Don’t Get Caught in the Home Inspection Trap
Most homebuyers consider hiring a home inspection company to review the condition of the property they are about to purchase. The home inspection can include the following: Home/Property Inspections and Environmental Hazards (mold, etc.), Radon, Wood Infestation, Water Service, On-Site Sewage, and almost anything else one can think of.
The inspections are chosen, and often paid for by the buyer and presented to the home seller as a contingency of the home purchase. When the buyer has the chosen inspections completed by a certified home inspector the agreement offers them the following options:
1. Accept the Property with the information stated in the Report(s) and agree to the RELEASE in Paragraph 28 of this Agreement.
2. Terminate this Agreement by written notice to Seller, with all deposit monies returned to Buyer according to the terms of Paragraph 26 of this Agreement.
3. Present the Report(s) to Seller with a Written Corrective Proposal (“Proposal”) listing corrections and/or credits desired by Buyer.
In many cases, the inspections and subsequent replies to the inspections by the home buyer have a time limitation. In Berks County, real estate agents tend to urge their customers to consider 15 days for the inspections to be completed.
Choices #1 and #2 are fairly simple. #1 states that, if the buyer is fine with the report(s), they continue with the home purchase, and the inspection contingencies no longer exist. #2 is the exact opposite and gives the prospective home buyer the option to void the transaction without default.
Here is where the home inspection trap is located.
#3 allows the buyer to present the home inspection report(s) to the seller and/or the seller's REALTOR® along with a written corrective proposal. We, agents, call this the REPLY TO INSPECTIONS/REPORTS ADDENDUM TO AGREEMENT OF SALE, (PAR Form RR).
This form, along with the inspection report is presented to the home seller, at the buyer's request and may ask for the seller to repair, replace or give a monetary credit to the buyer for items that may be faulty as noted in the home inspection report. In my opinion, the agreement language is ambiguous and allows the buyer to ask for almost anything under the sun. This is the cause of many agreement renegotiations.
Let’s use the roof as an example. The home inspector may state in the report that the roof while functioning properly at the time of the inspection, has reached or is close to its equitable life. The buyer asks for the home seller to replace the roof, prior to settlement at the seller's cost. While we are at it, let’s say that the home failed the radon inspection and the seller is also being asked to install a radon remediation system.
There is little doubt that the home seller is not very happy after hearing this news. The seller may feel that they are being taken advantage of and decide that they will have the radon re-mediated but refuse to replace the roof. The prospective buyer is not satisfied with the seller's decision and terminates the Agreement. Ouch!
The seller felt that the buyer was being unreasonable and decided not to replace a roof that both the real estate agent and the buyer knew was 20 years old when they made the offer. The age of the roof was listed in the Seller Property Disclosure Statement that was signed by the buyer when submitting the agreement. The buyer then terminated the deal and left the report in the seller's lap all due to the terms of the agreement. The home is now stigmatized. This is the home inspection trap. Give me what I want or else!
The homeowner is now left with an unsold home that has been off the market for 2 weeks and is changed from pending sale to active. That is the good part, really! Now the seller and his real estate agent have to seek another buyer for the home. But this time the new buyer asks why the home was pending sale and now is listed as active? Obviously, the change of status raises red flags.
The agent for the new buyer asks why the last deal fell apart. The seller's agent explains what happened and sends the buyer's agent the Seller Property Disclosure Statement AND the 48 page home inspection report, left behind by the last buyer. The new Buyer notices the inspectors’ comments about the roof, the failed radon test, and other items on the report that they are uncomfortable with. The new buyer decides not to make an offer, makes a low offer, and/or asks for the items on the report to be addressed by the seller. Here we go again!
One way to avoid the trap is to simply have your real estate professional exclude the language in selection #3 requiring the buyer to provide the inspection report. This means that you, the seller, will not be receiving a home inspection report from anyone. The buyer either accepts the home as is or voids the Agreement. This does not mean that there cannot be a deal struck between the parties if there truly are issues with the home. It simply nullifies having an ambiguous and hot home inspection report dumped in your lap.
There are several other ways to avoid the home inspection trap and other adverse circumstances when selling or buying your Berks County or Reading, PA home. One good way is to contact me to represent your home selling needs and I can protect and advise in all circumstances relating your real estate dealings.
Knowledge is power!
Jeffrey C. Hogue