Bad Home Inspection Results: What To Do
A bad home inspection should not be an automatic deal breaker for a buyer.
- It may be that the seller is willing to make proper repairs or provide a cash credit at closing to cover damages. Such concessions can amount to thousands of dollars that buyer’s don’t have to spend – and should not overlook.
- A properly written home inspection clause can allow the buyer to effectively re-open the negotiating process in the event of a bad home inspection.
- Do not write home inspection language yourself — this is a job for professionals. For details regarding home inspection contract clauses, be sure to speak with brokers or a local real estate attorney.
Home Inspection: Don’t skimp
Should a bad home inspection doom a real estate transaction? If done right, a bad home inspection may actually be the most important consumer tool available to buyers.
At first this may seem like a strange view, but if you look at how the real estate marketplace works you might agree. Let me explain.
Real estate contracts both bind and release
Most real estate transactions are held together by sale agreements written by lawyers for brokers who belong to local MLS systems. These are agreements, which are up-to-date and generally reflect some balance between buyers and sellers.
However, real estate sales are not games, like checkers. As a buyer, your goal – like the seller’s – is not some vague notion of fairness. Instead it is to get the best possible result from a transaction.
In many cases, a sale agreement will include the opportunity for a buyer to have a home inspection within a given period – say 10 days – to disclose any defects with the property.
The problem with such mundane disclosures is that they don’t provide recourse for the buyer if problems are actually found. Instead, such wording simply says you can have an inspection, but there’s no obligation for the seller.
It’s up to you to negotiate what happens after an inspection — if the seller must make repairs or let you end the transaction and get back your deposit.
Satisfaction and a bad home inspection
Purchase contracts in Missouri have an inspection clause, which says the buyer is entitled to a home inspection, which must be “satisfactory” to the purchaser. If the buyer is not satisfied, the deal is off and the purchaser’s deposit must be returned in full.
In this situation, says Successful Real Estate Negotiation, the “contract will be final only when the buyer says the inspection is satisfactory.
“But what standards are imposed on the purchaser? What standards can be imposed? When the issue of satisfaction is raised, who other than the buyer in this case can say what “satisfaction” means?
“As long as the evaluation seems within the realm of logic and good sense — what a “reasonable man” might conclude — courts generally will not interfere.”
It may well be that the home is perfectly fine and that’s great. It may also be that when defects are found the seller will agree to a discount sufficient to “satisfy” the buyer. Or, in some cases, it may be that the buyer will walk away from the transaction.
A bad home inspection turned good
A properly written home inspection clause can allow the buyer to effectively re-open the negotiating process. How will the seller react? That likely depends on the market.
In a strong seller’s market, the owner may not be in the mood to negotiate. An offer with a tough home inspection contingency might be ignored. But — in markets which are balanced or stalled — the reaction may be different. The seller may be very willing to bargain.
Here’s why:
First, the seller is likely obligated to disclose the (now known) defects to the next purchaser.
Second, the next purchase offer may not be as good.
Third, there’s no rule which says there must be a “next” purchase offer anytime soon. Or at all.
Fourth, unless the property is a tear-down, somebody is going to have to repair the property. The real argument is whether it will be the buyer or the seller.
The bottom line
A bad home inspection, whatever “bad” might mean, should not be an automatic turn-off. It may be that the seller is willing to make proper repairs or provide a cash credit at closing to cover damages.
Such concessions can amount to thousands of dollars that buyer’s don’t have to spend – and should not overlook.
Posted by: Carlson Mortgage – a top-rated St. Louis mortgage broker providing home loans in the state of Missouri. We are routinely ranked as a #1 mortgage broker in Missouri on Yelp, Google and Zillow. We can be reached at (314) 329-7314 seven days a week.
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