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 got a call from a lender yesterday on a deal we're working on together. She's got some potentially bad news for my clients and wanted to let me know the scoop. It's the kind of heads up I very much appreciate!

But she also proceeded to tell me that she wasn't going to call my clients with this information for a couple of days. She wanted to research all the options and have every potential question answered before she called them.

I understand that instinct. It's hard to call someone and know they'll have questions and know you won't instantly be able to answer all of them.

But, I have a basic belief that I shouldn't know something about your transaction that you don't. This is NOT part of the canon of ethics for the National Association of REALTORs. There are plenty of other agents who think this goes a step too far and that in some cases we should be protecting our clients from things they don't really need to know.

But, I don't necessarily appreciate it when other people decide what I should and shouldn't know. I can't believe most of my clients would appreciate that.

In this instance, it's not permanently hiding information from anyone. It's just a couple of days delay in relaying the information. We're not talking about someone doing something immoral or unethical.

Still, it's the kind of thing I struggle with.

So, what do you think? If you're a consumer, do you want to know everything I know as soon as I know it? Would you rather I only told you things when I think you must be informed and that I spare you some of the scary details? If you're an agent or broker,  how do you deal with this question?