By Jon Miller, Realtor®
Home inspections are usually the most stressful part of buying a home after negotiating an agreement with a seller. Many home buyers aren’t sure what to expect from inspections and that can make the home inspection process especially difficult to deal with. The best ways to minimize stress during home inspections is to be prepared, to understand the process, and to understand what to expect from negotiations. There are a few key points to be aware of before getting into the details . . .
- More home sales fall apart during the inspection process than at any other time during the home buying process.
- There’s no such thing as a perfect home. Every home has issues. Some are major issues, some are minor issues.
- Sellers aren’t required to make repairs, provide money for repairs, or fix anything. Those things may be negotiated.
- Homes don’t pass or fail inspections. Inspections are an assessment of the condition of the home.
What Home Inspection Is (and Is Not)
- A Home Inspection is . . .
A professional’s opinion of the condition of the home based on what they can see and operate
- A Home Inspection Is Not . . .
- A Pass/Fail Test
- A list of items that the seller has to fix in order to sell the house or ‘make it right’
- A code inspection (Municipalities each have their own code requirements and it would be impossible for inspectors to know the codes for every town)
- A list of items that are required to update older homes to current standards for new construction
Most home sales are contingent on inspections. For a re-sale home in PA, home buyers will elect or waive various inspections as a part of the original offer and the agreement reached with the seller. In just about any home sale, other than for certain investment properties, home buyers will elect to have the purchase contingent upon home inspections. This allows home buyers to walk away from the purchase after their inspections and get their deposit money back given certain conditions (usually letting the seller know in writing within a certain time period, but you’ll have to look at your contract for specific details).
In the Philadelphia area, most buyers will elect to make their purchase contingent upon the following inspections when purchasing a home . . .
- General Home Inspection
This is a visual inspection of the major components and systems of the home.
- Radon Inspection
Radon is a carcinogenic gas released from rocks in the ground that seeps up into foundations. Test equipment is placed in the home to take measurements of the gas.
- Termite/Wood-Destroying Insects Inspection
Termites and carpenter bees are common pests that can destroy wood in a home.
- Water and Septic Inspections
For homes with wells and/or septic systems (typically in the suburbs, but there are some within the city limits).
In most cases, you’ll have 10-12 days to perform your inspections, get written reports, and provide a written reply to the seller. This is called the Inspection Contingency Period. The written reply can state that you’re accepting the property as-is, terminating the contract, or asking for repairs and/or money toward repairs. Again, this is a general rule and you’ll need to check your contract for specifics.
After the Inspection Contingency Period, you and the seller will enter into a Negotiation Period if you’re requesting money and/or repairs. This period is typically 5 days. If agreement hasn’t been reached, you’ll usually have a 2 day Decision Period to decide if you’d like to accept the property as-is or terminate the contract and get your deposit money back. These are typical, but every home purchase is different so specific details will be laid out in your purchase contract.
What to Expect During the Home Inspection
The General Home Inspection is a visual inspection of the house and it’s components. An inspection of a large detached home can take about 3 hours, an average size home usually takes about 2 hours, and a condo may take as little as a half hour.
Whenever possible, home buyers should attend the home inspection so they can ask questions of the inspector and learn about the house first-hand. If a buyer is unable to attend, as is common for out of town home buyers, they will typically talk with the inspector over the phone after the inspection is complete and follow up with questions after receiving the written report.
The standard language in the PA purchase contract allows for the buyer’s agent, the seller, and the seller’s agent to attend all inspections. However, it’s not a common practice for sellers and their agents to attend inspections in the Philadelphia area. In my opinion, agents have no role at the home inspection. Agents aren’t trained to assess the condition of the home, that’s the inspectors role. Likewise, an agent can’t decide what’s important to you or not important to you nor can they make promises that a seller will make repairs (nobody knows until they’re asked).
The major components and some of the things that inspectors look for are listed in the chart below. This isn’t a complete list but provides an overview of what to expect during a home inspection.
|Area/Item||What do inspectors look for?|
|Site Conditions||Proper drainage to direct water away from the house, cracks in sidewalks and walkways that can be tripping hazards, large branches overhanging the house that can be dangerous, railings near stairs, note the condition and evidence of possible structural damage to retaining walls, porches, patios, decks, fences, and gates.|
|Roof & Attic||Assess the approximate age of the roof and evidence of leaking. Assess the condition of flashing (connection between two materials), note puddling on flat roofs, note weak spots in the structure, note wear/damage to roofing materials, note condition of gutters and drainage. Note conditions in accessible attic spaces including evidence of water penetration and proper ventilation.|
|Structural Items||Note the condition of siding including brick faces and pointing (mortar between bricks), condition of vinyl siding and stucco. Will often recommend further evaluation of stucco by a stucco inspector. Note condition of trim, soffits, and fascia.|
|Heating, Ventilation, and Air Conditioning||Check the age of the system(s), verify that systems are operational, proper ventilation of exhaust gases, note condition of ductwork, note items that can be improved or repaired.|
|Electrical Systems||Note damage to the service line (the cable that brings power from the street to the home), note the conditon of the electrical panel and note issues with wiring in the panel, note the presence of ungrounded outlets, note outlets that are wired backwards, note the presence and visible condition of knob & tube wiring. Note presence/absence of GFCI outlets near water sources and on the exterior of the home. Note functionality of interior and exterior lights and switches.|
|Plumbing Systems||Check water pressure to sinks, tubs, showers and look for proper drainage. Note visible evidence of leaks under sinks, in visible parts of plumbing the carries waste outside the house. Note the age of the plumbing system and type of materials used in system. Note age and functionality of water heater. Note condition of water heater exhaust ventilation system.|
|Kitchen||Test refrigerator, stove/range, built-in microwave, range hood exhaust, and food waste disposal units. Note condition of countertops, cabinets, drawers, and flooring. Note evidence of under sink leaks. Note absence/presence of functioning GFCI outlets.|
|Laundry||Note condition of water supply lines and shut off valves. Note dryer ventilation system in functional. Will often recommend that dryers be vented to the outside if not already. Note absence/presence of functioning GFCI outlets. Inspections don't typically include testing of the washer and dryer.|
|Bathrooms||Note presence of vent or window. Verify that vents take air outside instead of into an interior cavity, if visible. Note condition of shower, tub, counters, cabinets, and flooring. Look for evidence of leaks under sinks. Note absence/presence of functioning GFCI outlets.|
|General Interior||Note condition of flooring, properly functioning doors and windows, presence of ungrounded outlets, functionality of lights and fans, presence of railings, evidence of water leaks. Look for evidence of structural concerns.|
|Foundation, Basements, and Crawlspaces||Note visible items including cracks, evidence of water penetration, ventilation, evidence of damage to visible joints.|
|Windows and Doors||Issues with opening and closing properly; Broken/cracked windows and broken seals (evidence of moisture between panes)|
|Stairs & Railings||Note condition of interior and exterior stairs and railings including loose steps, tripping hazards, and the condition and/or absence of railings.|
|Decks||Note the condition of the deck including rotted wood and potential structural and safety concerns. Note condition of posts and contact with the ground that can cause early decay.|
|Underground Oil Tanks||Note the presence of visible underground oil tanks on the property.|
In many cases, the home inspector may recommend further evaluation of specific items by a specialist. This is common with indications of bigger issues with plumbing, electrical systems, roofing, and heating/air conditioning. It’s also common in the case of potential structural damage (ie, bulging walls, leaning retaining walls, cracked/uneven porches and patios, foundation cracks).
Buyers will sometimes ask their home inspector if they should ask to have an issue fixed by the seller or if they should ask for a discount because of an issue. The answers to these questions are outside of the scope of a home inspector’s area of knowledge and expertise. These questions are best best discussed between the buyer and their real estate agent.
How Bad Is It?
Inspections are tough for many, if not most, home buyers and sellers. Home buyers often leave inspections feeling like they’ve found the worst house in the neighborhood, their bank account will be drained, and that the sky is falling. This is especially true for first-time home buyers, but it’s just as true for people who haven’t bought a home in several years because home inspections become more and more thorough and detailed every year. A home inspection report from the 1990’s may have only been 5-10 pages for a single-family home. A typical inspection report today will be about 30-35 pages long. It can be overwhelming.
It’s important to understand how the inspector will rate the severity of issues. The inspection report will typically include categories similar to those below. It will be helpful to keep these in mind as you go through the inspection and the written report.
|Major Concerns/Defects||Major concerns are generally considered "Material Defects." These are items that are expensive to repair and are either structural or safety issues. If the item is not an expensive repair or significantly de-value the home (ie, several thousand dollars), it will fall into one of the other categories.|
|Minor Issues/Defects & Safety Concerns||These are items that should be repaired but are not expensive and can often be addressed over time.|
|Items to Monitor/Other||Items that require regular maintenance or are likely to need to be addressed over time but are currently functioning properly and in working order.|
|Items needing further evaluation||Inspectors will often recommend further evaluation by a specialist for potentially expensive issues and concerns that go beyond a home inspector's training and level of expertise.|
On the seller side (seller’s will usually get a copy of the report along with requests for repairs or money), sellers believe that the home inspector is nitpicking every little item and expects the home to perfect. The sellers have often been living with these conditions for years and likely don’t feel like the concerns are that important. The inspection report is often a shock. Sellers often disagree with the inspector on the severity of issues, the need for repair, and/or whether or not the issue even exists.
Note on Older Homes – Knob and Tube Wiring
Many older homes have at least some Knob and Tube Wiring. Knob and Tube is the first generation of residential electrical wiring. This wiring method was installed in homes in the early 1900’s through roughly into the 1940’s. Most homes built after that time period would not have knob and tube wiring.
Knob and tube wiring is not grounded so it doesn’t protect appliances and electronics from power surges so it’s recommended that expensive and sensitive items not be plugged into outlets connected to knob and tube. It’s debatable whether or not the presence of knob and tube wiring is a material defect, but it’s not debatable when certain dangerous conditions occur.
I suggest doing research on knob and tube wiring before looking at older homes and looking for indications of knob and tube when touring homes if this wiring method is a concern. Indications include 2-prong outlets and visible ceramic knobs and tubes in exposed areas such as basement ceilings. You can find more information about knob and tube wiring in these article from the International Association of Certified Home Inspectors and the American Society of Home Inspectors.
Another type of wiring that’s often found in older homes is called Fabric-Covered Wiring. This type of wiring can be thought of as the second generation of residential electrical wiring. It was installed in homes from about the 1940’s and into the ’60’s, or so. Like knob and tube wiring, fabric-covered wiring is not grounded and may be indicated by the presence of two-prong outlets. The presence of fabric-covered wiring is generally not considered a defect with the home unless certain dangerous conditions exist.
Negotiating Inspection Issues
Every home inspection is different, but every home has issues that will be noted on the inspection report. It’s more common than not that a buyer will ask for either repairs or money toward repairs after the home inspection. We’ll take a look at negotiation strategies and options next.
There are two main strategies for negotiating inspection issues. One approach is to ask for everything to be addressed. The other is to focus on the material defects, or “Major Concerns.” These are the items that are expensive and either safety or structural issues.
Asking for everything (no matter how big or small) often seems the best approach from a buyer’s perspective because they want as much as possible to be fixed. It’s an aggressive approach that usually results in putting the seller on the defensive and in a position where they fight on every issue and, ultimately, offer very little. This approach may be more effective in a buyer’s market, but in a seller’s market or for a popular property it may be easier for the seller to sell to someone else.
The other approach is to negotiate the items noted as “Major Concerns.” These items are things that a seller would need to repair or disclose to another buyer if the first sale falls through. Generally, this is the more effective approach as it focuses on the items that just about any other buyer would also ask for and it’s relatively easy to make a case for repairs or money because the knowledge of these issues devalues the property.
Previously disclosed and visible issues can be tricky. In general, it’s best to factor these into the original offer rather than to attempt to negotiate them after the home inspection. The response from many sellers is “We told you about this, why are you negotiating it now?” The same rule of thumb goes for items that are visible to the naked eye and should be noticed when touring a home (ie, a large visible stain on a living room carpet).
As a general rule, if it’s a seller’s market and the seller had other offers a buyer may be able to negotiate less than they could in a buyer’s market where sellers have few buyers to choose from. The seller isn’t required to make repairs or provide money, it’s whatever is agreed upon by the buyer and seller.
Operational, But Old
It’s fairly common that an inspector will note an item that’s old, even beyond it’s useful life expectancy, but functioning properly. As a general rule, age is not considered a defect since it is operational. Negotiating repair or replacement of something that’s functioning properly is typically an uphill battle. However, if a seller has disclosed that an item is old or it’s clearly visible, it can be best to make an initial offer that includes a remedy.
Further Evaluation & Estimates
Most home inspection reports will include recommendations for further evaluation of certain items by a specialist like a plumber, electrician, and/or roofer. In many cases, there may be only an indication of an issue or it can be simply to gather information about the condition of a system that is beyond the scope of a home inspection.
It’s important to note that recommendations for further evaluation do not necessarily mean that there is a definite issue that needs to be addressed. This is a critical detail when negotiating repairs. Some buyers will request that the seller bring in the specialists to perform the recommended further evaluation. Inspections are part of a buyers due diligence so further evaluation is best performed by the buyer (and certainly within their agreed upon time periods).
Buyers will typically do best in negotiations with the specialists opinion in hand. Asking for a repair with only a recommendation for further evaluation from an inspector is typically less effective as there may not be an issue to repair.
Some inspection reports will include estimates for repairs. While these estimates may be only ballpark figures, they can be extremely helpful in negotiations. Be sure to ask if your inspection report will include estimates before scheduling your home inspections if these estimates will be important to you. Whether or not estimates are included, you may want to get estimates from specialists during the Inspection Contingency Period.
Repairs or Money?
Deciding how to remedy concerns is an issue of it’s own. Buyers tend to prefer that sellers make repairs and sellers tend to prefer to deal in money. Here’s a look at some things to consider with each approach . . .
Seller Makes Repairs Prior to Settlement
- This may delay settlement due to scheduling contractors
- The buyer may not be happy with the work and that will cause issues
- The seller may not be able to pay for the repairs before settlement, though sometimes they can be paid with the seller’s proceeds from settlement
Money for Repairs
- Money toward repairs is typically provided as a credit by the seller toward the buyer’s closing costs at settlement. This allows the buyer to keep more money in their pocket to make the repairs.
- Lenders allow the seller to pay up to 3% or 6% of the purchase price toward a buyer’s. If the seller is already paying the maximum amount of seller assist they aren’t allowed to pay anything more toward the buyers closing costs. In that case having the seller make repairs may be the only option.
- If having the seller provide a credit toward the closing costs isn’t an option, it may be an option to reduce the price however taking this route will save a few dollars off of a monthly payment, but it doesn’t provide the funds to make the repairs anytime soon.
Home Warranties are additional insurance plans that can be purchased by sellers, buyers, or homeowners. Think of a Home Warranty as an extended service plan that you might buy with an electronics purchase. Some things will be covered and others won’t be covered so it’s important to fully understand exactly what’s covered and under what conditions. The purchase of a Home Warranty may be a way to deal with some issues that come up during the inspections. Online reviews for home warranty companies are mixed, at best, so I recommend checking into those before deciding if this is an option.
Choosing to Walk Away
In some cases, buyers choose to walk away from a purchase. In fact, more home sales fall apart during the inspection period than at any other time during the home sale process. The issues may be too big to take on and/or an agreeable solution with the sellers may not be reached. The PA Standard Agreement for the Sale of Real Estate (the purchase contract) includes the details on the conditions that allow a buyer to terminate a contract and get their deposit money refunded. It’s critical that all conditions are met if this option is chosen.
Before terminating a contract, there are a few questions that buyers should consider. As an agent, it’s not my place to say what’s important to a buyer but I have found that asking these questions can be help buyers make the right decision for them. In my opinion, that’s the most important thing.
- Is the issue a “Major Concern?”
- Is the issue common in the area and price range? This will be good to know because if it’s likely to come up again it’s best not to find yourself in the same situation again.
- What are your options? When terminating a contract it means starting over again. If it’s a seller’s market and you’ll have difficulty finding another house (and will likely end up competing with other buyers for those homes) that can be an issue.
- Is it about the concerns on the report or is it about “winning” the negotiations? It’s up to you, not your agent, to decide which is more important to a buyer, but taking a step back when things have gotten heated (which is often the case with inspections) can be helpful.
- Was the issue known? Was it factored into the asking price or the original agreement? If so, there may not be a lot of leverage in negotiating these issues after the inspection.
- Did the seller have other offers? Seller’s who’ve had multiple offers on their home have a lot of leverage in negotiations compared to a seller whose home has sat on the market for months and months without interest.
Home inspections are typically the most stressful part of a home purchase. Understanding what to expect during the home inspection process, how home inspections work, and what your options may be for dealing with issues can help minimize that stress. There will be issues discovered by inspectors on every home so expecting that a home inspection will go perfectly smoothly isn’t realistic. Being prepared and working with your inspector and agent to determine the best course of action for you will help make sure you’re on the right path.