| August 10, 2015
Hatteras Island Real Estate:Over
the years, I have written several articles concerning home inspections.
Recently, there has been an increased level of discussion from a
variety of sources concerning this important aspect of real estate
transactions. So, let’s revisit the topic of home inspections with the
goal of both updating the environment within which home inspections are
conducted and providing perspectives from the viewpoints of both buyers
Perspectives on Home Inspections
a buyer and a seller have agreed upon the price and terms for a
property, there are a number of activities that take place between the
time the contract is finalized and the closing of the sale. This is
where a major update of the sales process has taken place. In the past,
real estate contracts often contained a number of contingencies to
protect the interests of the buyer and the seller. Several years ago, a
new contract form was introduced in North Carolina which, for all
practical purposes, eliminated the need for most contingencies.
In place of contingencies, a provision known as a Due Diligence Period
was included in the contract. During this time frame – usually about 30
days – buyers have the right to conduct any and all inspections and
evaluations of the property that they deem essential prior to their
purchase. Of particular significance is the stipulation that during the
Due Diligence Period, the buyer has the right to terminate the contract
for any reason or for no reason. One of the most common and important
evaluations that buyers order is a home inspection.
According to an informative pamphlet published by the North Carolina
Real Estate Commission, a home inspection is an evaluation of the
visible and accessible systems and components of a home. It is intended
to give the client, most often the buyer, a better understanding of the
condition of these systems and components. Since most buyers lack
the knowledge, skill and emotional detachment needed to inspect the
home themselves, they usually retain the services of a licensed home
A home inspector can be located independently by a buyer or, more
commonly, through a real estate agent. Before performing the
inspection, the home inspector will usually call the buyer, discuss any
areas of special concern that the buyer may have, and forward a
contract containing a description of the inspection services. Then, the
inspector will schedule a date for the evaluation and will coordinate
access to the home through the real estate agent.
The actual home inspection can take two hours or more, depending on the
property being evaluated. The buyer is welcome to accompany the
inspector. After the inspection has been completed, the inspector
will prepare a report that generally consists of a summary supported by
individual pages that provide details of the inspection of each system
and component in the house.
The home inspector works for the buyer, and it is the home inspector’s
responsibility to let the buyers know as much as possible about the
property that they are purchasing. In some cases, the inspector may
recommend further evaluation of an item by a specialist, such as an
engineer, a contractor, or an electrician.
Home inspection reports often contain comments that certain aspects of
a house do not meet current building codes or that the house contains
plumbing materials that are no longer in use. When evaluating these
comments, buyers may not be aware that sellers do not have a
responsibility to bring a home up current building code standards. The
house is assumed to have met the building code standards in effect at
the time the home was built.
Following receipt of the home inspection report, the buyer generally
submits a list of repairs that they request the seller to complete.
This, in essence, generates a second round of negotiations after the
basic price and terms of the contract have been already been finalized.
The home inspection is very comprehensive and contains observations
that are both substantive and cosmetic. The extent and depth of the
inspection can be a source of potential friction between the buyer and
the seller when the list of repairs is presented to the seller.
Some buyers take the approach that the seller should fix the majority
of the items identified as defective by the home inspector, while
others focus their request for repairs on the items that they consider
to be most important. Neither philosophy is right or wrong. However, it
has been my experience that the repair negotiation process goes most
smoothly when the list of repairs is limited to those that are related
to some reasonable criteria such as the safety of the house or those
that the seller would probably have to fix whether or not they were
selling the property. Reasonable requests by the buyer are usually met
by a reasonable response from the seller.
Interestingly, the sales contract contains another provision that the
buyer and seller may, but are not required to, engage in negotiations
for repairs/improvements to the property. This is a bit of a Catch 22
situation since if the seller is not willing to negotiate repairs, the
buyer has the right to terminate the contract under the due diligence
section of the contract.
Once agreement has been reached concerning which repair requests will
be acceptable to the seller, the issue then becomes the manner in which
the repairs will be addressed. One choice is for the seller to actually
make the agreed upon repairs. The other option is for the buyer and the
seller to negotiate some sort of financial settlement.
There is often less room for potential controversy if the seller does
not make the repairs. If the seller makes the repairs, then there is
always the possibility that the buyer will not like the manner in which
the repairs were made, and still another round of negotiations can be
The more common solution is for the buyer and the seller to settle the
repairs through either a mutually agreeable price reduction or an
agreement for the seller to pay a portion of the buyer’s closing costs.
Whatever the agreed upon resolution of the repair request ends up
being, it is important for the buyer and the seller to reach agreement
before the end of the Due Diligence Period or to agree in writing to an
extension of the Due Diligence Period.
The good news is that this story almost always has a happy ending. The
buyer purchases a home that has passed a wide range of tests and
evaluations, and the seller obtains a fair price for his or her
property, allowing them to move on to the next chapter in their life.
For both parties, it is all about dreams – those to come and those that
have been fulfilled.
To learn more about the home inspection process, talk with your real
estate agent, and read the North Carolina Real Estate Commission’s
pamphlet, “Questions and Answers on Home Inspections”. This
publication is available online at http://www.ncrec.gov. Click on the consumers tab, and scroll down to publications.