It’s Going to Be Okay
So you’ve just received your a bad home inspection report on the house you are planning to purchase. Ouch. No matter how bad the report is, the steps to navigating a bad home inspection are the same. The only thing that changes is, the worse off the report, the more difficult the negotiation decisions are.
Follow these steps and it’s going to be okay. The worst thing that can happen here would be that you do not buy the house, you lose your home inspection costs, and you keep your earnest money. It is not ideal – I know, but it’s still better than buying a lemon. Move on with a smile because that house isn’t your problem!
Related: What is a Home Inspection?
Understand the Report
Take the time to read the report carefully and understand the issues. If you have questions or need clarification, don’t hesitate to reach out to the inspector for more information.
Also, be sure there are not any issues that will prevent you from getting a loan either. Generally, for FHA and VA loans, the items that will prevent you from getting a loan are most commonly chipped paint, exposed electrical, and any health hazard.
Prioritize the Issues
Not all issues identified in a home inspection report are created equal. Prioritize the issues based on their severity and potential impact on your safety, health, or finances.
Generally, in the Columbia Gorge, I encourage you to focus on the medium to high issues, and to let the DIY items go. People generally do not like being nit-picked, and it’s wise to act like a good buyer to your seller in case you need to ask for a favor within the transaction.
Get Estimates for Repairs
Once you have prioritized the issues or repairs required by your loan, get estimates (bids) from licensed contractors. This will give you an idea of the costs involved, as well as provide you supporting materials to show the seller if they question your inspection response for repairs.
See our list of Local Resources for a list of available contractors.
Negotiate with the Seller
With your list of repairs, it is time to make your second decision. How are you going to propose your repairs to the seller that justifies your request(s). Don’t worry too much about this, it’s my job to assist you through this entire transaction.
Here are your options:
Option 1: Seller Credits Buyer and Buyer Makes Repairs After Close
If the buyer receives a home inspection credit, the buyer can use the funds to address the issues highlighted in the report after closing. Sometimes buyers like this method because they can make the repairs themselves or hire a company they trust.
Buyers and sellers like this option because it’s easy just to transfer a problem instead of mobilizing the people, time, and energy. Sellers and buyers are usually both too busy preparing their personal property to be moved into a new home.
This is a stress fee path for transactions on a tighter timeline.
Option 2: Seller Makes Repairs Prior to Close
If the seller agrees to make repairs prior to close, this can be a great outcome for both parties as well. The buyer can rest assured that the issues identified in the home inspection report have been addressed, and the seller can usually avoid any potential renegotiation of the sale price.
Once the repairs have been made, the buyer can move forward with the purchase of their new home. Just be sure to get documentation that the work is was done by a professional or done up to local coding standards by the seller.
For transactions on a longer timeline, this can be a great alternative for everyone.
Option 3: Buyer Makes Repairs Prior to Close at Their Expense
If the buyer has to make repairs to a home prior to close, it can be a stressful and risky situation. It should be wisely used with full understanding of the risks. There is always the chance that you end up terminating on the transaction with nothing to show for your costs or efforts.
An example on how this situation may occur is usually found in a seller’s market. This happens when a buyer’s loan program may not lend on the property due to the condition. There may be a second offer in backup position that may be stronger than your current offer, or, the seller is a grouch… and you are limited on homes to buy…
For VA and FHA loans, the home cannot have any chipping or peeling paint, as well as, exposed electrical. Vegetation on or too close to the home would also need to be addressed for these loan programs.
Option 4: Buyer and Seller Agree Somewhere in The Middle
This is usually one of the more common outcomes that I see in the Columbia Gorge. It can go all sorts of different ways though – in a mix of all of the previous options. People are just… different. They have different concerns, different bank accounts, different skillsets, experiences, etc.
This is why we generally see a mutual compromise between both parties. Trying to be unfair financially is where feelings get hurt. So be respectful with your bids!
Option 5: Terminating the Contract
If the issues identified in the report are too significant for you or the seller is unwilling to address any kind of compromise you’d be willing to accept, consider backing out of the transaction. This may be the best option if the repairs needed are too costly or would require significant time and effort.
As mentioned at the begging of this article, let the house be someone else’s problem.
Final Walk-Through Inspection
If you get passed the inspection stage of your transaction, you’re doing great! It’s all down-hill from here.
Keep an eye on the timeline for repairs and consider scheduling a reinspection to ensure that the issues identified in the original report have been addressed correctly. That, or you and I can walk the property ourselves.
The home inspection report is a massively important part of the buying process. But remember, a bad home inspection report doesn’t necessarily mean the end of your transaction or that a fight is about to break loose…
By following this process and following through what what you agree to do, the inspection period isn’t that bad. It can be a very satisfying experience to work fairly with a seller to accomplish the completion of the transaction. Afterall, everyone wants to move on and get to where they want to go.