Kim Mullan Blog
What You Should Know About the Home Inspection Condition
February 26th 2016
Home inspection conditions are one of the standard conditions we see in offers in the London Ontario real estate market, usually coupled with a financing condition.
There are a number of things you need to know in advance so this is a smooth process.
1- You will likely see offers contingent on home inspection so be prepared for it.
2- Occassionally buyers will use a friend or contractor to provide insight on the property. Sometimes this can lead to disaster, a) Friends are rarely objective - the friend doesn't have the same emotional interest in the property or doesn't like that their friend is moving to a different area, think they should have used a different realtor, knows something about stressors in their lives etc and that colours the way they communicate their concerns b) a renovator/contractor stands to make money and potentially lots of money by finding fault in the property- to me this is a serious conflict of interest. I have seen a renovator come in and suggest a 20k renovation to a bathroom that had 1/2 and inch of surface mildew in the shower grout. Even when specialty equipment was brought in to negate the claims of "massive black mould in the walls" the buyers were convinced everyone was plotting against their best interest except the contractor they would be hiring to gut the bathroom. Headache and frustration galore! If you want to have the buyer use a qualified or certified inspector make sure you modify the condition in the event it doesn't specify that.
3- You will need to vacate the property for approximately 3 hours on an average sized home.
4- No, your agent will not be there. It is not customary for the sellers agent to be present. The buyers agent MUST be present for the entire duration of the inspection and the buyers will probably be on hand to discuss things with the inspector. If your own agent is present it raises red flags that you might be hiding or concerned about something and have sent your watch dog to keep an eye on what comes up. If the buyer is able to speak freely to the inspector and their own agent it will put them at ease during the process.
5- They are supposed to be looking for LATENT DEFECTS. These are defects or concerns that were not visible or evident when they made their offer to purhase and which might alter their valuation of the property once revealed.
6- If they find serious concerns they may a) sign a mutual release and walk away in which case their deposit is returned to them in full and a notice goes out to your local real estate professionals that you are open for business again, b) ask you to remedy the issue, c) ask for a price adjustment so they can remedy the issue or d) absorb the issue and firm up the sale.
7- If you don't want to remedy or adjust price be prepared that your next buyer will likely find the same issue and you will be back at the table. So pay now or pay later.
8- You might think that you can save money by remedy-ing the issue yourself as opposed to modifying price likely at the higher end of costs to account for any unexpected issues that turn up for the buyer will trying to resolve but consider this: your buyer may not be satisfied with your interpretation of the remedy or the workmanship and this can leave to increased inspections, lawyers involvement etc. Sometimes it's simpler to cut the cord and let them fix it their way so you have no further obligation or liability.
9- Your house may be in impeccable condition but the inspector will find deficiencies. The inspector goes over the property educating the buyers about risks and maintenance issues. Sometimes they are big and sometimes they are reminders that small items need to be watched or could be updated to better systems.
10- Be as flexible as possible about scheduling the inspection. At the end of the day the buyer has to work with what the inspector has available.
11- Make the house warm and inviting for that inspection...Clean, Bright emotionally appealing - the better they feel about things the more likely the buyer is to overcome their own objections.
12- While the buyer may remove the condition right away they may also choose to wait until the end of their conditional period which is their legal right.
13- Ensure your conditions don't allow a window where the buyer can wait until after their financing is approved to come and do their inspection. If a buyer is going to cool off they are more likely to use the condition of inspection to get out of the deal. Waiting 10 days for financing approval and THEN doing their inspection means you are off the market longer than necessary if they are cooling off. If they don't want the house after home inspection you want a mutual release ASAP.
1- The purpose of your inspection is to look for LATENT DEFECTS that were not visible or evident when you negotiated your offer. These are hidden defects that seriously alter your valuation of the property.
2- You are legally required to make a concerted offer to try to satisfy the condtion of home inspection which means you cannot use to walk away from the property if you haven't done an inspection. If you have done one and aren't satisfied you can submit a MUTUAL RELEASE and within about 10 days your deposit will be refunded to you in full.
3- If you are firming up the sale you have two options a) you are not required to do an inspection and can WAIVE it within the conditional period or b) if you have done the inspection and are satisfied with the results you must submit a NOTICE OF FULFILLMENT within the conditional period or the sellers can sell to someone else.
4- If you do not submit documentation before your conditions run out the sellers have no further obligation to you. They may choose to extend conditions or revive negotiations but if they think there is a more motivate buyer in the wings they may take advantage or your late submission to move onto other options.
5- The inspector WILL find deficiencies. Even new homes sometimes have deficiencies but you can bet that older homes will have items that could be updated with better systems, will have wear and tear, might have defective or missing GFCI's* etc. What you need to do is ask your inspector for context. This is very important! A new GFCI might run you 30 bucks. A compromised foundation is another matter. Both circumstances don't equally merit the same dramatic fear-driven response. If your inspector isn't communicating concerns with context so you know what really requires imminent concern and what is an item for future maintenance or would be a good item to upgrade/update ask your inspector to qualify his concerns so you know what it will require of you and whether or not that's something you are prepared to absorb. Don't present the seller with a make-work list of minor deficiencies unless you are prepared to lose the property. They are not obligated to do anything. They may choose to but be wise in what you require. Sometimes they have other interest they may look more attractive. If you have small things that are not deal breakers better to ask your Realtor for the contact of their handy-man.
6- If you are need contractors quotes to determine whether or not the costs allow you to proceed with the purchase of the house don't use the home inspection condition for that purpose. I have read stories where sellers felt that buyers had no disclosed their intention for inspection and tied up their homes on the market while they decided if quotes to improve were acceptable or not and ran into issues where sellers stated that there were not significant defects to allow for mutual release even though the conditions stated that the results of the inspection had to be at buyers satisfaction. Safer to make it conditional on buyers of approval of contractors quotes for revisions. There is no grey area there.
7- If you are satisfied with the inspection and prepared to absorb any deficiencies firm up the condition as soon as you can. It's courteous to set the sellers mind at ease. Good will can go a long way.