Can My Home Fail an Inspection?
I am occasionally asked before performing an inspection for a homeowner if the home can fail the inspection. That depends on what type of inspection is being done. The three most often performed inspections are:
1) The FULL inspection where the home’s structure and systems are being assessed. This inspection is technically not a pass or fail.
2) The UMVI (wind mitigation) insurance inspection, used to determine discounts on the homeowner insurance on the property. Again, not a pass or fail, but the amount of discount offered will be dependent on the specifics of the findings.
3) The 4-POINT inspection: requested by lenders or insurers if the property is over 20 years old. Actual age requirement will vary depending on lender or insurer. This inspection can be failed. The requesting company wants to see a “Clear” report. That is, no “unsatisfactory” conditions that need to be repaired.
Full inspection: While it’s true that an inspector can find many things wrong when they do a home inspection, there is really no such thing as a home failing an inspection. That’s because a full home inspection is really about information – not about passing or failing.
In almost every case, an inspection is done as part of a home-sale transaction. It makes sense for a potential buyer to know if the home has deficiencies before the sale is completed.
The information learned from a home inspection is likely to result in one of three possibilities.
First, if there are no or very limited issues, it may help complete the sale process.
Second, there may be some issues that would require the buyer to make repairs. If that’s the case, and the buyer still wants to purchase the home, the seller can sell the home as is and lower the price to offset at least some of the repair costs. Another option would be for the seller to make the repairs before the sale is final.
Third, there may be enough wrong with the home that the potential buyer walks away from the deal.
Some of the issues that could results in option three are: roof problems or other structural issues, electrical, HVAC, or plumbing issues, foundation problems, termites or other pests, mold or failing seals in windows or doors.
Neither the seller nor potential buyer wants to be surprised by any of these issues. To avoid that, we recommend the seller consider having a pre-listing inspection done. Yes, that’s an additional cost for the seller, but it can be well worth it. We have written before about the idea of a pre-listing inspection. You can see that article here.
With the information from a pre-listing inspection, the seller has various options. If the inspection shows no or few issues, the seller, working with their Realtor, can determine a price for the home and put it on the market confident that the price is consistent with market value.
If small repairs need to be done, the seller can make those repairs before determining the sale price. Or they can disclose the repair items and adjust the price accordingly.
Finally, if there are the significant issues found, they are faced with the same options – make costly repairs or set the price to sell it as is and disclosing the issues. Knowing these issues early allows the seller to consider options and to get bids that may lower the cost of making repairs and eliminate the issue. Thus, raising the possible sale price and reducing the possibility of a lost sale.
So, here’s the bottom line. Your home cannot fail a full inspection. But having the inspection, especially before listing the home, provides the seller with valuable information to use while working with their Realtor to determine the value of the home before putting it on the market, and significantly raises the chances that the sale will go through smoothly.
With the UMVI (Wind Mitigation): The more of the desired characteristics that make the home likely to survive a high wind event the better the discount. The wind mitigation criteria are spelled out on the form. Click here for the form.
With the 4-Point Report: The inspection reports findings related to the status of the roof, the electrical system, the plumbing including the water heating, and the HVAC system. If there are any “unsatisfactory” issues found in any of those areas the home will “fail” the inspection and the requesting company will require that those issues be corrected prior to issuing a loan or insurance. Click here for the form.