Step 12 to Buying a Home: Tips for Reading the Inspection Report
Once you have the inspection report, you need to review it thoroughly.
Don’t be surprised if it’s 30 + pages long with more than 25 “issues” that need to be repaired. This is typical. I’ve never seen an inspection report that didn’t have at least 5 items that needed repair. However, there is a big difference between small mainly cosmetic repairs such as needing to re-caulk a shower or repair a broken microwave handle and large issues such as a sewer back up. Remember, the home inspection is an informational report for you, the buyer, not a to do list for the seller. We should only be concerned about structural issues, safety defects, or appliances/mechanicals not working. Therefore, here are my tips for reading the inspection report:
- Pay attention to issues relating to the electrical, plumbing, roof, foundation, or water intrusion issues as these can be big ticket items to repair.
- If there are any big-ticket items which are concerning to you, decide if you want to have additional inspections performed. For instance, we can bring in a structural engineer, a sewer inspector, an electrician, a pest inspector, etc. If you want to bring in additional inspectors, you’ll be responsible for paying their fees.
- Make a list of items you feel the seller must repair or you’re not willing to go through with the transaction.
- Make a second list of items you’d like the seller to fix, but would be willing to still close on the house without the seller fixing.
- Make a third list of the items you’re OK with fixing yourself or feel don’t really need to be fixed.
Once you’ve done this, email me your list and I’ll review it and suggest changes if you’re leaving out an expensive repair, not asking for enough, asking for too much, etc.
Keep in mind that the purchase agreement states that “the property is sold… “AS-IS” in its PRESENT physical condition” (Residential Purchase Agreement, Paragraph 11), while you have the right to do all inspections, and to ask the seller to make repairs and/or perform repairs, they are under no obligation to do so.
If we do ask the seller to repair items or provide a credit for you to fix the items after closing, credits go towards your closing costs. For instance, if we negotiate a $2,000 inspection credit that amount would come directly off your closing costs. Therefore, you’d bring to closing $2,000 less than originally expected. That way you have that $2,000 to do needed repairs after the closing. The lender sets very specific limits on the credits that may be made by the seller.
Remember that the things on the inspection report which are important are:
- Safety issues
- Structural issues
- Working components such as appliances which are not working.
We should NOT be asking for paint to be touched up, the gutters to be swept out, etc., no home is going to be perfect. Remember, we are concerned with safety issues, things not working, and potential future problems.
Once we’ve agreed on a strategy, I’ll negotiate any repairs and/or credits with the seller’s agent. If there are only a few minor issues which need to be fixed, the negotiation will probably go quickly. However, if contractors or trade people need to be brought in to give estimates, this process might take some back and forth.
If we are able to come to an agreement with the sellers, they’ll almost certainly ask you to formally remove any contingencies (we’ll discuss that in the next section). Any repairs that have been agreed to would need to be completed by the final walk through with receipts proving the work was done sent to us ahead of time.
If we are not able to come to an agreement, you have the right to cancel the agreement instead and get a refund of your earnest money. Keep in mind, as part of the purchase negotiations we might have already asked the sellers to provide a home warranty for the first year. We’ll come back to home warranties in a future section.
Go back to Step 11 to Buying a Home: Tips for Attending the Home Inspection, go forward to Step 13 to Buying a Home: The Importance of Contingencies.