How a Failed Home Inspection Can Impact Your Closing

While there are several reasons that a real estate closing might be delayed or canceled, one of the most common reasons is that the home did not fare well during the home inspection. Fortunately, this is something that the buyer has an opportunity to correct before the sale is closed. Continue reading to learn more about home inspection issues and what to do to avoid any surprises.

What Is a Home Inspection?

When selling a home, a buyer arranges to have the home examined by a qualified home inspector. This inspector will enter the home and perform a noninvasive analysis of the property's condition. In other words, he or she is not going to look into the walls, but he or she will visually inspect all the property's key components.

The systems are inspected, including the roof, gutters, exterior, heating and cooling (HVAC), electrical, plumbing, water, sewage, alarm systems, light fixtures, visible components of the foundation, flooring, and fireplaces. The inspector will also look for signs of rodent or insect damage and any potential safety issues. A home inspection is not the same as a home appraisal; however, issues found during the inspection can impact the property's appraised value.

What Causes a Failed Home Inspection?

A "failed" home inspection occurs when significant issues are found that require immediate repair. A leaky roof or faulty furnace are just a couple of examples of home inspection results that will negatively impact the home's appraised value. Most buyers will expect any issues found during the home inspection to be repaired, or they will likely demand a reduction in the home's selling price. While some of the issues found might be cosmetic, such as broken faceplates on switches or outlets, many issues found during home inspection impact the livability of the home.

How Can You Avoid a Failed Inspection?

If you are the buyer, there is not much you can do to prevent a home inspection from failing and causing a delay or cancellation of the closing. If you are a risk-taker, you could waive the home inspection and move forward with the transaction, but in that case, you will have to repair any problems you discover after purchasing yourself.

As a seller, there are a couple of things that you can do to prevent a home inspection from derailing your deal. The first is to purchase a home inspection for yourself before listing the property. By doing so, you will know what you need to repair or correct before the buyer’s home inspection. If you are not willing to make any repairs, at least you will be prepared for negotiations that may be necessary to preserve the closing. 

The other thing that a seller can do is to purchase a home warranty. These warranties cover any repairs needed during the first year (or longer) after the purchase of the home and give buyers a sense of security that the property is sound. In some cases, a buyer may waive the home inspection altogether if a home warranty is available. These warranties can be paid for from the proceeds of the sale, so you are not out-of-pocket before closing.


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