Closing Risks: What Happens If a House Fails Inspection?
In short:
Neither buyer nor seller benefits from a failed home inspection, but there are steps that both parties can take to move forward
Many “fails” are instead repairable defects, but most full fails are defects in the home that lead to it being dangerous
Your lenders and insurers also care heavily for these areas of the closing process and may refuse to lend if a home does not pass
A failed step during the closing process can be a frustrating experience, so what happens if a house fails inspection, and what do you do next? Fortunately, there is a transparent process for inspections, outlining the items that fail a home inspection. In many cases, you can negotiate a closing that includes the repair or renovation of the area that an inspector identified as needing attention.
Working with the other party to negotiate subsequent steps can be a challenging process. However, below you will find detailed advice, helping you understand the process and offering answers to questions you might have
To ensure clarity in the process moving forward, work with Schulte & Co. and discover some key tips to get the home back on track for closing.
What Happens If a House Fails Inspection
Your priority should be to prioritize your own safety. If the home has failed due to key issues related to the property's stability, exit the location as soon as possible. If you are the seller, hire someone immediately to assess the potential damage. However, if the failure is less severe than that, then ensure that all processes you have in place do not trigger, such as financing, so that you do not end up with money you cannot use.
You should start discussing the potential for fixes with the other party in the sale. If you are the seller, you will then need to begin prioritizing steps to ensure the location passes a future inspection.
As the buyer, you may have extra negotiating power to request a price reduction, and you may even be able to request that the seller perform essential renovations that get the home back into selling condition before you close. If your lender or insurer imposes these limits on the sale instead of you, then this becomes even easier, as you have the documentation to prove that the location will not sell if they do nothing.
If things are still too risky, you can always walk away if you are uncomfortable before putting down a deposit. Cancelling within this timeline gives you the freedom to seek out a different property instead.
What Happens in a Home Inspection?
An inspector will review all of the major systems and structures in a home, including the:
Foundations
Property exterior
Utilities
Attic and crawlspace
These tests will include running the internal systems under normal conditions, and unless specifically requested by either party, will not include any more detailed analyses. In some cases, access limitations or weather conditions may also restrict the inspection.
They will document any hazards and defects they find within only a few days, including any evidence they have regarding issues, as well as a list of severities. Their commentary will also include repair or maintenance steps to help you with your ongoing negotiations and decisions. However, they will categorize safety and material issues differently from cosmetic ones, allowing you to use the list of serious problems independently during talks.
Who Pays for the Inspection If It Fails?
If you have paid for the inspection, then that is a service rendered unto you by the professional inspector. The results of their report do not alter the fact that they have completed the inspection itself, and the results are what you are paying for, even if they conclude that you cannot purchase the property.
Sometimes, an inspector can offer a reinspection at a discounted rate or as part of a bundle if you plan to purchase multiple properties. However, this will be on an individual basis, and you may need to ask about the possibility ahead of time.
Does a House Have To Pass Inspection To Be Sold
There is no law preventing the sale of private property from one person to another without an inspection, or if defects exist. However, a lender or insurer may not approve of the sale due to the potential for them to lose out through it, making it harder to finalize a mortgage or insurance documentation without an approved inspection.
Additionally, the inspection process is a step that buyers typically expect. If you do not produce documented results, both the buyer and a professional real estate agent may question the seller's trustworthiness.
However, there is one exception to this in Gig Harbor. In Pierce County, one must obtain a Report of System Status (RSS) for septic systems and submit it to the Tacoma-Pierce County Health Department before a purchase. As such, regardless of the outcome, the seller must resolve this issue by either repairing or replacing the septic system before seeking another inspection.
A few other, easily resolved, red lines set by local regions include:
Uncertified wood stoves must be removed, recycled, or rendered inoperable before a sale in Tacoma-Pierce County
Washington state states that the seller must install carbon monoxide alarms
You must also disclose any lead-based paint used in any pre-1978 homes in Washington
Expert Advice When the Home Fails Inspection
Now that you know exactly what happens if a house fails inspection, you can start taking steps to protect yourself and your home. Resolve the highlighted areas and consider negotiating for a reduced price if necessary. However, the whole process will be much easier if you have a real estate agent who can offer you a focused strategy matching your situation.
We understand how local negotiators operate and can work with you to secure the deal you want, while also collaborating with contractors to ensure that the home you receive is in the best possible condition. Reach out to us today for advice and to start mapping out your next move today.
