What Happens When a Home Inspection Fails?

You’ve made an offer on your home. The sellers have tentatively accepted. At that moment, everything seems like it’s pretty much set and your path to becoming a homeowner has effectively been cleared. Hopefully, you know there are a few steps left in the process, including an important one: you need to run a home inspection.

Technically, you don’t “need” to do a home inspection; there’s no law or rule saying you must. However, once the sale of the home is final, it’s final, which means the home inspection is your last chance to ensure that the property isn’t hiding any structural deficiencies or unpleasantness that could compromise the quality of your investment.

Typically costing a few hundred dollars, a home inspection is designed to catch anything that’s wrong with the property, from foundation damage to faulty appliances, to bad wiring, or leaky roofing. Your home inspection should catch it all. Ideally, the inspection won’t return much of anything—maybe a small fix here and there.

But what happens in the worst-case scenario? What if the home fails the inspection?

Defining Failure

Home inspections aren’t typically pass or fail. There may be regulatory inspections, such as electrical or plumbing inspections, that can ensure your building is up to code, but that’s not the purpose of a home inspection. Instead, the general home inspection is meant to provide an accurate assessment of the current state of the home, including anything that is or isn’t “up to code.” Accordingly, you can define failure a few different ways.

For example, you might define a home inspection failure as one that uncovers any issue with the existing home—but that’s a bad way to define it, since almost any home inspection would therefore fail. No home is perfect, so if your home inspection comes back with perfect marks, you should be suspicious.

You might also define a “failure” as several deficiencies or points of damage that make you reconsider your original offer. This is a more practical, semi-universal decision that’s useful as a tool to decide what to do next.

Your Options

At this point, let’s assume that your home inspection has “failed” by your standards, and there are multiple points of contention with the home. You have several options at this point:

1. Retract the offer. First, you could retract the offer entirely. Even though you’ve submitted a formal offer and your home seller has accepted, there’s almost always a contractual clause that makes this offer dependent on the results of a final home inspection. Because of this, if the findings of the home inspection aren’t satisfactory, you can walk away from the deal without any repercussions. However, it may not be in your best interest to do this; there’s a chance you could get the home for the price you originally offered, with everything fixed. Accordingly, this option is usually reserved for truly egregious cases where fixing every issue is unlikely, unreasonable, or uneconomical.
2. Proceed as planned. If the home inspection hasn’t found anything major, you might consider going along as planned. It’s usually worth asking for repairs or compensation (as you’ll see from the next set of options), but if the only issues are small ones, it might save time and effort if you forgo the negotiation process. Think carefully before you finalize this decision.
3. Request fixes. The most common option for home buyers is to request that the seller correct all issues that the home inspection found. If this is the course you choose, you can negotiate a timeline for the repairs and maintenance. If the home seller accepts, they’ll be responsible for making all the corrections within that timeframe so that the purchase can continue as planned (at the original price). The home seller may also refuse to make the changes necessary; if that’s the case, you’ll have the option to withdraw your offer or proceed.
4. Negotiate a lower price. Instead of negotiating to have the repairs done, you could also request that the seller decrease the original sale price. This is usually the best option if you’re in a time crunch and want to sell the home quickly, or if the seller doesn’t want to be bothered with the logistics of getting the repairs done. If this is the case, get a quote for the repair work from at least three different contractors. Average them out, and request that amount for the repair work to come off the original home sale price. If the home seller balks at that amount, back up your request with the evidence.

Of course, as you’re negotiating, you might also be able to negotiate to have some of the repairs done—rather than all of them—or work on finding a more agreeable price point between you. The post-inspection negotiation process doesn’t have to be black-and-white.

Knowing the Value of Repairs

It’s also worth noting that not everything that comes up in a home inspection is equally concerning. If there’s a problem with the foundation of a home, for example, it should raise more red flags than a bit of paint flecking off on the siding. The home inspector’s job is simply to report what’s there; it’s your job to determine where you’re willing to compromise and where you want to stick to your guns. Your home inspector will likely be available to answer any questions you have about the report, but it’s a good idea to take some of your own time to research the problems your home is facing, and learn about them so you can make a more informed decision.

If you’re confused about the home buying process, or if you’re intimidated, don’t worry—it’s a common feeling for first-time homebuyers. If you need a bit of assistance finding the right property for you, or if you’d like a better way to find properties that fit all your needs, contact Green Residential today; we have all the experts and the years of experience you need to make the best decision for your family.