In this video, we will share the purpose of home inspections and how they differ from an appraisal.
Most contracts for purchase have a clause giving the prospective purchaser an opportunity to inspect the home before committing 100% to the purchase. It’s called a contingency. The sale is contingent upon the buyer being satisfied with the outcome of the home inspection.
The home inspection period varies based on locale but is usually within the first week or two following the contract date. This timeframe will be stated specifically in the purchase agreement. In Texas, the inspection occurs during the Option Period, an agreed to amount of time usually 7-10 days that allows the buyer the unrestricted right to terminate.
What is included in a home inspection?
Basically, the buyer wants the inspector to reassure them that all the major mechanical features of the home are in good working order (as stated in the property disclosure filled out and provided by the home seller). In other words, everything in the home is functioning in the way it was intended.
So, the inspector is going to check the plumbing, electricity, lighting, heat and air conditioning, hot water tanks, and all the kitchen appliances (to name a few things). They will do a visual inspection of the roof and structure. Should they find any potential issues that require a licensed professional or a more specialized inspector to dig deeper, they will make this recommendation and the buyer can elect to have additional inspections at their expense.
What happens after the inspection?
The home inspector provides a report to the home buyer and their agent. This report outlines any and all of the concerns an inspector has after going over the property with a fine toothcomb.
The agent and buyer then make decisions as to whether any of the items need to be repaired to satisfy the buyer such that they move ahead with the purchase. This is where it gets tricky! If a buyer is especially particular, they may want everything on the list repaired – even small stuff. Other buyers may only ask for significant or high value items to be repaired (i.e. heat and air conditioning, roof, foundation, swimming pools, etc.).
Renegotiation of terms
Now the buyer’s agent presents the seller and their agent with a proposal. In Texas, the proposal is in the form of an amendment to the contract which may involve the seller making some or all of the repairs. Or, it may request the seller compensate the buyer a certain amount in lieu of making the repairs. In other words, “Mr. Seller, instead of repairing these things, simply reduce the price I originally agreed to pay you for the house by $ ______ and we can move forward with the sale.”
As the seller, you have the option of declining or countering their proposal. This is where having a strong, knowledgeable and experienced agent comes in. A “good” agent will be able to negotiate terms that are agreeable to both parties without you, the seller, having to give up more than you need to.
If the parties cannot come to an agreement within the contractual timeframes, the contract may be voided.
Pride and ego
We know that our clients take a lot of pride in their homes. Most of them want the house to be in perfect (or near perfect) condition when the buyer takes possession. But here is the reality. No house is perfect! Not even new construction (some of those have the longest list of problems!).
What about the appraisal “inspection?”
The home inspection is completely separate from the appraisal done by the financing company (if a buyer is getting a mortgage). The appraiser is hired by the lending company (but paid for by the buyer) and their job is to evaluate the value of the property to verify the bank isn’t loaning too much, and to make sure that the house meets the requirements for the type of loan the buyer is applying for.
FHA and VA home loans, among others, have different requirements than conventional loans. So, there can be certain things the appraiser requires to be done before the buyer can get their financing approved. In most cases, the seller will need to do these things in order to sell the house. Again, this is where your agent is there to guide you!
Naturally, if you have questions about the specifics of home inspections or anything else…just give us a call 512-818-0988 or email at firstname.lastname@example.org.