The home inspection part of home buying can be a nail-biting time for both sellers and buyers. Each party wants the inspection to go well so the purchase transaction happens. Of course, buyers want to make sure they’re not buying a property with major defects that will cost a lot to fix. And sellers might be wary of some kind of finding that will kill the deal. Realtors advise that a home inspection is a smart contingency that you don’t want to skip, even in a hot housing market. After making your initial offer, it’s the next critical piece to the home sale process.
Taking the home inspection seriously doesn’t mean it has to be stressful. In the larger picture of real estate, a failed home inspection is responsible for just 15% of failed home transactions. According to Zillow, here is the breakdown of all major reasons transactions fail:
∙ Money and mortgage issues: 23%
∙ The buyer changed their mind: 21%
∙ The purchase was contingent on the sale of the buyer’s home and the home didn’t sell in time: 17%
∙ The buyer backed out after the inspection: 15%
∙ The buyer wasn’t serious: 15%
What Causes Home Inspections to Fail?
Major issues that cause a home inspection to fail involve any one or more of the following problems:
∙ HVAC issues
∙ Roofing issues
∙ Window issues
∙ Foundation or structural problems
∙ Plumbing or electrical problems
∙ Mold
∙ Termites or other pests
∙ Drainage problems
∙ Toxic materials (asbestos, radon, lead-based paint)
∙ Building code violations
The cost to address these types of problems could be in the hundreds or thousands, depending upon the extent of disrepair.
Sellers Can Prevent a Failed Home Inspection
Many Realtors recommend that sellers get a pre-listing home inspection. This is a home inspection ordered by the sellers so that they may get in front of any major issue before putting their house on the market. If there are any HVAC or roofing issues, for example, they are likely better off taking care of the repairs before the house goes on the market. Once a buyer’s inspector finds defects, it opens the door for negotiations, which could mean lowering the sale price or satisfying a request with more extensive work. Note that whether the inspection is ordered by the seller or the buyer, any discovered defect must be relayed to future buyers.
How to Deal with a Failed Home Inspection
Remember that the purpose of a home inspection is to ensure that the home is functional and free of major issues such as those listed above. Things that require minor repairs should not be considered deal breakers. Stay calm if your inspection report lists a major problem. As a buyer, it’s in your best interest to negotiate for repair, replacement, or compensation for major defects. The seller is likely to negotiate with you if they don’t want to go through the hassle and time of killing the deal and looking for another buyer. Be specific about repair and replacement requests. A seller may prefer instead to either lower the price or offer some kind of monetary compensation at closing instead of doing the actual repairs. Your Realtor will help you navigate the options. In a super competitive market, a buyer may still choose to buy a home “as is” if the seller is unwilling to negotiate.
Should I Consider Waiving the Inspection Contingency in a Hot Housing Market?
Both small and major cities experienced fierce buyer competition in 2021. This caused many buyers to waive certain contingencies in order to appear more attractive to sellers in multiple offer situations. Zillow reported that 65% of sellers received at least one offer that waived the inspection contingency. But 88% of buyers said they went through a home inspection before their successful home purchase. That discrepancy means that waiving the inspection contingency doesn’t make a buyer a shoe-in to win over other offers. And it shows that most buyers want to ensure they’re paying for a sound home before signing the dotted line.
Real Estate Term of the Week
Major Defect: A condition of a system or component that renders it non-working, non-performing, non-functioning or unsafe, and requires a professional contractor to further evaluate and repair, correct, or replace.