What to Expect During Inspections

Welcome to the R+K Real Estate guide on what to expect during inspections! Whether you're a buyer or a seller, when it comes to navigating the inspection process, you've come to the right place. 

Home inspections are the largest "moving piece" of a real estate contract. We often say that getting an offer accepted is the easy part. Getting through the inspections is not easy. Everyone's excited when an offer gets accepted. But what about after an inspector goes through the entire property to find problems? And if you pay an inspector to find deficiencies, they're going to find them. After all, it's a used house (unless you're buying new construction). 

Getting through inspections successfully is where hiring a good agent to help you navigate the process is most critical. Negotiation is essential. Understanding of the local marketplace is non-negotiable. Problem-solving skills must be deployed. Knowledge and sound advice separates good agents from bad.

R+K Real Estate has a ton of experience navigating inspections. We've been doing this for over 10 years now and we have closed over 100 homes as listing agents. We have a huge network of contractors, inspectors, and trusted experts to help us provide the very best information to our clients in order to make the most educated decision. 

What follows is a guide on what to expect during the inspections process.

What to expect if you're Selling a Home

If you're a home seller, once you have accepted an offer, the headache of showing your home is over. The headache of allowing inspectors into the home has begun! OK, it's not really that bad. But it is a process and it involves a little bit of "letting go." The contract allows the buyers to inspect anything and everything (unless they have specifically excluded something in the contract.). Discouraging certain inspections or attempting to dissuade a buyer to inspect is not allowed.

• The contract states that a seller must provide "reasonable access" to the home. What does reasonable access mean? Basically it means that unless it comes down to life or death, you want to make sure that once a buyer has scheduled their inspections, you are providing unlimited access to the property during the actual inspection. 

• Most general whole-home inspections take 2-4 hours. A home inspector will evaluate all the systems of the home including (but not limited to) mechanical systems, electrical systems, plumbing, HVAC, roof, foundation, doors & windows, siding, appliances, and just about anything else of concern to a buyer. Optional inspections include doing a termite/pest inspection, testing for the presence of radon gas, and doing a sewer-cam inspection. If an inspector identifies an issue beyond their scope of experience, it's not uncommon to call in specific contractors, engineers or other experts to further evaluate an issue. 

• The Lawrence real estate contract defaults to a 10-Day "Inspection Period." Unless otherwise stated, this gives the buyer 10 calendar days to do any and all inspections. 10 days is almost always plenty of time for inspections. The parties can agree, during this timeframe, to extend the inspection window if needed.
• Seller should plan to vacate the premises during inspections. As is custom, the buyer is allowed to be present with the inspector during inspection. Inspections are usually carried out with the buyer agent (NOT the listing agent) present.   
  
• At the end of the Inspection Period, the buyer will also need to "resolve" the inspections. This means submitting a resolution to the seller, in writing. This resolution is generally to either ask the seller for repairs to items identified during the inspections, to move forward without making any requests, to cancel the contract, or to attempt to re-negotiate (on price, for example). 

The options available to the buyer to resolve the inspections is set forth in the contract itself. The negotiate of how the inspection process will play out is part of that initial offer to the seller. The Lawrence contract lays out two (technically four) options: 

1. "Cancel this Contract." This is the options that is typically referred to as "As-is" inspections. The buyer still retains the right to inspect anything and everything, but they (contractually) do not also retain the right to ask the seller to correct items found upon inspection. The do, however, have the right to cancel the contract for just about anything they find. In this case the inspection contingency guarantees the buyer does not lose their earnest money.

Note: Many sellers over the years have operated under the assumption that "as-is" protects them more than the buyer. We believe this is false. While there are advantages to this approach (not doing repairs) the disadvantages are enough to warrant a strong look before agreeing to go this route. Unless a buyer has provided some additional language that alters this section, a buyer can cancel the contract for almost any reason. Leaky faucet in the bathroom? Cancel. Is it worth losing a buyer and going back to market over a leaky faucet? No, most certainly not.

2. "Request Repairs." This option is far and away the most common route we experience. After inspecting the buyer resolves the Inspection Period by delivering a list of repair requests to the seller. The seller then has the opportunity to review the list, accept it all, accept some, or accept none of it. The seller has five calendar days to respond, referred to as the "Inspection Negotiation Period" of the contract. Experts can be consulted to help inform what to agree to (or not agree to) and to help gauge what certain repairs might cost. 

The response given back to the buyer is important: If the seller accepts and agrees to the entire list, no problem. Contract moves to close. If the seller instead strikes anything (or everything) on the buyer's list, the buyer then has three options: Accept it and move forward, not accept it and cancel, or attempt to continue to negotiate. 

Note: There is an important detail on the Lawrence contract under the Request Repairs option. This is referred to as "Buyer's First Repairs" and can be any dollar amount from $0.00 upwards to unlimited. What it means is the buyer stating that in the event they request repairs from a seller (and the seller agrees to said repairs), the buyer will cover the first $X amount of the cost of those repairs. The higher this figure proposed in the contract, the more "skin in the game" the buyer has in participating in the repairs. The higher the amount, the more assurance for the seller to get through inspection negotiations. 

3. The third option is to retain both options 1 & 2. This means that a buyer can either cancel for deficiencies found, or submit a list of repair request to the seller (or neither). It's basically like keeping all options open. 

4. Neither option. This can be referred to as "FYI Only" inspections. Buyer can inspect anything and everything, but for their own information only. Contractually, they have no right to request a resolution of deficiencies from the seller, or to cancel the contract. We do not see this option taken very often. However, for a seller client, it's a great option. It's just as good as waiving inspections entirely! 

5. And there actually is one final option for a buyer and that option is to waive inspections. While this option is great for a seller, it means it's a done deal, it's not seen all that often and can carry risks that should be discussed when accepting such an offer. 

Once a buyer has submitted a resolution and it's either been accepted (either by accepting the resolution right away or through further negotiation) then one of  the contract's main contingencies has been completed ( the other being financing if a buyer is getting a loan). Once an agreement has been found, the contract is usually as good as done. While it's not closed until it's closed, this is usually the part where a home seller can breathe a little sigh of relief. 

The buyer has the right to a final walkthrough and a chance to make sure the repairs were completed satisfactorily. 

What to expect if you're buying a home

If you're buying a home, knowing the market is critical. If you don't know the market inside and out, you should hire a Realtor to help you through the whole process. Finding the home is easy. Getting to closing is not. There are major pitfalls for home buyers that should be avoided. This is especially true for first time home buyers. Getting good, up-to-date, market-specific advice from a real estate agent can be the difference between success and complete and total failure. 

To get a start on getting through inspections, it's important when shopping for a home to buy that only the decision makers are present. Everyone seems to have an "uncle Frank" who bought a house once in 1997 or a friend who's a "real whizz-bang" when it comes to houses. These folks seem to know what they're doing so well, that they will find any and every reason to kill every single deal a buyer attempts to make. Instead, your agent's expertise should be relied upon. This is critical to finding a home in such a tight, low-inventory, seller's market like the one in Lawrence today. 

Here are the steps and options to help familiarize oneself with navigating inspections. 

• The first step is finding the right house. Seeing it in person is preferred, though we realize this isn't always possible. We have worked with remote clients many times. If you can see the actual, physical house, then that's the first opportunity to evaluate it's condition. Sometimes this is easy and the house reads like a book. Other times it's more difficult and deficiencies are latent or hidden. This equation differs for every client and every house. Some buyers are looking for a project and others aren't. Condition should be factored in to price.
• The next step is evaluating a Seller Disclosure. This is where the seller is disclosing specific things they know (or don't know) about the home's condition. How old is the roof? The HVAC? The water heater? Are they disclosing any major repairs since owning the home? Any known environmental problems? While not fool-proof by any means, a review of the seller disclosure is part of a buyer's due diligence. 
• Making an Offer. Writing a competitive offer can mean the difference between a winning and a losing one. Price is important. Type of financing (or cash?) is important. Ditto for using a good local lender. Paying special attention to the Inspections paragraph can be just as important as the price. 

This is the part where it becomes very helpful and informative to read the above section on "what to expect when selling a home." It may come in very handy to see how things look from the other side. What is a seller looking for in an offer to feel good about accepting it? The same options 1-5 apply here. We'll go through each from a buyer's perspective: 

1. "Cancel this Contract." The reason to go this route is usually because it may be what a seller is asking from potential buyers. You may see somewhere in the listing remarks that the sale is "as-is." This is what that means. But don't fret too much: You can still inspect the home. And if you find something scary, you can cancel. Or, and here's the trick: you can hint to a seller that you intend to cancel based upon deficiencies discovered, unless they're willing to complete a repair or two, or renegotiate on price. It may not work, but it can be worth an ask. If the inspection only turns up small, maintenance-level issues, no big deal. Just accept it and move on. If a big problem reveals itself and a seller won't correct it or renegotiate, then you get to cancel, receive back your earnest money. In such instances, you're only out a little bit of time and the cost of inspections. 

2. "Request Repairs." This is the route most buyers are comfortable pursuing. And it's the one that makes the most sense. Any deficiencies you find, you can ask the seller to correct. Or, you may not ask for anything. If there's a good inspection result and most of the big-ticket items are clear, there's little need to submit a honey-do list to a seller. You're buying a used house, it won't be perfect. If the seller rejects your request, you can either cancel or accept it and move forward. Or attempt a likewise negotiation. 

Note: Having a good Realtor who understands the local market is critical here. Just because an inspector found something doesn't mean you should ask for it. In fact, in most instances, you should not ask for it. It depends on what it is. Is the roof shot? You either need a new roof or you need to find another house. In fact, if the insurance company refuses to insure a bad roof, you can get financed. Does the electrical panel have doubled up neutrals? We find that all the time, it's a $200 fix. There's no need to risk a $400,000 house over a $200 problem. The inspections cost more than $200.

"Buyer's First Repairs." Again, we refer to the above section on this topic. For buyers this is a big moving piece of any good offer. If you intend to retain the right to ask the seller for repairs, this figure should not be $0. It should be something greater. How much greater? It depends. This figure is going to change from buyer to buyer and house to house. Some buyers are more able and aggressive. Some less so.

A certain house might call for bringing out all the stops. If it's "the one" what are you willing to do to get it? Maybe beefing up the "buyer first repairs" line. A word of warning though: if you put a high number here, you have to be prepared to either use it (pay it in cash, at closing) or not use it. Not using it means basically making no repair request of the seller after inspections. This can be confusing, so again, getting good advice from your Realtor will make all the difference! 

Options 3-5 are pretty much carbon-copy from what's above in the seller section. Depending on the situation, it's more rare for us to see a buyer going any of these directions. 

• Next is conducting the inspections themselves. R+K Real Estate recommends inspectors that we know and trust for our clients. Options include the Whole House/Mechanical Inspection, a termite inspection, a radon gas inspection, and/or a sewer cam. We always recommend sewer cam inspections. We have fallen away from recommending radon inspections in recent years. If you're worried about the presence of radon gas, a 48 hour test isn't going to tell you much. Certainly not if radon is present outside of those 48 hours. If exposure to radon gas is a concern, save the $150 on the test and just plan to install a radon system after you buy the home. They cost around $800-$1,200. 
• Inspections typically take 2-4 hours. Your agent will help you schedule the inspections. If possible, it is preferable to do them all at once on the same day. If you need to further evaluate, a contractor can be called in after the fact to help give information and cost estimates if needed. 
• There are 10 days (unless otherwise specified) for any and all inspections. At the end of the 10 days (the Inspection Period) the buyer must deliver a resolution in writing to the seller. This resolution can be a repair request, a cancellation, a notice to move forward as-is, or an attempt to renegotiate.
• Seller has 5 days (unless otherwise specified) to respond to the buyer's request (if any). If the buyer is asking for repairs, and the sellers strikes any one item in the repair request, the buyer has the right to accept and move forward, to cancel and get their earnest money back, or to attempt another renegotiation. If no agreement is reached in that 5 days, buyer retains the right to cancel unilaterally. 
• If repairs are agreed to by seller, buyer has the right to a final walkthrough and to copies of the invoices to prove the work complete. 

For both buyers and sellers to consider:

• It should be kept in mind throughout the process that as the broker, R+K Real Estate provides the system and real estate advice. However, we make no decisions regarding what ends up in an offer or what a buyer or seller chooses to do in an inspection negotiation. While we provide the system and the supervision, it is the client's responsibility to make the decisions on what to do or what not to do. It is up to the client to read the documents we provide prior to signing them. 

We hope you found something helpful in the above descriptions of the inspection process. As you can see, there is a lot to consider when approaching and getting through this process.

Every situation is different. Everything is a negotiation. Expertise and professionalism are key in finding success in making it to the closing table. It is our goal to get every single client from making an offer to the closing table. It doesn't always happen. Surprises pop up and some things can't be helped or avoided. But by having clients well-informed to the process, our chances of success are increased!