The Other Cost of the 'Clean' Inspection Report
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A buyer called me a couple years back about a building he was about to close on. Around 200 units. Class C. The inspection report came back what you would call clean. A few maintenance items. Nothing that would kill a deal.
He was nervous. He could not tell me why. He just knew something felt off, and that feeling was the only reason he picked up the phone.
I was already in for an EMD position on the deal, so I had skin in the game. I told him I would walk the building with him. Not as the lender. As an engineer.
We got on site and the seller’s team had set up a schedule. Two hundred units in one day. Two escorts. Both very friendly. Both very good at moving the group along.
After the first hour I started writing unit numbers down on the back of my packet. Not because I doubted anyone in particular. Because that is what an inspection is. You count what you saw. You count what you did not see. Then you look at the gap.
By lunch we had skipped seven units across three buildings. All of them on the same side of the property. All of them on a top floor.
I asked, very politely, if we could circle back to the units we missed. The escort said sure, no problem, we’ll get to them at the end. We got to the end. We did not get to them. I asked again. We got there.
The ceilings in those bathrooms were black. Not stained. Not discolored. Black with mold. The kind of mold you do not patch over. The kind that means the roof has been letting go for a long time, and that water has been running down the inside of an exterior wall for a long time, and that nobody who lived in those units was sleeping easy.
We walked away.
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Here is the part the inspection report would never have caught. The seller wanted a number that priced the building as clean. The mold remediation alone was a six-figure surprise. The cascade behind it was bigger. Envelope work. Framing repairs. Unit displacement. Lost rent. Legal exposure to current residents. Easily another seven figures before anyone picked out paint colors.
The report said the building was clean. The building was not clean. The building had a problem so significant that the seller had built a one-day schedule around hiding it.
This is what I mean when I say an inspection report is not protection. An inspection report tells you what the inspector saw. It does not tell you where the inspector did not go.
The pictures tell you what the pictures show. The pictures do not tell you where the pictures were not taken.
When someone is moving you fast, that is the finding. When someone is being unusually accommodating about which order you see things in, that is the finding. When the seller has built a system around what you experience on site, the system is the warning label.
The buyer who called me did not have an engineering background. He had a feeling. The feeling was correct. The feeling was the building telling him what the seller would not.
A few questions to sit with this week, whether you are buying anything or not.
What is the equivalent of the seventh skipped unit in the last big decision you made? What did you not look at because someone made it easy not to look at it?
—Jon
If you have a story like this, hit reply. The inspection that almost cost you. The walk-through that saved you. The feeling you almost ignored. I read every one.