After a Home Inspection Reveals Defects
Using a Home Inspection as a Negotiation Tool
Smart real estate professionals recommend that every single home buyer in America obtain a home inspection before buying a home. Not only is a home inspection a crucial element, but as any real estate agent will tell you, it offers disclosures that an agent can't provide. Not to mention, real estate agents don't want to get sued for not suggesting that a buyer obtain a home inspection. But what happens after a home inspection reveals defects?
First, realize that a home inspection does not release a seller from the responsibility to disclose known defects. Depending on various state laws, most sellers are required to disclose to a home buyer any material facts and things that might be wrong with the home. If a seller possesses knowledge, for example, that tree roots often creep into the sewer line and need to be removed from time to time, the seller should disclose this to the buyer. It could mean the sewer line should be replaced, and the buyer might want to obtain a sewer inspection.
Sometimes, sellers worry about disclosing because they don't want to make repairs. They don't want to deal with a Request for Repair. They figure if the buyer finds out about a problem, then the buyer will ask the sellers to fix it or, worse, that the buyer might not complete the sale. They don't stop to think that if the buyer finds out about it after the home closes, the buyer might sue the seller for purposely withholding pertinent information. Material facts should be disclosed.
Not only do buyers often want to sue sellers in this situation, but they also tend to sue everybody involved in the transaction, including all of the real estate agents and their brokerages. A real estate agent's hope is a home inspector will uncover any defects the seller has not disclosed, whether on purpose or not. At least then the buyer is armed with disclosures and can make an informed decision. A home inspection comes with a fee, which is often paid for by the prospective buyer.
Is The Seller Required to Make Repairs for Defects Noted in the Home Inspection?
Buying a home is a large and unique purchase. It is not like buying a new car or a new jacket. For instance, when shopping at Macy's, my mother used to slip a dress off the hanger and examine that dress from top to bottom, looking for a defect before she bought it. If she could find a loose button or a hanging thread, she would demand a discount. But you can't really do that with a house unless the home is brand new.
You may not realize this, but a brand new home -- a home that has never been occupied -- can also reveal defects. In California, for example, builders guarantee the workmanship of a new home for 10 years. Builders want to deliver the home in excellent condition to the buyer and will fix most problems. Repairs are not required with a resale home, a home that has been previously occupied.
Why Would Sellers Make Repairs After a Home Inspection?
Some sellers try to be proactive and may order a home inspection before putting the home up for sale. While this preemptive disclosure might be potentially useful, it can also backfire.
- No two home inspections are alike.
- Defects on the pre-home inspection might be wrongly noted.
- The buyer will still obtain his or her own home inspection anyway.
- The seller might make repairs pursuant to the seller's home inspection that the buyer would not request.
- The seller might be required to hand over an inaccurate home inspection to the buyer.
The main reason I see sellers make repairs on behalf of buyers is because the sellers know that if the buyers cancel, we are required by law to give a copy of the buyer's home inspection to the next buyer. The next buyer might demand more repairs or offer to pay a lower price, based on the home inspection. But maybe not. Depends on the type of market. In a seller's market, the next buyer probably won't care.
In a buyer's market, it's often better to deal with the buyer at hand. Few sellers want to be the owner of that home that is now suddenly back on the market, which raises immediate suspicions as to the reason why. Buyers tend to think there must be something wrong with the home that forced the first buyer to cancel. Not only does the seller have to struggle with that issue, but the seller also has to deal with a new buyer's quirks.
Once the second buyer realizes that the first buyer canceled, the second buyer might be too frightened to move forward. Buyers don't want to make what they believe would be a stupid mistake. They worry that they might be missing some crucial element because they tend to know about as much about a home inspection as the first buyer, which is often very little.
Even homes that are sold "As-Is" are subject to a home inspection. But most sellers in this case are not required to make repairs, even upon request. Rather, the inspection information will be used by the buyer to proceed with the repairs themselves.
At the time of writing, Elizabeth Weintraub, BRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.