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Realities of Real Estate: The rules of the road for a home inspection

As we get into spring, a lot of homes will be going under contract. But getting your house under contract isn’t a guarantee that it’ll get to settlement.

The inability of a buyer to secure financing can derail a purchase, but the biggest bone of contention that comes up is often the home inspection. More than just about anything, home inspections are the leading culprit in blowing a deal.

At times, there are legitimate reasons for a buyer to withdraw. However, all too often, problems arise because the agents, buyers and sellers are unclear about how the process should work. Home inspectors themselves can also contribute to creating an issue by overblowing the significance of flaws discovered in a house. Consequently, here’s how home inspections are commonly handled.

Depending on your contract, home inspection requirements can demand different levels of what a buyer will deem acceptable. For a basic home inspection, a buyer will want to determine that all the structural, mechanical, electrical and plumbing aspects of the home are in proper order.

If you have a well, septic system or fireplace, a buyer may also want to have special inspection contingencies regarding those systems. For an older home, you could also expect inspections for environmental issues, like asbestos. Regardless, what the buyer is looking for should be clearly spelled out in the contract.

The key is to make sure everyone understands what the buyer is looking to inspect, and what the seller might be liable for, should something need fixing.

For instance, most contracts include a pest inspection. In the Maryland Association of Realtors contract, it states that if treatment or repairs should be needed, as a result of termite or wood-destroying insects, the seller would be responsible for the cost, up to 2 percent of the purchase price of the home. So, if it’s a $400,000 home, the seller may need to pay up to $8,000 for repairs or treatment resulting from bug problems.

In reality, all that may be required is a termite treatment. For most homes, this expense is usually anywhere from $700 to $1,000.

Many other inspections, like well or septic tests, normally have limits on what the seller must spend for repairs. Sellers should be aware of these limits, and be prepared to accommodate the worst-case scenario. Chances are that you won’t need to drill a new well or replace your septic system. After all, you been living in the house; you know if your toilet flushes properly and what the water quality is like.

Nevertheless, a home inspector may find problems that you aren’t aware of, and sometimes, they can be costly.

In addition to knowing your potential financial exposure, sellers and buyers should also be clear about the scope of a home inspection.

First off, the purpose of an inspection is to find “significant” structural, mechanical, electrical and plumbing defects in the house. The key word here is “significant.” Buyers and sellers tend to have a different idea of what constitutes “significant.”

A home inspection is not meant to address anything aesthetic. Beauty is in the eye of the beholder. If, as a buyer, you don’t like the black walls in a kid’s bedroom, that doesn’t constitute a significant defect in the house, nor do things like scrapes, scratches and stuff that would be considered routine maintenance.

As a buyer, you should have considered all those things up front when you decided what to offer on the house. The home inspection is also not your second chance to go back and try to renegotiate the price of the house. Any repairs a buyer wants should be directly related to legitimate home inspection issues as defined in the contract.

It’s important to note that a home inspection is not a punch list. If you’re buying a 50-year-old house, you can’t expect the seller to go through and fix every little flaw or defect in workmanship.

The home inspection also isn’t an opportunity to bring an old house up to date with current zoning standards. So long as it doesn’t present a safety hazard, what was acceptable in 1910 doesn’t necessarily need to conform to how things are built today. This is especially true for old and historic homes. They’ve been sitting there a long time; many of them don’t have level floors; there’s frequently much that’s not straight or square.

For a home inspection, the question is do these things represent a structural problem, or are they just the nature of the beast.

We’ve found that there’s a pretty simple rule of thumb to home inspections – everything should work and function as it was intended. The dishwasher should wash dishes; the hot water heater should make hot water and so on.

That doesn’t mean the mechanicals or construction need to be consistent with current standards or work as efficiently as the latest technology, but everything should be sound and in operating condition; no more; no less.

Furthermore, the “future condition” of a property is not something that’s up for grabs in a home inspection. For example, if a roof with 25-year shingles is in its 23rd year, but it’s keeping the rain out, the roof is performing as was intended, making it unacceptable for a buyer to ask the seller for a financial credit or roof replacement.

As a seller, don’t try to hide problems with your home. That will only come back to bite you in the end.

All contracts require that sellers disclose what are called “latent defects.” A latent defect is any material defect that a buyer would not reasonably be expected to ascertain or observe by a careful visual inspection of the property, or anything that would pose a threat to the health or safety of the home’s occupants. As a seller, if you know there’s a structural problem lurking somewhere behind the sheetrock, you have an obligation to disclose that to the buyer.

Finally, we have one last bit of advice for sellers. If you know it’s broke, fix it before you put your house on the market

There are several benefits to a proactive approach. First, buyers tend to turn little issues into big expensive problems. Many times we’ve seen buyers look at something that might take 15 minutes and $50 to fix, and use it as a reason to ask for a $5,000 credit at settlement.

Second, if you wait to fix things after the home inspection, you’ll frequently find yourself paying more to get it done. In most home inspection addendums, all repairs must be made by a licensed contractor. So if you’re a bit handy, you can do some of the easy repairs up front by yourself, or you can wait until after the inspection and pay a contractor $150 an hour.

Third, we all have those things that have been broken and bugging us for years. Fix it now, and you might actually get a few months of enjoyment by taking that little annoyance off your list.

In sum, it’s easy to let a home inspection turn into a negative, adversarial debate between the buyer and seller. Just be clear about the extent and scope of what the contract says the home inspection will cover, and you’ll avoid creating an issue that could unnecessarily blow the whole deal.

Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is McWilliams@BobDonna.com.