Paying small home-inspection fee could save househunters thousands in trouble

Q. We signed a contract to buy a house and, following your advice, made our offer contingent upon receiving a satisfactory report prepared by a professional home inspector. The inspector found several problems, including mold in the walls, that would require about $24,000 to fix. The seller won’t make the needed repairs or reduce her price to offset the cost of the work, so we have decided to cancel the sale and demand that our deposit be returned. Can we also demand that the seller reimburse us for the $450 inspection fee?

A. You were wise to make your offer contingent upon obtaining a satisfactory inspection report because now you have the legal right to demand that your deposit be returned. If you had failed to include such a clause, the seller would have the right to keep your money.

Getting reimbursed for the $450 inspection fee is another matter. In most real estate deals, the buyer is legally obligated to pay the inspection fee — even if the transaction is later canceled — because it’s a service provided to the buyer rather than the seller. Unless the purchase offer states otherwise, you’ll probably have to pay the tab yourself.

That’s probably not the answer that you wanted to hear. But look at it this way: Giving the inspector a check for $450 is a whole lot better than purchasing a home with hidden problems that would cost tens of thousands of dollars to repair.

Q. I recently came back to America after finishing a four-year stint in the Marines. I was thinking of buying a triplex or small apartment building and living in one of the units while renting the others out to help pay my mortgage. Will the Veterans Administration guarantee a loan for this type of purchase, or does it only help vets who want to buy a single-family house?

A. The no-money-down loan program that’s operated by the Veterans Administration can be used to buy a single-family house, a condominium, a townhouse or a co-op. The program can also be used to purchase an apartment building that has up to four units, provided that the veteran lives in one of them.

You can get details about the Veterans Administration’s various loan programs by calling the VA’s regional office or by visiting its web site, homeloans.va.gov.

Q. My uncle passed away earlier this year and left his house to me. I recently sold the property and made a profit of about $77,000, which is almost enough to pay off the mortgage on my own home. If I pay my own loan off in a lump sum, will it raise my overall credit score?

A. Paying your loan off would certainly relieve you of a major monthly expense, but it probably won’t raise your credit score. In fact, it could actually lower it.

Most banks and other creditors check a consumer’s FICO score when determining whether a loan or other type of account should be approved or denied. The FICO scoring system was developed a few decades ago by California-based Fair Isaac Corp., and it’s designed to help lenders gauge an applicant’s future credit risk.

Therein lies the rub. An installment loan that you pay monthly, whether it’s a mortgage or a car payment, gradually increases your credit score because your prompt payments demonstrate that you are a reliable borrower. But if you pay the loan off in a lump sum, you’ll no longer have a credit-building account — and your FICO score may drop.

As my kids might say, “That’s kinda goofy, huh?” And I would agree.

Still, I think that paying your loan off with the resale profits from your uncle’s home might be a good idea. Paying the mortgage off in a lump sum will save you thousands of dollars in future interest payments, even if it doesn’t hike your credit rating. You could invest the $77,000 in a certificate of deposit, depending on the interest rate of your mortgage.

Thank you for your service to our nation.

Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.

"Giving the inspector a check for $450 is a whole lot better than purchasing a home with hidden problems that would cost tens of thousands of dollars to repair"

David W. Myers, About Real Estate