Inspection: Rejection, Concession or Graduation?

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Appraisers and inspectors are commonly viewed with fear by both sellers and buyers. Their independent opinions can upset a deal. If an appraisal comes back low, a lender will refuse to make a loan based on the purchase price, and the seller will be forced to meet the appraised value – or forfeit the deal.

Likewise, inspectors often find flaws that can undermine a deal or reopen price negotiations. The value of the house is intrinsically linked to its condition. If the condition of the house is not accurately reflected in the agreed-on price, both the appraisal and the inspection might come into play to indicate the true value of the house. That can put the owner and buyer back at the negotiating table to hammer out concessions.

Here is a short guide to getting the most from the inspection – and to keeping your deal on track. To learn more about how inspections fit into overall home pricing, please visit our Pricing Guide.

First, hire a qualified inspector.  Inspectors must be licensed by the state and should be experienced in examining houses similar to yours.  State regulations vary. For the latest in changes in state regulations and rules, check with the American Society of Home Inspectors.

Sellers:

  • Assemble for the inspector a set of receipts, drawings, municipal building permits, occupancy permits and other evidence that supports your contention that improvements were made legally and in compliance with local building codes.

Buyers:

Don’t assume that the inspector is conversant with the building code for your municipality. If an illegal improvement seems sturdy enough, the inspector may not realize that it is not in compliance with municipal codes.

To ensure that the house is compliance with local codes – so that you do not inherit sloppy or dangerous work that will be expensive to bring into compliance – hire a municipal inspector to come out and examine the house. Have the inspector pull permits for the address and compare those with the list of improvements on the listing sheet. If there are discrepancies, that could mean that the owners did work without permits or inspections. That means that the work might be substandard at best and dangerous at worst.

If you discover illegal improvements, negotiate to either have the seller cover the cost of coming into compliance retroactively, or have the seller handle that themselves. Of course, demand signed permits and certificates of occupancy to ensure that the work was done properly.

Don’t confuse maintenance with improvements.

Maintenance includes:

  • Heating and cooling systems
  • Water heater
  • Foundation
  • Roofs
  • Windows
  • Plumbing
  • Electrical system
  • Appliances

Are all in good condition? Can the seller provide evidence of cleaning and other routine care?

Improvements go beyond keeping what is there functional. Improvement can include:

  • Kitchen remodels
  • Bath renovations
  • Additions
  • Conversions, most typically, attics and basements to living space

Ask the seller to provide proof that the improvements were done in compliance with municipal building codes.  You want to see evidence in the owner’s records that correspond with the city’s records of permits pulled, work inspected,  and certificates of occupancy granted.

A good inspector will peel back corners of carpet to see the condition of the floors underneath. She will poke a jackknife into wood that looks soft to search for  termites and carpenter ants. He will examine the joints and crevices of the foundation, outside and in the basement, looking for leads and evidence of improper drainage that can make the house susceptible to floods.

The inspector will also observe and comment on the condition of :

  • surfaces, such as counters and floors
  • fixtures, such as showers and toilets
  • appliances, especially essential kitchen appliances
  • windows and doors, checking that they open and close
  • safety features, such as handrails.