Most home purchase contracts allow the buyer to obtain a home inspection report, even if the Seller is selling as is, and Buyers are more likely to obtain a home inspection report than ever before, even when buying a home as is. So, what should you look for when you receive the inspection and what can you ask the Seller to repair?
- “As Is” Contract Negotiations. With the typical “as is” contract, the Buyer can obtain an inspection and usually back out of the contract if it is unacceptable, but the Seller is not obligated to make any repairs. However, if you have an “as is” contract, a home inspection report can give you the opportunity to negotiate Seller repairs, a repair credit, or a lower purchase price.
- Monetary Cap on Repairs. With a typical contract that does require Seller repairs, there is usually a limit on how much money the Seller is required to spend (usually a percentage of the sales price or a fixed dollar amount), a limit on what constitutes a “defect”, and a clause which allows the Buyer to back out of the contract if the cost of repairing the defects exceeds the Seller’s limit and the Seller is unwilling to make repairs which exceed the limit.
- Defects. If done properly by a qualified person or company, the home inspection report will usually note every defect in a home, whether or not it constitutes a “defect” under the contract. The inspector’s job is to find everything that is or may be a potential problem, whether or not the Seller is obligated to fix the problem.
- List Repairs by Seller. When reviewing a home inspection report, look at the sales contract language which deals with Seller repairs and highlight those items noted in the report which the Seller is obligated to fix. At a minimum, if your contract requires the Seller to make repairs, you should report these to the Seller and ask them to be made.
- Cosmetic Issues. Most contracts do not require a Seller to repair cosmetic items, such as peeling or chipped paint, paint stains, cracks in tiles or grout, or cracks in driveways. However, cosmetic items can be evidence of potentially worse problems, such as a paint stain being evidence of water damage which may be caused by a roof leak. Be sure to ask the inspector to advise whether a cosmetic item should be cause for concern.
- AC Units and Appliances. Look at the remaining useful life of major components of the home such as AC units, and appliances. Often inspection reports now give an estimated useful life of these items. Even though most contracts do not require the Seller to repair or replace something that is working, if an inspection says the AC unit, or major appliances are likely to need replacement in the near future, that information may help you decide whether the home is worth the price you are paying.
- Roof. Be aware that some insurance companies are now requiring the roof to have at least five years of remaining life before they will insure the home. They may cancel your insurance after you have closed on the home if they do an inspection, their inspector determines that there is less than five years remaining, and you do not agree to replace the roof. Check with your insurance company before closing and ask what their requirements are. If they require information on remaining useful life of the roof, make sure your inspection report includes that and it satisfies your insurance company.
Bottom line: Home inspections can be a valuable tool in negotiating with your Seller or in deciding whether your dream home may become a nightmare.