The home inspection is an important (but optional) part of the home-buying process.
It’s a chance for the buyer to receive a detailed assessment about the property’s condition, from an unbiased and knowledgeable source. It can also help prevent unpleasant surprises down the road.
Here are the most important points covered in this guide:
- The home inspection usually occurs after the seller accepts the buyer’s offer.
- This is when the house goes “into escrow,” meaning a deal is in progress.
- The buyer is responsible for arranging and paying for the inspection.
- It’s best to schedule it as soon as possible, after the offer acceptance.
- Home buyers can also use a “contingency” as a way to back out of the deal.
When the Home Inspection Takes Place
This will make more sense if we zoom out and look at the buying process as a whole, and how the inspection process fits into it.
While they can vary, most home buying transactions follow this sequence:
- The buyers find a property that meets their needs and falls within their budget.
- They make an offer to purchase the home, using a standard real estate purchase agreement document.
- The seller accepts the buyer’s offer, agreeing to the price and other terms that were written into the contract.
- The two parties will then sign the real estate purchase agreement, and the deal moves forward.
- At this point, home buyers often schedule an inspection to learn more about the true condition of the property they are buying.
- The inspector will examine many aspects of the property, including the roof, foundation, electrical system, plumbing, windows and doors, insulation, and more.
- The inspector will give the buyer a detailed report that includes their findings and any problems they discovered that might require fixing. They typically do not provide cost estimates.
- If any issues are discovered, the home buyers will decide whether they want to (A) ask the seller to repair them prior to closing, or (B) buy the home as-is and make their own repairs.
- If the buyers decide they no longer wish to purchase the home based on the findings, they could use an inspection contingency to back out of the deal.
You’ll notice that the home inspection takes place after the offer has been accepted, not before. This sequence makes the most sense for both the buyer and seller. So let’s explore it from both perspectives.
As a buyer, it would be wise for you to have the home inspected sooner rather than later. That way, if the inspector uncovers serious issues you are not comfortable taking on, you can back out and move on to the next suitable property.
How This Sequence Benefits the Buyer
As the buyer in a real estate transaction, you will be the one paying for the home inspection. They typically cost somewhere between $300 and $500, on average.
But they can exceed that range for larger and more complex properties, or in markets that have a shortage of licensed inspectors.
As a buyer, you don’t want to spend hundreds of dollars for an inspection until you’re sure the seller is going to accept your offer. That’s why it makes sense to make the offer first.
Having the home inspection take place after the offer but before closing gives the home buyer a chance to back out of the deal, possibly by using a contract contingency.
From the Seller’s Perspective…
In a typical real estate transaction, the homeowner won’t allow the inspection to take place until after they have accepted the offer. And it’s easy to understand why, if you put yourself in their shoes.
The home inspection is somewhat invasive for the seller. In most cases, the sellers will leave the premises so the inspector can do what he or she needs to do uninterrupted. They also have to grant the inspector access to the house or else use a lockbox.
Most sellers will only go through this process once they have accepted what they feel is a reasonable offer from a qualified and serious buyer.
If they reversed the process, and allowed for a home inspection before the offer, they might be having an inspector examining their home for no reason. Maybe the buyer comes in with a low offer, which the seller then turns down. In that scenario, the inspection would waste the time of everyone involved.
Contingencies Allow Buyers to Back Out
When buying a house, you have the opportunity to write certain contingencies into your purchase offer. These are conditions that must be met in order to complete the sale.
Contingencies give you a way to back out of the contract if a certain situation arises, like an unsatisfactory home inspection. They also allow you to recover your earnest money deposit, to avoid a financial loss.
But this kind of “contingency clause” must be written into the contract at the start. This is another reason why it’s logical to conduct the inspection after the offer is accepted.
Many buyers include a home inspection contingency within their purchase offers, for this very reason. It gives them a way to back out of the deal without losing their earnest money deposit.
The Importance of the Inspector’s Report
A home inspection usually only takes two to three hours to complete, depending on the size and complexity of the house. When the inspector finishes the process, he or she will write up a detailed report of findings. The inspector will then sit down with the buyers to go over the report, item by item.
This is an important part of the process. It’s the buyers chance to find out the true condition of the house, and to ask questions about any potential repairs.
According to the American Society of Home Inspectors (ASHI):
“The inspector will write a report about their findings, which will go to the homebuyers and homeowners. Based on report, the homebuyer can withdraw the offer, renegotiate the offer or ask the seller to fix specific issues.”
As a buyer, it’s important to slow down and ask questions at this stage. You shouldn’t rush through it or feel like you’re inconveniencing the inspector by asking a lot of questions. You’re paying for this information, so you want to make sure you absorb it all.
Disclaimer: The home buying process can vary from one transaction to the next, for a variety of reasons. Because of this, portions of this guide might not apply to your particular situation.
Brandon Cornett
Brandon Cornett is a veteran real estate market analyst and reporter. He has been covering the U.S. real estate market for nearly 20 years. More about the author