Inspect Before You Invest: How to Spot Expensive Property Problems Before You Buy

Don Minehart (00:00)
I looked at the furnace. I looked at it. It was 22 years old. It had a lifespan of 20 years. So I’d say it’s done. I looked at the hot water tank, it was 15 years old. The manufacturer says eight. So I think that’s—well, as a matter of fact, if I had a 15-year-old water tank, it would go, because I’ve seen them cut open.

And I looked at the air conditioner, it was thirty years old. So I’m looking at items that are immediately at about ten thousand dollars.

I look at a roof, another 20. I’m at 30. I look at a water problem, or maybe worse yet, a possible organic substance problem, which people call mold, which you can’t until you test it. And all of a sudden I’m sitting there, maybe a hundred thousand dollars for this $200,000 or $250,000 home.

Scott Bursey (02:14)
Welcome back to the Real Estate Pros Podcast, powered by Investor Fuel. I’m your host, Scott Bursey. And today we’re delighted to be joined by Don Minehart, who has been shaking up the real estate industry since 1995. Don first made his mark as a project salesperson, brings his expertise to Howard Hanna Real Estate Services. Owning property valuation, structural integrity, and professional home inspection gives him and his clients an unbeatable technical advantage in the market today. Don, welcome to the show.

Don Minehart (02:50)
Thank you, Scott. I’m happy to be here.

Scott Bursey (02:52)
It’s awesome having you here, my friend. And to help our listeners get up to speed, please give us the ninety-second highlight reel of how your career ignited and where you’re pouring your fuel now.

Don Minehart (03:03)
Well, being here in Pittsburgh, I went into real estate when I saw them build an interstate that went from Pittsburgh to the Pennsylvania Turnpike into an area called Cranberry Township, Butler County. In the Pittsburgh area, when you cross over from Allegheny County, which is the county that Pittsburgh is located in, into Butler, the tax assessment or the property taxes drop in half, or pretty close to it. So I saw an opportunity to go into real estate at that time. I had been in sales, and I was fortunate enough to become project coordinator of the first custom-built housing development in that area. After that, ended up doing about five different developments of different types of houses. So that was my education.

Scott Bursey (03:50)
That is an incredible journey. And it’s clear that you’ve been able to pave your own path by combining those technical skills with the sales side of the business. You know, Don, what really caught my attention about you was the way you’ve been able to seamlessly bridge the gap between high-stakes traditional real estate sales and the nitty-gritty technical world of structural integrity and property valuation. Along those lines, curious to know: how does your background in home inspections give you a leg up when you’re negotiating on behalf of your clients?

Don Minehart (04:25)
That’s a great question. And when you can go in and when you have the training of an inspector—and I was blessed because I was trained by very good people—you’re able to go in and basically evaluate a house. So to give you an example, the first place I want to go is the basement, because here in Pittsburgh we have three rivers, which means we have water. The basement fix is not a pretty granite countertop. It is an expense that you’re going to spend that doesn’t do anything for you but stop water from coming into your basement. So that’s my first look. Second, I’m looking at the roof because I know that we’re looking at anywhere from ten thousand to up initially for the buyer.

The other thing that has really—that I really delved into as an inspector that I don’t know whether other inspectors do, but I study building codes and passed the building codes. And I think when you’re investing, when you’re buying, you need to find an agent to work with you that understands building codes. And I, for instance—and I’ll try to be quick about this—there was no building code in Pennsylvania really until 2004. Then they adopted the 2004 code.

Eventually they adopted the 2009 code. In 2009, we didn’t have a code change until 2022, and they didn’t adopt the new code, they adopted the 2018 code. But when you go back and you look at those codes, you see the cumulative effect on housing. And there’s costs associated with that, and there’s reasons for those changes. So if you’re looking at a house, you really should know when it was built and what to look for. And that’s where the advantage comes in.

Scott Bursey (07:02)
Do you find that sellers react differently when they know that you’ve done the inspection work yourself?

Don Minehart (07:07)
They don’t know that. I’m just going out and showing the home. About the only thing that I really can’t do as a Realtor from the evaluation standpoint is operate water or operate their dishwasher. But from a visual—and keep in mind, home inspections are visual observation for the most part—so I’m just visually observing the house and evaluating when it was built, how it was built, who built it, and what I should anticipate. Having worked with—I got my start with custom builders. I worked with—we had eight different ones in our development. So I learned a lot from them. And also having done the Energy Star evaluations for Energy Star for a few of the local builders, I had to go in and examine the house during the pre-drywall. So you see a lot.

Scott Bursey (08:00)
That makes perfect sense. Thank you for highlighting that, Don. And wondering, in your experience, what’s the most common technical issue sellers overlook before listing their homes?

Don Minehart (08:11)
The age of their items and the real value of their items. And quite frankly, we tell our buyers or rather our sellers to have a pre-inspection, despite what I know and see, because I really don’t—anybody that’s worked in real estate realizes that the hardest thing to do when you’re looking to list a home is to tell the seller exactly what you believe. It’s hard because you’ve got other people competing for that listing who are not going to do that.

So I refer—I’d like to look at it and say, let’s have an inspection. And there’s a strong reason for that, Scott, and that is this: if you sell a house and the buyer has very little knowledge of housing, the agent has very little knowledge of the condition of a house, the report comes back. Well, hey, first, we’ve got to worry about what the inspector has said to the buyer.

And that can be very scary. Secondly, we’ve got to worry about how they evaluate that inspection report. And we’ve got to worry about how their agent reacts to that, because we’ve heard where agents said, “We don’t even read the reports, we just go by what the buyer says.” It’s sad. The reality is, if you have the knowledge upfront, you’re not going to move forward to even make an offer on a house unless you know what it’s like. So we find that having that inspection, the seller knows, the seller can disclose better. But more importantly, Scott, if that buyer walks, that property becomes stigmatized. And the seller ends up losing more money than they probably would have had they done the work. The second thing is if I as a seller know what’s wrong and want to correct it, now I’m in control of who I hire. So I can control the cost. And for us, we have a concierge service. We know the contractors. And these aren’t people that are on these different lists; these are people that work mainly specifically for the top agents and get the work done in a very quick period of time and get it done right.

Scott Bursey (10:20)
Don, we’d love your take on where do you see the biggest opportunity for investors to improve property value using smart structural upgrades?

Don Minehart (10:30)
The first thing would be to realize what does today’s buyer want. And when I say that, the question is, or the thing of it is, know your price points. If it’s a one-car garage, you have a limit. If it’s limited closet space or limited storage, you’re gonna have a limited value. If you have—and we all know that to create structural issues to solve a water problem, to solve a roof, to replace windows, these are all things people expect to work in a house. So if you’ve got to put your money into that, you’re wasting your time unless that house was a great value to you, because all those items add up really fast. Also, you have to keep in mind the change in today’s buyer. Today’s buyer wants a home that they can just move into.

They’re afraid of contractors, they’re afraid of problems. They’re willing to pay. If you do the right things to the house and have it prepared, they’ll pay for it. But you really need to know your pricing, where the limits are, and a good price per square foot for your market. What’s it going to cost me to make the changes I want to make? And where am I at in the end? I remember working with a group of investors that contacted me. They looked at the house. I looked at it. I looked at the closet space and I said, “This is not gonna work.” I looked at the kitchen, it was too small. I said, “This is not gonna work.” They bought the house. They made changes to the kitchen to make it look pretty. They changed the bathroom around, and they lost money in the end.

You have to know what the buyers are looking for. The bottom line is you need to know a lot if you’re going to invest without the use of an agent, but if you’re going to use agents, you need to research who you’re using, because they will make you money.

Scott Bursey (12:20)
Thinking about the current market, what is the biggest threat to property valuation you’re tracking right now?

Don Minehart (12:27)
The biggest threat is that most, especially in Pittsburgh, most of the homes were built prior to 2009. So the condition of them and the effect of water on them and the lack of maintenance from people is astounding. And the cost to correct has gone up exponentially, as most people would know: building costs, labor—and it’s tough to find good labor.

The other question is, did I find a good laborer that will actually do the job?

Scott Bursey (12:56)
How are you advising your clients to prepare for that shift?

Don Minehart (13:00)
Best way is to show them a home and teach them what you’re actually looking for, and that way they get into the mindset of, “We’re not just looking for the pretty pony, we’re looking for something that is not going to cost us a lot of money in the long run.” You know, I could walk into the kitchen and say, “Wow, those granite countertops are pretty and the cabinetry’s pretty and that’s a pretty bathroom,” but when I look at the overall cost—and just to give you a quick example, you’ve got investors online. I remember this quick one: agents in the house. I happen to be in the house looking at a house for a buyer. Buyer was not with me. The agent is on a FaceTime phone call with the buyer. And I heard the buyer say to her, “Well, how old is the hot water tank?” She stood there and looked at it and she goes, “Well, it looks pretty new to me.” He said, “Well, how’s the furnace?” She goes, “Well, that looks new too.” He goes, “Were they on the disclosure form?” She goes, “Yeah, they were on there. They didn’t know the ages.” They go, “Okay.” So she walked out of the room.

I looked at the furnace. It was 22 years old. It had a lifespan of 20 years. So I’d say it’s done. I looked at the hot water tank, it was 15 years old. The manufacturer says eight. So I think that’s—well, as a matter of fact, if I had a 15-year-old water tank, it would go, because I’ve seen them cut open.

And I looked at the air conditioner, it was thirty years old. So I’m looking at items that are immediately at about ten thousand dollars.

I look at a roof, another 20. I’m at 30. I look at a water problem, or maybe worse yet, a possible organic substance problem, which people call mold, which you can’t until you test it. And all of a sudden I’m sitting there, maybe a hundred thousand dollars for this $200,000 or $250,000 home.

Am I gonna buy it? No. Did somebody buy it the next day? Yes. Maybe her client.

Scott Bursey (14:50)
Interested to hear, Don, how do you leverage your knowledge of structural integrity to speed up the transaction process?

Don Minehart (14:58)
Well, by preparing the buyer or the seller for what the inspection report will more than likely say, they can already financially make those plans. And we will take it to the point where we will talk to them about what the actual value of the house is. So let me say we did have to replace those items. Okay, well, this is the actual—once you do it, if you called me tomorrow and said, “I need to sell this house,” I’m going to tell you where you’ll be sitting. And if it doesn’t increase the value, then you’ve got to question whether you must want that house really bad if we can’t negotiate it down. But the plus side is when you have a really good negotiator, that changes the game as well.

Scott Bursey (15:38)
Where do you see the market in real estate in Pittsburgh in the next twelve to twenty-four months, Don?

Don Minehart (15:46)
I think you’re gonna continue to see a problem with inventory. And I don’t believe it’s just Pittsburgh. Back in 2008, what happened was the banks basically shut the builders down. In Pittsburgh, we had a lot of what we called mom-and-pop builders. And the developers would go in and develop the land, they’d bring in—and I was involved in this—we’d bring in six, seven builders and build out and sell. That got wiped out. Now you have very, very few custom builders here. And if you hire them, you’re at the high end, you’re in a luxury end. So you end up with—now the name is slipping me, but let’s just say the builder who builds every house, every third house the same: tract builders. And that’s pretty much what you have here in Pittsburgh.

Well, you’re still limited because there’s only so much money they’re going to invest in developing, and their project has to move along so fast that you have limitations in the availability of housing. As I said, you’ve got older housing stock, and a lot of that housing stock has been neglected because what I found in inspecting, which shocked me, is people do not know how to take care of their homes. They just don’t.

Scott Bursey (17:02)
Don, if you could walk us down this path: if you were coaching someone new today, what is the one specific technical skill they need to master to outperform ninety percent of other agents?

Don Minehart (17:15)
Understand construction, understand what you’re selling. That’s really the big thing. I would go back, it’s real simple: type in when did the area change building codes? When those building codes changed, what was the cause and effect? What is the importance of that cause and effect? And where do I go from here? And I’ll just give you a quick example.

When we went in Pennsylvania to the 2018 code, now builders were required to do blower door testing. Now ask an agent if they know what a blower door test is. That could be interesting. But the bottom line is prior to that, you had a few builders here in Pittsburgh that did hire people like myself to do the testing. The interesting thing is when they did it here—I worked with a couple of the tract builders doing that. They were doing Energy Star building. The Realtors knew nothing about it, didn’t embrace it, didn’t care. So the builder ended up dropping it. But the bottom line is if I—and to give you an example, when I even talk about just that one item, I could go into a house built in—well, I did this when I opened the company. I went into a house that was built in 2009. It was a luxury home, very expensive.

I put a blower door test on it, and right now you would have to meet a minimum amount of air changes. I believe—it’s been a while since I’ve been in the business—I believe we’re at five right now here in Pittsburgh. It came in at forty.

That means it changed air 40 times in one hour. So the cost to heat and cool that house was unbelievable. Make a long story short, I found a duct that ran from the fireplace to the exterior of the house. It was bringing in all the cold air it could possibly right in the center of the family room. We closed that off and it changed the scores, and then we did some other things. But the bottom line is, that is an important test. Nobody here’s using it, but the builders now have to do it. So when you see utility bills climbing, especially with these data centers and everyone complaining about energy, having that blower door test, having that house nice and tight makes a big difference. And the effect is insulation: where is it placed? Sealing: did they seal the windows properly, or am I gonna have problems with water coming into those windows? I mean, there’s—

But the interesting thing, Scott, including myself, we don’t refer a blower door test to our clients before they buy the house. That would cause a big uproar in this business. But it is going to be at some point in time a factor. And it should be.

Scott Bursey (19:54)
Thank you for dropping that knowledge for our listeners. And Don, you have dropped a tremendous amount of knowledge today. But are there any final thoughts that you’d like to leave with our listeners?

Don Minehart (20:05)
Once again, the biggest, most important thing is go find an agent who understands the business well, understands a house, how it’s built, understands the costs involved with owning a house and maintaining a house, and is frankly honest with you as to its real value.

I just recently worked with a couple, I showed them quite a few homes. And the reason that we had to look at so many is there were so many problems in the other homes given their price range, we couldn’t buy them. Then eventually we found the right one that was at the right price where it wasn’t going to nickel and dime them to death while they owned it.

One last thing, Scott. I also recently—and I try to stay away from it—I sold a new construction home. I went in and looked at the house before—and this is words for anybody looking to buy—I went in and looked at the house prior to the drywall going up, and I saw gaps that were going to allow water to actually come into the walls.

Complained to the project manager, told him what needed to be done, got a phone call three days later saying the municipality just came through and gave us our permits to move forward with drywall. I said, “Okay, this is the thing, and this is the way I am: we’re gonna come to closing, I’m gonna bring an infrared camera, we’re gonna show where the leaks are because I know where they’re at. You’re gonna put the guy up and his wife up in a hotel. They’re gonna be prepared for this. You’re gonna tear through the walls, you’re gonna correct it, and then they’ll move in.

And it’s gonna cost you a lot of money.”

Just because you think that your officials are looking at these houses, that talent, that knowledge is limited. Hire people. If you’re gonna build, hire people that know what they’re doing. If I was going to buy something, Scott, if I didn’t have a great inspector, I’d be hiring an engineer to look at the house before I spent my money.

Scott Bursey (21:58)
Thank you for that, Don. And Don, for those of our listeners that want to keep this conversation moving, stay in your lane, or collaborate with you, what’s the best way for them to reach you?

Don Minehart (22:52)
You’re gonna laugh at my email address. It’s [email protected]. I don’t care if somebody calls me. I don’t typically answer the phone, but they can leave a message, I’ll call them back. It’s 724-249-4606. I’ll repeat that: 724-249-4606. I am willing to talk to anybody. I love helping people. That’s why when I jumped into this, Scott, not only did I work with custom builders, I honestly went out in jeans. I didn’t try to sell a house. I went out, laid some brick, did some pounding of nails, had them teach me how they build a house. I joined the top appraisal company in Pittsburgh and did a little mentorship with the owner to learn how they do their thing. I did the blower door testing for a company—we did thousands of homes.

I had several people working for me for Energy Star. I personally did over four thousand home inspections. And it’s been a blessed, blessed business for me. And the reason I didn’t get into investing is I’ve been so busy learning things and trying to help people when they buy and sell homes, I just don’t have time to do everything.

I’m happy to help people.

Scott Bursey (24:10)
Don, thank you for joining us today. This has been just a tremendous conversation. We appreciate you.

Don Minehart (24:17)
Thank you. It was my pleasure.

Scott Bursey (24:19)
And to our listeners, we appreciate you. If you received value from today’s episode, please subscribe. We’ll be fueling your tanks with a lineup of elite guests, just like Don Minehart, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.