When to Walk Away After a Home Inspection
Mon Dec 14 2020
A home inspection is an essential part of buying a house. This part of the process protects home buyers from unknowingly purchasing property with expensive, hidden issues.
Sometimes a home inspection reveals problems that sellers don’t want to fix and are deal breakers for the buyer. But how can you tell when an inspection unveils a true lemon?
Let’s take a look at when experts say it’s time to walk away from a property after a home inspection.
What Is a Home Inspection?
A home inspection is a non-invasive examination of a real estate property’s condition. The home buyer typically hires the inspector after their offer on the house is accepted.
The inspector looks the home’s structure and systems, including:
- HVAC units.
- Electrical panel.
The inspector will examine the roof for deteriorating segments and look for water marks on interior ceilings which may indicate leaks. They’ll also check out the foundation for damage or cracks that could indicate serious structural issues for the home.
Inspections also detail the age and working condition of appliances, including the refrigerator, range, built-in microwave, and water heater. If a washer and dryer are included in the sale, the inspection will list those in the report, too.
The inspection also notes evidence of infestations, whether that is termites or other bugs and rodents.
What to Expect In a Home Inspection Report
Few homes will come away from an inspection without any issues. The general rule is that the older the house is, the more line item issues a home inspection may reveal. But even new homes may have some problems in the inspection report.
In other words, it’s totally normal when a home inspection report notes some issues. In most cases, problems in the report are used for negotiation: the buyer can either ask for the repairs or a credit in escrow to reduce the price of the house.
Homes are sold “as is” are the exception. This means the seller knows there are things wrong with the home and may even disclose most of them at the onset of escrow (if not before). In “as is” sales, the owner is less likely to negotiate on items already disclosed or noted in a report because they have likely priced the home to account for these issues. When dealing with an “as is” property, buyers should use the inspection report to confirm existing issues and determine if the price of the home makes sense for the work that needs to be done.
Things that Fail a Home Inspection
It’s important to understand that the inspection report isn’t a pass/fail type of document. It methodically names systems and appliances and their condition. It details problems so that homebuyers have the information to make an informed decision.
Some issues are bigger concerns than others and may lead to bigger concerns for homebuyers.
The most common problems that may cause a buyer to walk are:
- Major mechanical issues with the furnace, A/C, water heater, electrical, or plumbing.
- Structural issues, like bowing foundation, split rafters in the attic, and rotted wood.
- Cosmetic issues, like wear and tear to the siding, roof, and decking.
A “failed” report may cause a buyer to walk from the deal, especially if the seller isn’t willing to address the issues. However, sellers are often motivated to negotiate based on requests of the homebuyer’s inspection report.
Reasonable Requests After a Home Inspection
It’s important to manage expectations when making repair requests following your inspection. After a home inspection, you can usually make one of two requests: have the owner fix the problem or get a credit for the repairs in escrow. A savvy realtor can be a big help here: they can help you understand the price of repairs and whether sellers are likely to comply.
“It’s reasonable to expect the seller to fix any deferred maintenance items,” says realtor Kimberly Mann. “Deferred maintenance is any item that the seller should have been taking care of in the home but hadn’t. This often happens when sellers are unaware of what they should be keeping up with.”
It’s usually reasonable to ask for repairs for:
- Simple electrical issues, like changing out old outlets to GFCI outlets.
- Plumbing, like snaking existing plumbing to clear out pipes.
- Termite issues, like tenting the house before escrow closes.
Generally, smaller issues can be dealt with quickly and easily. In most cases, the seller is willing to get it fixed or negotiate a credit.
When to Walk Away After a Home Inspection
We’ll say it again: there’s no hard and fast rule for when to walk away from a home after an inspection. It completely depends on how much you want the home and how willing you are to make the repairs yourself if the seller isn’t willing to negotiate.
As real estate investor Josh Eberly says, “You can technically ask for anything during the inspection period even if the house is being sold ‘as is.’ Though the intent of the seller has already been made, it’s not uncommon for there to be major additional issues uncovered during the inspection. Negotiating this can be of advantage to the buyer because the seller may not want to walk away from the deal.”
As a home buyer, you should have a strategy for the negotiation. Ultimately you have to be comfortable with the cost (or work) of any repairs that a seller won’t do. For someone who is handy, fixing the problem themselves may only require sweat equity and a few dollars in materials or parts. But as the cost of repairs rises, consider whether the value of the home is worth it.
A home that needs a lot of repairs may not get appraised at the value of the selling price. In a situation like this, you may have no option but to walk away from the property because the loan will not fund.
“It can be difficult but homebuyers should be prepared for anything until they’ve had an inspection,” says Jeff Falkowski of House Report Card. “You may need to let the deal fall through or renegotiate after you get the results. The home inspection is another step in the home buying process, not the last step.”
If the seller isn’t willing to negotiate, buyers should consider:
- What is the cost of the repair?
- Are there unseen potential costs with the repair (e.g., fixing one plumbing issue shows a much bigger problem once a professional opens up the pipes)?
- Are you able to fix the problem with sweat equity?
- Can you afford the house plus the costs of repairs?
Once you answer these questions, you’ll be in a better position to practically determine whether or not you should walk away from the house. If you can’t afford it, it’s a money pit you don’t want. Even if you can afford it, it may not be worth the total price of the house plus fixes and you might be better off buying a home that has fewer headaches.
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