If you’re new to the home inspection process, and unsure how it fits within the grand scheme of a property transaction, a simple online search will present you with a bunch of articles that generally portray home inspection as one of the most pivotal tasks brokered between the buying and selling parties. At the same time, though, you’ll see just as many articles highlighting home inspection contingency waivers as a powerful bargaining chips for buyers in competitive markets.
So how can both things be true? How can home inspection be so pivotal and disposable at the same time? With this post, we hope to provide some nuts-and-bolts context to the dollars-and-cents value of home inspections when it comes to buying or selling a home.
Home Inspection Findings Help Buyers and Sellers Discuss a Property in Tangible Terms
An asking price is, essentially, the sum of a property’s parts—warts and all. It accounts for all of a home’s attractive amenities, like spacious square footage or brand-new, energy-efficient windows, as well as its unflattering features, such as leaky ceilings or outdated electrical wiring. It’s difficult for true buyer-seller negotiations to begin before an inspection has been performed, and in many cases, sellers will hold off on deciding an initial listing price until they’ve conducted a pre-listing inspection, especially in a competitive market where property values are hard to peg.
Before inspection, buyers and sellers are in the dark when it comes to finding points of leverage. A seller may be offering a home with a quality, verifiable renovation history, but until the fruits of that labor are memorialized in an inspection report, they can only rely on word-of-mouth promotion. Buyers, on the other hand, often use prescribed repairs as leverage for lowering asking price, often in exchange for assuming any repair liability identified in the home inspector’s findings.
A Lengthy Inspection Report Can Drastically Undermine Buyer Interest
Real estate novices often fail to distinguish between a property’s aesthetic condition and its structural viability, especially if said property has the benefit of being a newer construction in a nicer neighborhood. In some cases, bidding wars begin before the true contents of a home can be uncovered during the inspection. For example, a home may feature a new metal roof and siding from a trusted local home improvement company, but it may also have a basement with porous hopper windows, leading to an accrual of stagnant moisture and a host of structural weakening concerns.
If a home inspector issues a findings report filled with immediate repair concerns like these, it can severely chill buyer interest, and eventually lead to a great reduction in asking price. This is why buyers, sometimes, use their power to waive home inspection requirements from purchasing agreements as a bargaining chip, so sellers are not forced to account for underlying structural deficiencies.
Specialty Inspections Can Further Prolong the Purchasing Process
A general home inspection should be between 3 and 4 hours long, depending on the home’s history and the number of parties present during the process. However, a general home inspector may not be best suited to make certain determinations, such as termite damage or the property’s radon concentration. In those cases, a specialist is brought in, and when that happens, someone must incur the additional expense. This issue will either be introduced in the negotiation process, or one of the parties will agree to cover the expense in exchange for some concession from the other. Outside of the added time commitment, any significant specialist findings will also affect the asking price and any counteroffers.