Failed Home Inspection

Tamsen Butler
Ed Craine

Not every house is suitable for purchase, but this does not mean that the house cannot be brought up to standards after deficiencies are recognized. In this LoveToKnow interview, mortgage expert Ed Craine explains what happens when a home does not pass inspection prior to sale.

Why Houses Fail

LoveToKnow (LTK): What are potential reasons for a home failing inspection?

Ed Craine: Potential troublesome areas on a home inspection report are problems which could compromise the health or safety of those living in the home. The presence of mold, for example, is a health risk as is the presence of radon. Safety issues may include insufficient electrical services, faulty wiring, severe dry rot, structurally unsound stairs, decks, etc.

Older homes may not necessarily be up to present day safety codes. An example of this situation would include a home that was built 20 or more years ago, which has a second story deck. The posts which support the railing of the deck may be spaced too far apart by today's standards but were up to code at the time it was built.

Luckily though, virtually any problem is fixable. Mold can be removed; an electrician can replace or repair wiring deficiencies and so on. The only problem that really can't be fixed is the actual location of a home. If the home is situated on a hillside and subject to mudslides, that obviously can't be fixed. But everything else can generally be fixed.

It's important to note that sometimes sellers will have hired their own inspector and will tell buyers they don't need to pay for a second inspection. Don't fall for this! Buyers should always hire their own inspector, to make sure that their best interests are protected. A second opinion can never hurt.

Responding to a Negative Report

LTK: What should homeowners do following a home inspection that reveals substantial problems?

Ed Craine: The best option for homeowners is to have any problems found during a home inspection corrected. Alternately, a homeowner may choose to not have the corrective actions taken, and instead discount the home's price or offer the buyer a credit. However, this can backfire and result in the seller discounting the home more than the problems would have cost to repair. This may also reduce the number of potential offers the seller will receive as some buyers will be reluctant to buy a home which they'll have to repair immediately.

LTK: What should potential buyers do if the home they want to buy receives a less-than stellar inspection report?

Ed Craine: Reviewing all the inspection paperwork is a preventative measure to make sure you know what you're getting yourself into. It's always better to be safe than sorry, especially when it comes to one of the largest financial investments you'll ever make.

The first logical step would be to ask the seller to fix any problems. If the seller refuses, a buyer should work with their REALTOR® to negotiate a price reduction. If a solution cannot be reached, the buyer should look for another home.

In short, if you can't buy a home at the price you want and in the condition you want, you shouldn't buy that home.

Early Inspection

LTK: How can sellers avoid failing a home inspection?

Ed Craine: Sellers can avoid failing a home inspection by having the home inspected several months before planning to list the home for sale. This will give you plenty of time to get bids on necessary corrective work and have any problems corrected before the home is listed.

About Ed Craine

Ed Craine is CEO of San Francisco based Smith Craine Finance, an award winning mortgage brokerage. He was named the California Association of Mortgage Brokers' "Broker of the Year" in 2008. Ed serves as an Executive Director for Business Network International (BNI), and is a contributing author to several NY Times Best Selling Books. Ed is also the publisher of Broker Banker Magazine. Visit SmithCraine.com.

Failed Home Inspection