What Is a Home Inspection Contingency and Why Is It Important?

Reviewed by Margaret JamesFact checked by Vikki Velasquez

Before you buy a home, one of the things you should do is to have it checked out by a professional home inspector. Yes, we can hear your objection: “Buying a home is expensive enough as it is! Why would I choose to fork over hundreds more if I’m not required to?”

In this article, we’ll delve into what a home inspection can reveal and whether it’s worth it for a home buyer to hire an inspector.

Key Takeaways

• A home inspection contingency allows buyers to hire a professional who will tell them about major and minor issues with a home before purchasing it.
• A thorough inspection is a critical step in purchasing a home, and many lenders won’t offer financing on a home without one.
• Home inspectors look at the exterior and interior parts of the home, including but not limited to electrical, plumbing, roofing, HVAC, and foundations.
• Home inspections can uncover potentially life-threatening problems like mold or faulty wiring that could cause a significant fire.
• Most potential buyers have a seven-day window after a home inspection to walk away from the purchase.

The Home Inspection Contingency

Home inspections provide an opportunity for a buyer to identify any major issues with a home before closing. Your first clue that a home inspection is important is that it can be used as a contingency in your contract with the seller. This contingency provides that if a home inspection reveals significant defects, you can back out of your purchase offer, free of penalty, within a specific timeframe. The potential problems a home can have must be pretty serious if they could allow you to walk away from such a significant contract.

In some situations, realtors are also known to include home inspection clauses in contracts, such as those for a newly built residence. In new home construction, inspections generally cover:

• Foundations: Checking before the concrete is poured (once poured, there’s very little that can be corrected).
• Pre-drywall: Checking the structure and mechanics before the drywall is laid.
• Full inspection: A full walk-through is performed of the completed home.

What a Home Inspection Covers

Inspectors vary in experience, ability, and thoroughness, but a good inspector should examine certain home components and then produce a report covering their findings. The typical inspection lasts two to three hours, and you should be present for the inspection to get a firsthand explanation of the inspector’s findings and, if necessary, ask questions.

Also, it makes more sense for you to be there in person to see any problems the inspector uncovers instead of relying solely on the snapshot photos in the report.

The inspector should note:

• Whether each problem is a safety issue, major defect, or minor defect
• Which items need replacement and which should be repaired or serviced
• Items that are suitable for now but that should be closely monitored

An excellent inspector will even tell you about routine maintenance that should be performed, which can be a great help if you are a first-time home buyer. 

While it is impossible to list everything an inspector could check for, the following home inspection checklist for buyers should give you a general idea of what to expect.

Exterior Inspection

The inspector will complete a full inspection of the outside of the structure. This will include climbing into any crawlspaces under the home and using a ladder to reach and inspect the roof and other items.

Exterior walls

The inspector will check for damaged or missing siding, cracks, and whether the soil is in excessively close contact with the bottom of the house, which can invite wood-destroying insects. However, the pest inspector (yes, you might want to engage one of those, too), not the home inspector, will check for actual damage from termites, etc. The inspector will let you know which problems are cosmetic and which could be more serious.

Foundation

If the foundation is not visible, and it usually is not, the inspector will not be able to examine it directly. Still, they can check for secondary evidence of foundation issues, like cracks or settling.

Grading

The inspector will let you know whether the grading slopes away from the house as it should. If it doesn’t, water could get into the house and cause damage, and you will need to either change the slope of the yard or install a drainage system.

Garage or Carport

The inspector will test the garage door for proper opening and closing, check the garage framing if it is visible, and determine if it is properly ventilated (to prevent accidental carbon monoxide poisoning). If the water heater is in the garage, the inspector will make sure it is installed high enough off the ground to minimize the risk of explosion from gasoline fumes mingling with the heater’s flame.

Roof

The inspector will check for areas where roof damage or poor installation could allow water to enter the home, such as loose, missing, or improperly secured shingles and cracked or damaged mastic around vents. They will also check the condition of the gutters.

Termites and Mold

Home inspectors do not usually have to check specifically for termite damage, mold, asbestos, or water contamination. If you are concerned about these issues, ask your inspector for a heads-up if they suspect any of these problems.

Interior Inspection

The inspector will also complete a thorough inspection of the interior of the home. They will inspect everything from the ceiling to the cabinets under the sink.

Plumbing

The home inspector will check all faucets and showers, look for visible leaks and test the water pressure. They will also identify the kind of pipes the house has if any pipes are visible. The inspector may recommend a secondary inspection if the pipes are old to determine if or when they might need to be replaced and how much the work would cost. The inspector will also identify the location of the home’s main water shutoff valve.

Electrical

The inspector will identify the kind of wiring the home has, test all the outlets, and make sure there are functional ground fault circuit interrupters (which can protect you from electrocution, electric shock, and electrical burns) installed in areas like the bathrooms, kitchen, garage, and outdoors. They will also check your electrical panel for any safety issues and check your electrical outlets to ensure they do not present a fire hazard.

Heating, Ventilation, and Air Conditioning (HVAC)

The inspector will look at your HVAC system to estimate the age of the furnace and air conditioner, determine if they function properly, and recommend repairs or maintenance. An inspector can also give you an idea of the age of the home’s ducting, whether it might have leaks, if your home has sufficient insulation to minimize your energy bills, and whether there is any asbestos insulation.

Water Heater 

The home inspector will identify the age of the water heater and determine if it is properly installed and secured. The inspector will also let you know what kind of condition it is in and give you a general idea of how many years it has left.

Kitchen Appliances

The inspector will sometimes check kitchen appliances that come with the home to make sure they work, but these are not always part of the inspection. If you think you’ll want to keep them, be sure to ask which ones are omitted so that you can test them yourself.

Laundry Room

The inspector will make sure the laundry room is properly vented. A poorly maintained dryer-exhaust system can be a serious fire hazard.

Fire Safety

If the home has an attached garage, the inspector will make sure the wall has the proper fire rating and hasn’t been damaged in any way that would compromise its fire rating. They will also test the home’s smoke detectors.

Bathrooms

The inspector will check for visible leaks, properly secured toilets, adequate ventilation, and other issues. If the bathroom does not have a window or a ventilation fan, mold and mildew can become problems, and moisture can warp wood cabinets over time.

Not Covered in a Home Inspection

A home inspection can’t identify everything that might be wrong with a property; it only checks for visual cues to problems. For example, if the home’s doors do not close properly, or the floors are slanted, the foundation might have a crack, but if the crack can’t be seen without pulling up all the flooring in the house, a home inspector can’t tell you for sure if it’s there.

Some areas inspectors won’t look at include:

• Inside walls (won’t cut open drywall or insulation)
• Inside pipes or sewer lines
• Inside chimneys
• Behind electrical panels

Furthermore, most home inspectors are generalists—that is, they can tell you that the plumbing might have a problem, but then they will recommend that you hire an expert to verify the issue and give you an estimate of the cost to fix it. Of course, hiring additional inspectors will cost extra money.

Home inspectors also do not specifically check for termite damage, site contamination, mold, asbestos, engineering issues, and other specialized problems. If they have reason to suspect a problem, though, they’ll likely give you a heads up or you can ask them to do so. Some inspectors offer radon testing as an add-on; some will recommend asbestos testing services if your home appears to be at risk.

However, problems without visual cues—pests, radon, lead—may crop up after the inspection.

$450

Average cost of a mold inspection for an average-sized home. The range is $250 to $1,100, depending on the size and location of the home and the test you choose, among other factors.

After the Inspection

Once you have the results of your home inspection, you have several options:

• If the problems are too significant or too expensive to fix, you can choose to walk away from the purchase as long as the purchase contract has an inspection contingency.
• For problems large or small, you can ask the seller to fix them, reduce the purchase price, or give you a cash credit at closing to fix the problems yourself. This is where a home inspection can pay for itself several times over.
• If these options aren’t viable in your situation (for example, if the property is bank-owned or being sold as-is), you can get estimates to fix the problems yourself and come up with a plan for repairs in order of their importance and affordability once you own the property.

Important

Legally, you don’t have to get anything fixed after a home inspection. However, you may be unable to obtain financing if the house has electrical issues, water damage, structural issues, damaged roofing, problems with HVAC, poor plumbing, or infestations of pests like rats, mice, or insects.

Home Inspections: Worth the Investment?

The cost to hire a home inspector varies greatly, depending on the size and age of the home and the region; the range is roughly $300-500. Of course, that can go much higher if the general inspection’s findings lead to more specialized inspectors being called in. Ask ahead of time how an inspector charges.

It’s important to put things in perspective. Remember that an inspection is:

• Not the sole determinant for buying a house. Maybe you’re willing to make some renovations to the house with these problems. The inspection will help you determine exactly how many you’ll need to do.
• Never free and clear of problems. An inspection will always find a problem with a home. Even new home constructions will have minor issues that need to be addressed.
• Not about getting all the fixes done. No seller is going to fix everything for you. They may negotiate on some of them, but expecting a resolution of all issues is unreasonable.

How Do You Write a Counter Offer After a Home Inspection?

After a home inspection, you can ask your broker to negotiate any necessary repairs with the sellers or ask the sellers to lower the price so you can fix the problems yourself. Getting quotes from local contractors will help you write out a counter offer based on estimates, but a buyer should be aware that a seller is not obligated to fix anything.

What Should You Ask During a Home Inspection?

During the inspection, ask the inspector what they will inspect and what isn’t covered in the inspection. Ask them about anything you are worried about, like a sagging roof, poor electrical, or rusty-looking or slow-flowing water out of the taps. Don’t be afraid of asking questions during the inspection such as, “Is this a big problem or a little problem?” and if they can explain any functions of the home you might not be familiar with, like a fireplace or an oil burner.

How Long After a Home Inspection Does a Buyer Have to Back Out?

Many home inspection contingencies are based on a seven-day timetable. This means that after you sign the purchase agreement and the inspection occurs, you have seven days to send a formal notice that you are backing out. But be sure to check your contract, too.

How Should You Prepare Your Home for a Home Inspection?

Make sure there is easy access to the property, from clearing the entrance to your basement to getting rid of any clutter. Take a good look at your roof; are there shingles falling off? If so, it might be time to fix them. Make sure all taps and toilets work. Then check that all the light bulbs are working in both exterior and interior lights.

Fuse boxes should be easily identifiable, leaks and water damage should be repaired, and if you have a pest or bug infestation, bring a professional in to take care of it before the inspection occurs.

What’s the Difference Between a Home Appraisal and a Home Inspection?

A home appraisal is a different action than a home inspection, but it is also often a required contingency. A mortgage lender sets up an appraisal, and the appraiser will use various valuation methods, including comparable home prices, size, and quality of the home, to assess its fair market value.

A home inspector only evaluates the home’s condition for overall safety or potential trouble spots, like a leaking roof, peeling paint, or anything that doesn’t meet the local building code.

The Bottom Line

A home inspection will cost you a little bit of time and money, but in the long run, you’ll be glad you did it. The inspection can reveal problems that you may be able to get the current owners to fix before moving in—or else prevent you from inadvertently buying a money pit. For new home construction, it’s a crucial part of the home buying process.

If you are a first-time homebuyer, an inspection can give you a crash course in home maintenance and a checklist of items that need attention to make your home as safe and sound as possible. Whatever the situation, addressing issues early through a home inspection can save you tens of thousands of dollars down the road. Still, a home inspector can’t see the future. When you buy a home, especially an older home, be prepared for unexpected problems to crop up over the years that were not mentioned during the initial home inspection.

And if you are curious about becoming a home inspector, you will need to complete the list of requirements issued by your home state. There isn’t a national certification, and each state has its own rules and regulations. You must earn your license through a combination of home inspection classes, hands-on experience, and passing a state exam.

Read the original article on Investopedia.