Mortgage Daily

Published On: December 19, 2022

A poor house inspection should only sometimes deter a buyer.

  • The seller may be willing to make the necessary repairs or issue a cash credit at closing to offset the damages. These concessions might amount to thousands of dollars the buyer does not need to spend – and should not be overlooked.
  • A properly drafted house inspection clause might let the buyer reopen negotiations in the case of a negative home inspection.
  • Do not write home inspection language yourself; this is a task for experts. Consult brokers or a nearby real estate attorney for specifics about house inspection contract provisions.

Home Inspection: Spare No Expense

Should a poor house inspection derail a real estate deal? A poor house inspection may be the most important consumer tool accessible to purchasers if conducted properly.

This may sound unusual at first, but if you consider how the real estate market operates, you may concur. Let me clarify.

Property Contracts Are Both Binding and Releasing

Most real estate transactions are governed by sale agreements drafted by attorneys for brokers who are members of local MLS systems. These contracts are current and often show an equilibrium between buyers and sellers.

However, real estate transactions are different from games such as checkers. As a buyer, your objective, like the seller’s, is not some abstract idea of equity. Instead, the objective is to maximize the outcome of a transaction.

In many circumstances, a selling agreement would allow the buyer to conduct a home inspection within a certain time frame to reveal any issues with the property.

The issue with such commonplace disclosures is that they only provide remedies for the buyer if genuine issues are discovered. Instead, the language states that you may conduct an examination, but the seller is under no duty to do so.

You are responsible for negotiating the outcome of an inspection, including whether the seller must make repairs or whether you may terminate the deal and receive your deposit back.

Overcoming a Poor Home Inspection

As a purchaser, you desire more robust inspection language.

It may be proposed at this point that a different clause is required. For instance, the inspection provision may provide that you have the right to a professional house inspection. If any damages are discovered, the seller must either make the repairs or pay a certain sum, such as $3,000, to remedy any concerns.

Is this language more refined? Yes, but it still leaves some gaps. The owner may undertake repairs using inexpensive components. Or the repairs are performed with little regard for craftsmanship.

Also, by providing a $3,000 closing credit, the seller can eliminate house inspection concerns even if the house inspection reveals that $8,000 in repairs are required. The revised language does not let the buyer terminate the agreement without forfeiting the deposit.

Good and Poor Home Inspection

This section stipulates that the buyer is entitled to a house inspection that must be “acceptable” to the buyer. If the buyer is dissatisfied, the transaction is canceled, and the deposit must be refunded.

According to Successful Real Estate Negotiation, the deal will only be finalized if the buyer confirms that the inspection was satisfactory.

“However, what requirements are put on the purchaser? What standards are enforceable? Who else but the consumer can define “satisfied” when the subject of satisfaction is brought up?

“As long as the judgment appears within the range of logic and common sense — what a “reasonable man” could infer — courts will normally refrain from interfering.”

The provisions in the first two attempts at house inspection wording benefitted the seller. While the third try favors the purchaser. Is this unfair? Who says?

The residence may be flawless, which is excellent. However, when flaws are found, the seller may agree to a significant reduction to “satisfy” the buyer. Or, in some instances, the buyer may withdraw from the purchase. 

A Poor House Inspection Turns Good

A properly drafted house inspection provision might allow the buyer to reopen negotiations. What will the seller do? It depends on the market.

The owner may be unwilling to bargain in a market dominated by sellers. A bid with a stringent house inspection contingency may be rejected. In balanced or stagnant markets, however, the response may be different. The vendor may be quite willing to negotiate.

This is why:

First, the seller must likely disclose the (now-known) flaws to the subsequent buyer.

Second, the subsequent acquisition offer might be inferior.

Third, no rule dictates when the “next” purchase offer must be made. Or at all.

Fourth, unless the property is a complete wreck, somebody will have to fix it. The actual debate is whether the buyer or seller will initiate the transaction.

The Conclusion

Whatever “poor” may entail, a poor house inspection should not be an automatic deal-breaker. The seller may be willing to make the necessary repairs or issue a cash credit at closing to offset the damages.

These concessions might amount to thousands of dollars the buyer does not need to spend – and should not be overlooked.

Do not write your house inspection language; this is a task for experts. For further information on house inspection contract terms, consult with brokers or a local real estate attorney.

What Are the Mortgage Rates Today?

Current mortgage rates continue to make purchasing a (thoroughly examined) home an excellent investment. Compare mortgage lender offers today.


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