There is a lot to think about and consider in here, and this early in the process is exactly the time to do it, so you can prepare ahead of time.
What Is An Inspection Contingency?
What does it mean to say that a purchase agreement (contract) is contingent on inspection? In a nutshell, it means that buyers have a right to choose a professional inspector and, along with their agent and anyone else they deem appropriate to be present, shall be given access to the property to inspect it from top to bottom without disturbing anything. If the buyers decide, based on the inspection, that they do not want to go ahead with the purchase, they will instruct the buyers’ agent to send written notice to the listing agent that buyers have decided to cancel the purchase agreement, at which point both parties have already agreed in writing, in the purchase agreement, to immediately sign a cancellation of the purchase agreement directing the earnest money be refunded to the buyers. We will go deeper on this when we meet to preview the offer forms (‘purchase agreement’ forms). But because this is such a common question, I wanted to spell it out at this earlier stage of the process.
What Happens At A Home Inspection?
A general home inspection will involve hiring a professional who will follow a massive checklist, to observe all that they can see pertaining to the major structure and systems of the home including foundation, attic, roof (exterior and attic), HVAC, electrical, windows, plumbing, exterior systems protecting the home and much more. Further information on the property can usually be acquired by searching permit records (online in most cities in the Metro Area), which I can assist with, of course. (The massive checklist inspectors follow is typically reflective of the American Society of Home Inspectors standards of practice.)
You will recall that in the “Tour Homes” section, I alluded to looking for more obvious issues when we find ourselves in a home of particular interest, so we should have a list of things we already know about the property before you even write an offer. There are times, however, when more significant things that we could not have easily known do come to our attention at the inspection, and you have an opportunity to negotiate that the sellers come back to the table to address those things, or as I mentioned above, you may opt to cancel the contract.
It is important to realize that sellers vary a great, great deal in their willingness or unwillingness to address items found in an inspection, and success in trying to get them to make remedies can be very unpredictable and is influenced by the state of the market and the influence of the listing agent (although in most cases, you may be surprised to learn that I find that the listing agents are usually more on our side than the sellers so long as the requests fall reasonably in the categories of ‘major surprise,’ or are health or safety issues).
Inspections usually last between two and four hours, depending on the size of the home. In terms of buyer attendance, it is very important that a buyer be at the inspection if at all possible, although inspectors tend to have varied preferences for when they like to see a buyer arrive. Some prefer the buyers to be there for the duration while others prefer the buyers come toward the end to get a walk-through summary after the inspector has completed his or her work.
Either way, you can expect to receive within 24 hours a full written report with many, many accompanying photos, and you should feel free to come for as much of the inspection as you wish, with a recommended minimum of one hour at the end. (Even if your inspector prefers to delay client contact until the walk-through summary, this is a great time to reacquaint yourself with the property, measure for furniture, etc.) A general home inspection will typically cost somewhere between $400 and $700 depending on the size of the home and the inspection company’s exact fees.
While at the inspection, the inspector can answer questions as you go, so if there’s anything you don’t understand or are concerned about, just ask. While evaluating the inspection findings, it is often helpful to filter them through these questions:
-Are the items you’ve flagged major or minor issues?
-What needs to be done to resolve any flagged issues?
-What is the likely range of costs of repairs?
-Are there things you will need to do after moving in?
Going Beyond The General Inspection
It is important for you to understand upfront that there are many detailed areas of a property that a general home inspection will not typically cover. We’ll go over these on a property-by-property basis while we are on our hunt for your home. During the next step of the process, when we go through a trial-run of the purchase agreement, I will touch on some of the more common ancillary inspections that you may find yourself considering, such as a radon test, moisture testing, air-quality testing, a sewer-line inspection via camera scope, a wood-burning chimney inspection via camera scope, and an inspection of trees and shrubs by a certified arborist. Most of these ancillary inspections will cost in the neighborhood of $150-$400 each.
The New Walk-Through Consultation
In the latter part of 2020 and most of 2021 and even the early months of 2022 we found ourselves in a historical, unprecedented, extreme seller’s market. It was a period where often, 25% to 40% of new listings were being almost immediately put under contract with buyers who decided to not include an inspection contingency in their offer due to the pressure of trying to land a good house in a very competitive market. As inflation drove interest rates higher through 2022, the rate of homes selling with inspections waived dropped considerably and is now more typically in the 7%-12% range. While it’s reassuring to know that 85%+ of homes sales will only close after a buyer has had a chance to inspect, the sad flip-side is that the very best listings out there often still wind up in bloody bidding wars where the victor has waived their inspection contingency.
This is all quite troubling, on many fronts. For starters, it obviously leaves many buyers in a position of purchasing homes with less knowledge of the property than is advisable and historically typical. At the same time, it also means that the most conservative and careful of buyers, who choose to submit offers with inspection contingencies, will have a very difficult/ nearly impossible time being competitive when in multiple offers for the most appealing prospective properties, unless they are fortunate enough to be in a position to make a cash offers.
Most sellers and their agents are going to give strong preference to offers where there is no inspection contingency because it eliminates so many risks for the sellers—risks of finding something that they have to pay for, and perhaps even more, risk of buyers using the inspection contingency to cancel if they simply get buyers’ remorse. It happens, it is very easy for buyers to do because there is no “litmus test” for them to justify a cancellation, and it really can mess up a seller’s momentum because cancellations show up on the MLS and always cast some level of a shadow of doubt on a property, even when the cancellation had nothing to do with the property.
In 2020, when I saw this no-inspection-contingency trend taking shape, I reached out to several inspection companies asking if they would add a service to their repertoire—having inspectors that could be available on short notice to walk through homes to do a mini-inspection of sorts, perhaps with no report, and a reduced fee These walk-through consultations would happen DURING MY SHOWINGS. I was definitely thinking it would be nice to at least get eyes on the bigger items. The problem I immediately ran into, not surprisingly, is that not too many in the inspection industry were very keen on having to adjust their business models for me and a short list of other agents who were calling for a similar pivot. They also wanted to adhere to their standards of practice, for both altruistic and liability reasons, I am sure, and their professional standard is a full-blown inspection with a full-blown written report, full stop. But since the prevalence of homes being sold with no inspection really seemed to take off shortly after the New Year in 2021, the inspection companies adopted a new stance. Funny how that happens when 25-30% of your revenue starts to disappear. Credit to them for their willingness to adjust, and who could have ever thought we’d see a market like this?
Fast-forward a few years and there are still companies that will perfrom what they have come to call a “walk-through consult,” which takes place during a showing, just as I outlined above. As the highly regarded Reuben Saltzman, owner of Structure Tech, said “something is better than nothing” (you may check out his YouTube video by copy/pasting this link:
https://www.youtube.com/watch?v=lvHsVAtJnuo&feature=youtu.be).
The inspectors I have had at walk-through consultations will not put this in writing, but they will tell you that they can usually cover about 70%-90% of a full inspection at a 45-minute walk through during a showing appointment, including ‘most of the major stuff,’ so this is an option that I feel I must present to clients. Although it is certainly not ideal and not something I can recommend, at least it gives you an option. Probably the biggest things lost from dropping down to a walk-through consult is an inspection of the attic, interior of the electrical service panel, and just a general diligence that surely must take a bit of a dign when you only have 45 minutes to an hour in the property.
Choosing An Inspector
If you want to start thinking about who you may wish to hire for inspection services, for starters, know that you are free to hire any professional to conduct your inspections. If you would like some referrals, let me know and I can provide some for you to consider.