Is a Bad Inspection Cause for Losing a Home? – Financial Considerations

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in Mortgage

home inspection listHaving an offer accepted on a home is cause for celebration. Unfortunately, even if a seller accepts your offer, it does not mean you’re in the clear. You are still 30 to 60 days away from closing, with plenty of potential for slip-ups along the way. One of the most nerve wracking points during this period is the home inspection.

A poor home inspection report shortly before you are to close on a house can be a deal breaker. Make sure the inspector you choose is reputable and keep your realtor involved. You can even ask him or her to stop by while the inspection is taking place. The bottom line is, you want to do everything in your power to make sure the report is accurate.

That being said, when there are problems, how do you know whether to move forward with the purchase or move on? And what steps should you take to insure you are making the right decisions?

Below is a step by step process of what you can do if you receive a bad inspection report:

1. Evaluate the Report
Go over the inspection report in detail and ask yourself this question: do I really need to fix the problem right away or at all?

Often, home buyers (especially first timers) find that the houses in their price range need a little work. As a result, the inspection reports can seem overwhelming at first glance. The key here is to determine if the issues sited are smaller, cosmetic things you can live with, or major issues that need to be dealt with immediately.

The inspection report on my last home purchase turned up several red flags. Fortunately, all of them were minor items that did not need to be immediately repaired. They included such things as cracked grout, a broken interior door knob, and a missing GFCI outlet. If I had been faced with something more substantial, like replacing a roof or heating system, going through with the purchase would have been a more difficult decision.

2. Determine the Cost
You can receive more information on the potential cost by asking your inspector as well hiring a contractor to take a look. If you aren’t sure who to call, you can ask your realtor or the inspector for referrals.

Make sure you obtain written quotes from any professionals who give you estimates for the work. Not only will they help you in your decision making process, they will come in very handy when it comes to negotiations with the seller.

3. Negotiate
Some buyers are under the impression that they are responsible for all repairs and the costs associated with them. This is not the case. With the help of a real estate agent, a savvy buyer can work the concerns into an amended offer price and/or contract.

There are two ways of doing this:

  • Price Reduction. Ask for a reduction of the buying price so that you have money to make the repairs yourself upon moving in.
  • Put the Repairs on the Seller. Request that the repairs be made by a professional before the closing date.

The purchase of my first home and inspection did not go as smoothly as the second. There were a couple of plumbing issues that need to be fixed as soon as possible. While the seller was interested in reducing the selling price (so they didn’t have to supervise the work), I pushed for having the repairs made before the closing date. Since I was adamant about having the owner make the necessary fixes before I would sign the closing contract, the owner ultimately agreed to accommodate these wishes.

4. Set a Threshold
It is extremely important to remember that you need to feel comfortably with the choices you make. Buying a home is a huge commitment. It is easy to get so caught up in the rush of falling in love with a house, that you forget to keep things in perspective. Think about the following:

  • Possible Long Term Problems: Keep in mind that fixing a problem does not guarantee happiness once you move into the home. For example, mold is a serious issue that can potentially have long-term effects and can be difficult to remove completely. And even if you were able to successfully remove the mold, would you feel comfortable living in a home that has had mold issues in the past? This is a decision that only you can make.
  • Tough Questions: Once you’ve obtained estimates, sit down with all of the paperwork and your home buying budget, and do the math. What is the best possible situation? What is the worst? How far are you willing to go with the negotiations? This kind of reality check can keep you from going overboard and committing to something  that may be too much to handle in the long run.

After weighing the pros and cons, you should have a clear idea of what you’d like to get out of the sale. If the seller is willing to work with you, the details of the contract will be the most important step in the process.

5. Make Sure the Contract Is Clear
Should the seller agree to make repairs before closing, be sure that it states clearly in the contract that they are to be made by a licensed professional. The last thing you want is the homeowner making DIY style repairs. This can lead to shoddy work that will most likely become problematic soon after you move in.

In addition, ask the seller to keep the receipts and any guarantee paperwork related to the completed work, as well as the contact information for the contractor(s) they used. That way, if you have any questions, you know exactly who to call.

6. Take a Final Look
The final walk through before closing is your chance to make sure any agreed upon work was completed. Inspect the problem areas thoroughly. If something was not fixed, it is your right to delay the closing or alter the contract.

Final Thoughts
The process of buying a house is filled with emotional highs and lows. In order to be sure your needs are met, you must keep a clear head. When it comes time for the home inspection, choose your inspector wisely. Look over the report thoroughly and, if  there are problems, remember that you have options. Bring documented estimates to the table during negotiations and request that either the repairs be made, or the asking price be lowered. And remember, if things become too much to handle, you can always move on.

Have you ever had a poor home inspection report? Please share your experiences and tips below.

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{ 2 comments… read them below or add one }

Jerry 2012/11/05 at 12:29 pm

Having a poor inspection doesn’t have to lead to losing the deal. I think if you follow your advice, it’s insurance that you can negotiate your way through the process.

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Zimmy 2013/05/14 at 7:15 pm

We went though the home buying process a couple of years ago and had to pay for a home inspection on four houses. Three of the houses had very poor inspections and were immediately disqualified by us because of major issues with A/C etc. The fourth house passed the inspection with flying colors and we haven’t had many issues with the house. We spend $750 on failed home inspections but might have saved a bundle in the long run.

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