over the years. And, things that the VA or FHA consider to be a problem, may in fact be things that are not a problem at all. (I've seen deals fall apart over these things!)

A real home inspection takes around 3 hours, sometimes longer, depending on the home. Each system will be tested. The home will be evaluated for water issues. The inspector will go into the attic to look for leaks. Better yet, the potential buyer gets a better understanding of what they're buying, how the systems work and what they'll need to do to maintain their home in good condition.

The VA or FHA appraisal doesn't come close to performing any of these functions.

But there's an even bigger problem here. The lender assured my clients that if they find anything significant, they'll simply increase the size of the loan so they can immediately have it fixed. So, no worries about having to walk away from the contract and lose their earnest money deposit to the bank.

So, even if the appraisal says the home is worth only the contract price and the place needs a brand new roof, no problem loaning them the extra money? A lending institution, given our current situation is willing to loan over 100% of the value of the property to first time home buyers? (Yes, this is going to be a no money down transaction.) And, they'll say this up front without even limiting the amount? If the required repairs bring that number to 110% of the value of the home, are they still going to approve the loan?

I think the answer is "no" and I think they've badly mislead my clients. Lending institutions should do what they do best, make lending decision. (OK, that may not be what most of them do best any more but we're giving them the benefit of the doubt!)

Lending institutions should not be offering advice that puts my clients at risk for losing their earnest money.

I wish I'd bought a house on a busier street.

I wish I hadn't wasted my money on a home inspection.

I wish my commute was a little longer.

It was such a waste of time test driving the commute ahead of time.

I'm so glad I didn't worry about resale when I bought this house.

I so wish I'd bought more house than I could afford.

Using the seller's agent and having no representation was definitely a good move.

I'd just as soon not see photos on listings on the internet.

I wish I hadn't saved up so much money for the down payment.

I love that heavy metal rock band that practices in the garage next door.

Given that the bulk of sales in our area are either short sales or foreclosures, home warranties are becoming increasingly important.

Most short sales and foreclosures are sold "as is" meaning that the owner is not willing to repair any defects in the property. So, if the refrigerator doesn't work, too bad.

These are the properties buyers are snapping up and they're getting excellent deals. But it's a higher risk transaction and home warranties are one way to take away a little bit of that risk.

There are a couple of things to keep in mind if the seller is buying the home warranty, an increasingly common occurrence in this market.

Home warranties typically have basic coverage with options available for additional coverage. The additional coverage can cover things such as the roof, well and septic, swimming pools, etc. Depending on the property you're buying, it may make sense to consider purchasing the additional coverage yourself.

If the seller buys the basic coverage, most companies will allow the buyer 30 days to add additional coverage. Note that this is not meant to allow you to find problems and then buy insurance retroactively to cover them! So, the best way to do this is really at the settlement table.

When you're buying foreclosures or short sales, you should really have a home inspection before making an offer. But if you don't, a home warranty can be a very good investment!

For more information, check out my previous blog post on this subject.

If you've been reading this blog lately you know that I've been writing reviews of homes and adding photographs at FranklyMLS.com.

It's been a great experience and it's been educational. I've never noticed exactly how much differently I look at a house when I put on my buyer's agent hat. But I'm very aware of that now.

Earlier this week, however, an issue came up and I think it's worth talking about. I reviewed a house that's been listed for sale. It had no interior photos and so I took those, as well as additional exterior photos.

These photos got me in trouble:

In my comments I said there appears to be a mold issue here.

The agent strenuously (VERY STRENUOUSLY) objected to both my mention of the world mold and my taking photographs and posting them.

One of her arguments was that I am not an expert on mold. That is entirely true. I'm also not a doctor, but if I see a bone sticking through your skin I'm going to tell you it's broken, even if I'm not allowed to diagnose!

She had someone interested in the house and they saw the photos and the comments and changed their mind. (Again, what are they doing calling the listing agent?!)

What I'd tell a potential buyer is that there appears there may be a mold issue here. We'll need to get the home inspector to take a closer look at this. From what we see here we can't tell what kind of mold, whether it's dead or alive, active or inactive. There are many, many kinds of mold, many of them not harmful to humans. If you truly love a house, this shouldn't be enough of a reason to make you automatically walk away.

As with pretty much any problem in a house, there's a fix. The question in each instance is: is the fix worth the time and/or money involved.

By the way, the offensive photos and comments have been removed. I have mixed feelings about that and I'll take that up in a future post.

Meanwhile, I'm off on vacation! This space will be quiet for the next week and a half. I hope you'll have having as much fun as I am!