The Home Inspection Process: A Guide for Sellers and Buyers

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The home inspection is a crucial part of any home sale and purchase transaction, and for good reason. The buyer needs to know that he’s not buying a potential money pit and that there are no unsafe structures at the property before he hands over the purchase money. For the seller, understanding the home inspection process is an opportunity to fix anything that could scupper the deal and secure a top-dollar sale price. So what happens at this mysterious inspection, and what can you do if it throws up a red flag?

Let the Buyer Beware!
The legal framework for buying and selling real estate comes from British common law, which operates under the doctrine of caveat emptor: let the buyer beware. Caveat emptor means that the buyer has a duty to investigate the property before closing. The seller, on the whole, does not have to disclose any information about the property he is selling, good or bad.

Of course, this is a simplistic view and state law has intervened over the years to water down the caveat emptor doctrine. Today, most sellers make disclosures about the property, such as whether the home has flooded in the past and when the furnace was last serviced. Federal law also requires mandatory disclosure about health-harming substances such as mold and lead paint.

The problem with disclosures is that a seller only has to disclose problems that he actually knows about. Sellers do not have to poke around the roof or go deep into the foundations to uncover any problems with the property. Many sellers will not spot problems, especially those that are invisible to the untrained eye. That’s why 84% of home buyers hire a professional home inspector to put the property under the microscope.

How it Works

Once you have signed the contract, inspections usually happen within five or 10 days. The home inspector will arrive at the seller’s home, often with the purchaser in tow, and spend two or three hours looking at it. Here’s a summary of what the inspector is looking for:

• A home inspector makes a visual inspection of the property. He examines the structure and components of the home and notes any structural, mechanical, and other defects. Expect him to open closets, turn on faucets, run the washer, fire up the heating and wander through the basement.

• He will not break open walls, check for radon or other noxious substances, or verify whether the home is building code compliant. He’s not checking whether the house is legal or is worth the price the buyer is paying for it. The inspector is simply interested in the “big picture view” — the safety of the structure and the function of the home’s components.

• The American Society of Home Inspectors has issued a set of rules that dictate what an inspector must inspect and how he should report his findings. In theory, only ASHI-certified inspectors are required to follow the ASHI code of practice, but many states have endorsed ASHI’s guidelines as the benchmark for all state-registered home inspectors. Thus, a home inspector’s report will almost always cover the following components of the home: heating and air conditioning systems, electrical systems, plumbing, roof, attic, walls, ceilings, floors, doors, windows, foundation, basement, insulation and the exterior and structure of the home.

• Many inspectors offer extra services such as mold testing, radon testing, and energy audits — for an additional fee.

What Happens if the Inspector Finds a Problem?
After completing his inspection, the home inspector will prepare a professional report with color photos of his findings. Reports can run to 20 or 30 pages. If there are problems, the home inspector will describe the condition in his written report. The report will highlight defects that need fixing immediately and minor problems that could lead to more serious conditions down the road. If he suspects a defect that is not readily apparent from his inspection, the inspector may recommend follow-up action, such as an inspection by a structural engineer or pest control expert.

Remember, the home inspector represents the person who hires him. In most cases, this person is the buyer. Therefore, the seller may be the last one to learn about any problems that could potential wreck the transaction. It sounds unfair, but most states enshrine the concept of client privilege and prevent the home inspector from disclosing his findings to anyone other than his client.

No home is perfect — not even a new construction home — so the chances are the home inspector will find something. Before closing, the buyer needs to decide how serious the problems are and what she is going to do about them.

Home Inspection Contingencies in the Sale and Purchase Contract
A standard purchase offer typically includes one or more inspection-related contingencies. Sellers will, on the whole, accept a home inspection contingency as few buyers — and no mortgage company — will proceed without one.

A home inspection contingency exists to protect the buyer. If the inspection reveals any problems, the buyer can typically do one of five things, depending on the language of the contingency:

• Approve the report and move towards closing.

• Cancel the contract and have his earnest money returned.

• Ask the seller to carry out the repairs before closing. If the seller agrees, the deal moves forward. Otherwise, the buyer can cancel the contract.

• Adjust the price or ask for a credit at closing in lieu of repairs. This puts cash in the pot for the buyer to do the repair work after closing. It’s usually a good option for buyers and sellers as there’s no argument about which repairs are being done or whether they are done correctly. Also, a repair credit means the home sale will close on time. Some contracts provide for an automatic repair credit up to a specified value, for example, $1,000, or up to a fixed percentage of the purchase price. In all other cases the seller must approve the price deduction or credit and the buyer may cancel the contract if the seller does not agree.

• Extend the inspection contingency so the buyer can carry out further inspections recommended by the report.

If the buyer wants to walk away from the deal, the standard home inspection contingency contains a mechanism for her to do so. Usually, the buyer must give the seller notice and a copy of the inspection report, highlighting the areas of material concern. The seller can then fix the problem before next listing the home for sale.

Advice for Home Sellers
As with any contingency, a home inspection is an opportunity for the buyer to walk away from the deal if substantial problems are found. As a home seller, one of the smartest things you can do is hire a home inspector before you list a home for sale. That way, you avoid any nasty surprises further down the line. Hiring an inspector up front gives you the time to fix any problems so the price you accept for the home is the price you receive at closing, without having to accept a deduction for unexpected repairs. Looking to sell a home in Las Vegas, Henderson, North Las Vegas Nevada? Call 1-800-805-8354.

A Final Word
The best advice for both parties is — check your ego at the door. A home inspection is an information-gathering process. It’s not about squeezing a big discount from the purchase price or pushing through a home sale transaction when the property needs more repair than the buyer expected. Understand that repair issues are a fact of life, and be prepared to compromise, and your deal should go through a lot faster and with a fairer outcome for everyone.

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