Home inspection basics

Property Inspection Basics: What Every Realtor and Investor Needs to Know

Understanding the Importance of Home Inspections

A home inspection is a critical step in any real estate transaction, serving as a safeguard for both buyers and sellers. It helps verify whether the seller's disclosures about the property's condition are accurate and identifies any material defects—issues that could significantly affect the property's value, the health and safety of occupants, or the property's expected economic life. Material defects are those that would cause a reasonable buyer to pay less or reconsider purchasing the property altogether. Latent defects, on the other hand, are hidden issues not immediately evident during a casual walkthrough.

The Impact on Financing and Appraisals

The condition of a property directly influences its appraised value, which in turn affects a buyer’s ability to secure financing. Certain loan programs, such as FHA and VA loans, have specific inspection requirements that must be met for eligibility. Even buyers purchasing a property "as-is" should insist on a professional inspection, as this is the only way to truly understand what "as-is" entails.

Why New Construction Still Needs Inspection

It’s a common misconception that newly built homes don’t require inspections. However, a home inspector can help buyers assess the quality of construction and provide maintenance recommendations, ensuring the property meets expected standards.

Scope and Limitations of Home Inspections

Home inspections typically cover the property's structural condition, including foundations, roofing, and major systems like heating and air conditioning. Inspectors may recommend specialists for issues such as water intrusion, mold, or hazardous substances. However, inspectors generally do not assess minor cosmetic issues unless they relate to a structural problem, nor do they inspect fences, soil conditions, or irrigation systems.

Agent Responsibilities and Disclosure

While agents are not responsible for conducting comprehensive inspections, they are expected to recognize obvious defects and advise clients accordingly. Sellers are legally obligated to disclose any known material defects to all parties involved. If a seller is unaware of a defect or refuses to disclose it, agents still have a duty to inform the buyer if they become aware of the issue.

Selecting a Home Inspector

Buyers often look to their agents for recommendations on home inspectors. It’s best practice to provide a vetted shortlist rather than a single name, allowing buyers to make an informed choice. Agents should educate clients about the inspection process, manage expectations, and assist with negotiations if repairs are requested.

Pre-Listing Inspections: Pros and Cons

A pre-listing inspection allows sellers to address major issues before listing, potentially reducing negotiation hurdles and providing greater transparency. This can help set a realistic price and ease buyer anxiety. However, some sellers may hesitate, knowing that any discovered defects must be disclosed.

Navigating Inspection Contingencies

In competitive markets, some sellers may prefer offers without inspection contingencies, or even require buyers to waive them. Agents should ensure buyers understand the risks of waiving inspections and, if buyers decline an inspection, obtain a written waiver for liability protection. Inspection contingencies are common in contracts, giving buyers a set period to complete inspections and negotiate repairs.

Final Walk-Through and Inspection Costs

A thorough final walk-through is essential to confirm that agreed-upon repairs are complete and the property’s condition is unchanged. Inspection costs vary by property size and location, typically ranging from $200 to $495, with larger or more complex properties costing more.

Post-Inspection Negotiations and Repairs

After the inspection, buyers may cancel the contract or request repairs. Major issues—such as pest infestations, high radon, significant electrical or plumbing defects, or structural problems—are reasonable grounds for repair requests. Cosmetic issues are generally not negotiated. Buyers should obtain repair estimates from reputable contractors to support negotiations.

Best Practices for Agents

• Stay on top of deadlines and contractual obligations.

• Attend inspections and review reports with clients.

• Prepare precise repair addendums to avoid disputes.

• Set realistic expectations—inspections are for safety and structural concerns, not cosmetic upgrades.

Conclusion

A thorough understanding of the property inspection process protects all parties and ensures smoother transactions. By guiding clients through inspections, disclosures, and negotiations, real estate professionals add significant value and reduce the risk of post-sale disputes.