4-Point Inspections — Their Purpose and Importance in Real Estate

The Big Picture On 4-Point Inspections in Real Estate:

• •  A 4-point inspection reviews a property’s key systems—HVAC, electrical, plumbing, and roof—to identify major issues, helping buyers and insurers assess the property’s condition.
  • Often required by insurers, the inspection ensures that a home’s critical systems are safe and functional, reducing the risk of costly repairs for buyers.
  • The inspection helps buyers and insurers understand a home’s true condition, potentially lowering insurance premiums and catching minor issues before they escalate.

When buying a new property, it pays to know about four-point inspections and why they’re important. A 4-point inspection is an assessment conducted by a qualified professional and is an integral part of the real estate process.

This assessment looks at the four critical elements of the property: the HVAC system, the electrical system, the plumbing system, and the roof. Through a four-point inspection, potential buyers can identify any significant problems, avoiding costly repairs or replacements. This, in turn, helps you decide if the home is worth purchasing.

What Is a 4-Point Inspection in Real Estate?

A 4-Point Inspection in Real Estate is an inspection of a property’s four major systems:

• • The roof
  • The electrical
  • The plumbing
  • The HVAC (heating, ventilation, and air conditioning)

When you take out a homeowners or landlord insurance policy, sometimes the insurance company requires a four-point inspection by a licensed inspector. They need to know what they’re insuring, after all.

During the inspection, the inspector will look for any existing or potential problems with each of the four systems and recommend repairs or replacements as needed. The inspector will also provide a written report of their findings to the potential buyer.

Note that 4-point inspections only go so deep into the house. Inspectors focus only on what they can see. Any internal problems require a professional diagnosis and aren’t always caught.

Are 4-Point Inspections Required?

Some landlord- or homeowners insurance companies require the inspection to ensure that a home meets their standards for coverage. It depends on the insurer and the type of policy you have.

Additionally, inspectors sometimes recommend these in addition to the regular home inspections, as it allows them to dig deeper for you and evaluate more of the home.

What Does a 4-Point Inspection Include?

A 4-point inspection is a quick visual assessment of a home’s major electrical, plumbing, heating, and cooling systems. They are relatively inexpensive (more on that in a minute) and provide potential insurance providers with a detailed look at the condition of a home’s essential systems.

Let’s take a deeper look at the four components of this inspection:

Buyers and owners can use this report to assess whether the home is eligible for home insurance or the right buying opportunity.

What Are the Benefits of a 4-Point Inspection?

The inspection has a handful of benefits. The most significant one, however, is assuring potential home buyers, lenders, and insurance companies that a home meets certain criteria. 

A qualified inspector can identify any major issues that need to be addressed to meet the lender or insurance company’s requirements through a 4-point inspection. 

Moreover, below are some of what’s expected when you conduct the inspection.

Accurate Knowledge of The Home’s True Condition

A 4-point inspection can help uncover important details about a property’s essential systems. Inspectors will examine the roof, electrical components, plumbing infrastructure, and HVAC systems, revealing hidden issues that might otherwise go unnoticed.

For instance, an inspector may discover outdated wiring that poses a fire hazard or identify minor roof damage that could lead to significant leaks if left unaddressed. Knowing this, the homeowner or the buyer can decide about necessary repairs and fair market value.

Moreover, understanding the real condition of these critical elements lets homeowners plan for future expenses and negotiate more effectively during real estate transactions. 

Potentially Lower Insurance Premiums

If the property has undergone a 4-point inspection, the owner will often find themselves in a favorable position when it comes to insurance costs. It’s generally known that properties that have passed this inspection have lower risks, so insurance companies may offer reduced premiums.

A homeowner in Florida might save up to 20% on their annual insurance premium after demonstrating that their roof, electrical system, plumbing, and HVAC are in good condition. These savings can accumulate significantly over time, amounting to thousands of dollars.

In addition, some insurers may be more willing to provide coverage for older homes that have undergone a recent 4-point inspection, as it alleviates concerns about outdated or hazardous components. The inspection results will serve as tangible evidence of a property’s soundness, which allows insurance providers to offer more coverage options. 

Identify Minor Issues Before They Become Major Problems

As mentioned in previous sections, inspectors can spot subtle signs of wear or damage that may not be apparent to the untrained eye. For one, a minor roof leak might be identified through water stains on the ceiling, preventing extensive structural damage, mold growth, or both!

Similarly, the inspector can help avert the risk of electrical fires by spotting a loose electrical connection. Plumbing systems also benefit from early intervention, with inspectors detecting small leaks or corroded pipes that could lead to costly water damage if left unchecked.

HVAC systems also often reveal inefficiencies or maintenance needs during these inspections, which allows homeowners to optimize the equipment’s performance.

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4-Point Inspection vs. Full Home Inspection Comparison

For a comparison, here’s a quick overview of the differences between a full home inspection and a four-point inspection. However, some factors may vary depending on the inspector.

How Much Does a 4-Point Inspection Cost?

The cost of a 4-point inspection varies depending on the home’s size, location, and services provided. On average, it ranges from $50 to $150 — one of the more affordable inspection options.

It’s important to note that the cost of a 4-point inspection is not included in the cost of a regular home inspection required by your mortgage lender. In many cases, the 4-point inspection is an additional service a home inspector offers and is paid for separately.

Who Should Perform a 4-Point Inspection?

Older homes can sometimes have hidden problems and deficiencies that could create additional costs or expensive repairs. A 4-point inspection can help buyers identify possible issues early on and provide a better idea of the property’s condition before finalizing the sale. Just like a car going in for a check-up, a four-point inspection can help identify any major issues or risks with the home’s systems.

An inspection of this type can help buyers identify potential problems before signing contracts. While it’s never fun to find a major issue in your home, if issues are found, 4-point inspections can help buyers or homeowners budget accordingly.

Insurance companies may also request a 4-point inspection before providing or renewing a policy. This helps ensure that the company has a complete understanding of the property’s condition and any potential risks and hazards associated with it.

What are the Risks of Not Doing a 4-Point Inspection?

While not required by every state or insurance company, a 4-point home inspection helps you understand the property’s true condition. Not performing a four-point inspection can create a number of risks, as it leaves you without a clear understanding of the condition of the home.

You Could Find Serious Damage Later On

A major risk of not doing a 4-point inspection is that you will not be aware of any major damage or existing issues with the home. This lack of knowledge may put you at risk for serious, costly repairs.

Here’s a classic example: You purchase a charming 20-year-old home without a 4-point inspection. 6 months later, during a heavy rainstorm, you discover significant roof leaks causing extensive water damage to your ceilings and walls.

The repair costs, including a full roof replacement and interior renovations, total over $30,000—an expense you could have anticipated or negotiated with the seller had you inspected before buying.

Take it from someone who knows multiple people who decided to waive all inspections when they bought houses at the height of the pandemic. You REALLY want to get an inspection unless you want to end up with a huge bill to replace your furnace in the dead of winter.

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You Could Overpay for the House

If you opted out of a 4-point inspection and didn’t know of any potential problems with the home, you may be willing to pay more than it’s actually worth.

What if you bought a house without knowing it had outdated electrical systems that still use knob-and-tube wiring? A 3000-square-foot house that needs rewiring may cost you $10,000, an expense you could have factored into your offer if you’d known.

You Could Violate Laws & Regulations

Another risk of skipping a four-point inspection is that you could be in violation of local, state, and/or federal laws and regulations. Depending on the area where the home is located, certain codes and regulations may need to be adhered to for it to be considered up to code. Without a proper inspection, you could unknowingly violate a code and face costly repairs to bring the home up to standard.

You May Not Get the Insurance Policy You Want

Having a 4-point inspection performed on your home before submitting an insurance application for a new or renewed homeowners policy may mean that the insurance provider needs the necessary information to determine the property’s condition. Insurance companies typically use the findings from the 4-point inspection to establish coverage amounts, adjust the premium accordingly, or even deny the policy.

Let’s say you’ve got your eyes set on a specific insurance policy with better rates and coverage. You submitted your application cause you feel confident. Then bam! The insurance company comes back asking for a 4-point inspection. Now you’re scrambling to get it done, hoping nothing major happens up that could derail your plans. And if something does turn up? You might be looking at a much pricier policy or even a flat-out rejection. 

Final Thoughts

The 4-point inspections allow buyers to understand the home’s condition and its systems’ safety before making such a costly purchase.

That said, four-point inspections are not the same as home inspections. They go into a different depth and often miss critical details such as flood damage or foundation problems. Hire a home inspector for your peace of mind, to look under the proverbial hood of your house and assess the water supply lines, check for mold, verify the foundation, and more.♦

What have your experiences with four-point inspections been? Do you have any tips to share with other investors and homebuyers?

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