My focus for this week’s blog is an important one for both buyers and sellers — the home inspection. I will actually devote a couple posts to this topic because there is a great deal of information for both sides (buyers and sellers) in the real estate transaction. I am going to start with The Buyer’s Guide to the home inspection because there are a few more details buyers need to be aware of during the inspection process.
This step in the real estate transaction can be stressful and frustrating for both buyers and sellers. The parties essentially negotiate the repairs and inspection responses just like the purchase contract, and there are times that the inspection results in the deal falling through. We don’t want that to happen and our clients don’t want that to happen either, so I thought it would be helpful to share some guidance on navigating this step and getting closer to the closing table.
The inspection process happens after the buyers and sellers reach an executed purchase contract, meaning an agreement has been reached for all terms regarding the sale of the property. There is a section in the purchase contract that states how many days buyers have to get the inspection done and send a response to the sellers. Sometimes seven days is the time frame. Other situations call for fourteen days. In some cases, as many investors experience, inspection rights are waived because the property is being gutted and renovated by a licensed contractor. It just depends on what is agreed to in the contract. Buyers need to respect the allotted time frame and make the call to the inspector as soon as possible because they are responsible for “kicking off” the inspection process. The buyer’s agent should stay on top of this as well.
The buyer’s agent can recommend several inspectors that are well known in the community, or buyers can search themselves — it’s completely their choice. Just make sure the inspector is licensed and specializes in home inspections. Buyers need to call the inspector, get the inspection scheduled, and then let the sellers know when it will be so they are in the loop as well.
Typically, if buyers are in town, an inspector will recommend they meet at the property for the last 30 minutes or so of the inspection. This is an ideal time for the inspector to go over things he may have found in the house, point out areas in need of repair, and answer any questions. The buyer’s agent may go as well, but it is not necessary. In my opinion, this time is crucial for buyers investing in a property that needs some work. The home inspector is a great resource for information and estimates in addition to your contractor. Having read and presented many inspection reports, I can promise you it will be a smart decision to walk the property with the inspector if you have the opportunity to do so.
While the inspector is at the home, he or she will review the following:
- Room-by-room review
- Exterior home components
- Electrical systems
- Foundation and structural components – both interior and exterior
- Heating/air conditioning systems
- Plumbing systems
- Attic/basement/crawl spaces
A day or two later, the buyer’s agent will receive the inspection report, review it, and then present its findings to the buyers. Fair warning: these inspection reports are typically 20-30 pages. They’re very thorough and include details from every little finding throughout the home.
Here are a few of the items an inspection report might include:
- Maintenance problems such as rotting decks, paint chips, water damaged ceilings, etc.
- Electrical problems (wiring, malfunction, etc.)
- Drainage problems
- Roof leaks and defects from aging
- Poor ventilation, especially in an attic. Be sure all vents are working properly.
- Excess air leakage due to poor weather stripping and caulking around fixtures.
- Failed window seals, which are routinely found with dual pane windows.
- Environmental contamination caused by asbestos, mold, formaldehyde, lead paint, radon, soil contamination and/or water contamination.
- Faulty lines in water heaters, overflow piping and/or hazardous flue conditions in a fireplace.
Many buyers are put off by how many items are noted in the inspection report. Your agent should go through the report with you and explain anything that needs an explanation. The majority of items in the report are just minor things to monitor or maintain. The items we are concerned about in the sale transaction are the safety and defect items.
If an inspector finds issues in the home that are safety concerns or defects in function, those should certainly be on the inspection response and must be fixed by the sellers. Technically, those are the only items that have to be fixed; otherwise the buyer can walk away. In an investment situation, the repair process could be a little different because many investors conduct inspections for informational purposes only. The sellers are not required to fix anything. Additionally, some properties are sold “as is” and sellers will not provide any repairs. Be aware of that prior to negotiating the sale.
Once the buyer’s agent reviews the report and discusses it with the buyers, the inspection report is prepared, signed, and sent to the seller. Sometimes it works out that the seller accepts the first response, but often the parties will go back and forth a bit to make sure everyone is satisfied with the terms for repairs.
After an agreement is reached, the sellers are responsible for having necessary repairs made in the time frame given. Since this post is directed at buyers, my advice is to ask for repairs to be made prior to closing so everything can be looked over once more at the final walk-through. Also, it is smart to ask for invoices from the sellers for all repairs made to have proof and resources to call in case something goes wrong after ownership is transferred.
For a few more inspection tips check out this article on the 5 Biggest Home Inspection Mistakes. Check back next time for the Seller’s Guide to Home Inspections.