Home Inspections: A Crash Course for Beginners

Home inspections are back! This means you are either rusty working through this process and contingency, or you have no idea what you’re doing because you have never had to navigate inspections as part of an Agreement of Sale. This article is a framework to work through inspections and will get down to the basics, assuming many of you have no experience in this arena. This is your crash course on home inspections.

As a listing agent, your seller has accepted a contract and the buyers elected to do a slew of inspections. What’s next? The buyer/buyer agent will schedule the inspections within the timeframe identified in Section 13A of the Agreement of Sale. It is 10 days by default, but that can be adjusted when preparing the AOS. The home inspector will schedule the inspection with the seller, typically through ShowingTime, and sometimes directly through the listing agent. Home inspectors have a Supra eKey and can let themselves into the property for the inspection. Most home inspectors reach out to the listing agent to provide some guidelines for the inspection. You should forward this information to the seller, so that they can be prepared. Typically, this will ask them to have all appliances and utilities running (oil in the tank), clear access to the attic, clear access to the mechanicals and other tips for a smooth inspection. If a radon test will be conducted, the inspector will have instructions for the seller to maintain closed house conditions during the test.

Listing agents should share the inspector-provided information with the seller. They should also give the seller a heads-up about what will happen during the inspection. For example, most buyers attend the inspection. Some buyer agents attend the inspection, but they don’t always stay for the entire time. Your seller may want to present their home in the same manner as a showing because the buyers will be there for a much longer timeframe, and you want them to still be excited about the home and not distracted by dirty laundry or a messy kitchen. The home inspector will schedule the appointment with a beginning and end time. For the average house, it is approximately a 3-hour inspection.

It is customary for the seller to leave the house for the duration of the inspection. They can stay in the home if they choose, but they should stay out of the way of the inspector and provide privacy for the inspector to speak with the buyer. Sellers don’t necessarily know this or know what to expect, so the listing agent must communicate with the seller clearly to set expectations.

Buyer agents should set expectations for the buyer, as well. It can be very helpful for the buyer to attend the inspections, especially the whole house inspection. This way they can see the material defects that are found in person, and they can ask the inspector questions about the issues. This can give the buyer a much clearer understanding of the severity of the issues. If they skip the inspection and simply receive the report, they may feel overwhelmed, not knowing if the issues are significant or costly, or just routine, run-of-the-mill maintenance items. The home inspector will also show the buyer where the main water shut off is located, where the filter goes in the furnace and other useful tips that will help the buyer when they move in.

Who can’t attend the inspections? Only the buyer, seller and their real estate licensee(s) may attend any inspections (Section 12A1). The buyers cannot invite their parents or friends to visit the home during the inspection.

New agents should attend every home inspection they schedule to gain familiarity with the process and with the commonly found issues so that they can achieve a depth of knowledge related to homes, maintenance and material defects. The more you know about homes, the better a resource you are to your buyers. In fact, buyer agents should inform their buyers about the home inspection process beginning with their first meeting with the buyer. This is the best way to set the proper expectations for the buyer so that when they finally get to their actual home inspection, they have realistic expectations, and they will be happier with the entire process. You can let the buyer know things that are routinely found during inspections, like exhaust fans in the bathroom that vent to the attic instead of the exterior, ungrounded electrical receptacles, and the age of systems are a few examples.

Most home inspectors provide a full written report with photos either the day of the inspection or the following day. Some tests may take more time to get results; for example, the radon test runs 48 hours or more, and water tests sent to a lab may take several days to get results. Be mindful of the tests that take days to get back when scheduling the inspections. You’ll want to get them scheduled as early in the inspection contingency timeframe as possible.

It is safe to say that the buyer is responsible for the costs of inspections with one notable exception. If the buyer has elected a septic inspection, it is the seller’s responsibility to locate and provide access to the septic tank and system. The seller is financially responsible for having the tank or tanks pumped at the time of the inspection, and they are to provide the water for the test (Section 12C On-lot Sewage). Most septic inspection companies will coordinate the tank pumping and bill the seller, but sometimes a seller will insist on ordering their own company to pump the tank. These logistics should be coordinated with the inspection company, the agents and the buyer and seller. Don’t take for granted that the septic tank has easy access or can be easily located. Sometimes the cover is buried under a foot of dirt, and the seller has no idea where it is. It is the seller’s responsibility to find it and to dig the hole to the cover. Some inspection companies will dig for the cover, but they will charge the seller for this service. Many septic inspection companies will send the listing agent detailed paperwork to complete with the seller prior to the inspection, outlining their needs for the inspection and gathering as much information as they can about the septic system, so they are prepared for the inspection.

Some buyer agents will schedule additional inspections to occur simultaneously under the umbrella of the Home/Property Inspections and Environmental Hazards. These can include air quality/mold, a camera in the sewer line and a chimney inspection. The seller is entitled to request a copy of all of the inspection reports (Section 12A5).

If the Inspection Contingency Period is 10 days, then the buyer agent must have inspections completed and submit the Buyer’s Reply to Inspections/Reports or Written Corrective Proposal (BRI) to the seller by the 10th day. If the buyer is electing to terminate the agreement, then they will skip the BRI and submit a Notice of Termination of the Agreement of Sale (TERAREL). This document includes both the Notice of Termination and the Agreement of Sale Release and Distribution of the Deposit Money. Make sure you use this document to both terminate based the inspection contingency (Section 13B2) and release the buyer’s deposit to the correct party. Include the inspection reports in their entirety when sending to the listing agent.

If the buyer decides to complete the purchase after the inspections, they can either accept the property in the condition reflected in the reports or submit a corrective proposal. One of these two choices should be selected on the BRI.

What is a corrective proposal? This is where things can get tricky. First, the corrective proposal can include a list of repairs, a credit in lieu of repairs (seller assist), a change to the purchase price, or a combination of these three options.

Before delving into these three options, the buyer should consider their expectations. When purchasing an existing home, it is never in perfect condition. It is helpful to let the buyer know before the home inspection some of the things that typically come up on inspection reports. I’ve mentioned a few of these common issues earlier in this article, but you’ll find there are many items that appear repeatedly, such as lack of maintenance records for the HVAC system, exterior grading that could be improved, a water heater missing the pressure relief valve extension, or wood deterioration at the exterior door frames.

The primary purpose of the inspections is to find or catch major material defects. Every home has some maintenance that could be done. When considering what repairs to ask the seller to make, it is essential to keep in mind that the seller can refuse to make any repairs unless it is stated in the AOS. The buyer should understand that they will be taking over ownership of an existing home that is not perfect, and they can assume responsibility for anything found on the report.

One benefit to not requesting the seller to make repairs is that the buyer will have complete control as to how repairs are made once they own the home. The seller is ready to move on and not invested in making the highest quality repairs. According to the BRI, the seller will make repairs in a “workmanlike manner," which is vague, unless the buyer has stipulated more details about the repair or required completing a written proposal by a specific contractor.

When a major defect is found, then what? During the initial inspection contingency period, the buyer and/or buyer agent can obtain estimates for repairs. You can schedule an appointment for a contractor to take a look at any issue so you and the buyer can fully understand what’s at stake. Sometimes the actual cost is good news and sometimes its bad news, but when buyers and buyer agents guess at the cost, they are often wrong. If you want the seller to make the correction and use the contractor who provided the quote, you can specify that in the BRI.

Once the BRI is submitted to the Listing Agent/Seller, there is a 5-day negotiation period (unless the buyer agent changed this default timeframe in Section 13B3a). To be clear, the full 10 days is counted, and then there is a 5-day negotiation period. If the buyer agent delivers the BRI to the listing agent in 7 days, you still have 10 full days for the inspection contingency and 5 days following that for negotiation. A buyer cannot terminate the sale during the 5-day negotiation period. They can terminate by day 10 of the original contingency period, but once they submit a BRI with a corrective proposal, they have to wait for the 5 days of negotiation to pass before they can terminate the agreement. 

During the 5 days of negotiation, the seller can have contractors evaluate any issues the buyer would like to have corrected before committing to the repairs or to check the price of the buyer’s contractor. The seller can agree to the terms the buyer outlines in the BRI, counter the terms, agree to do some but not all repairs, or counter a seller assist amount. They can also decline to do anything in the buyer’s corrective proposal.

If the seller agrees to the buyer’s terms in the BRI, you will notice that there is no line for the seller to sign on that form. The listing agent can prepare a Change In Terms Addendum to Agreement of Sale (CTA) and outline the terms as stated on the BRI. Then, all parties can sign it. Alternatively, the buyer agent can submit both a signed BRI and CTA with the reports when submitting the buyer’s reply to the inspections.

If the seller and buyer come to an agreement that is different from the original BRI, one of the agents can draft a CTA, and all parties can sign it. The CTA needs to be fully executed before the end of the 5-day negotiation period. If it is not or if the seller declines to do any of the buyer’s requests, the buyer has 2 days to either accept the property as-is or terminate the agreement. Note that on-lot sewage disposal systems have a different timeline and process, which is outlined in Section 13C if the system needs to be replaced.

Here are a few best practices for inspections:

-Have a list of inspectors you or your buyer will contact so you are prepared when your buyer goes under contract.

-Have trusted contractors available to get timely estimates when needed. If you do not have trusted contractors, ask agents in your office, and you will likely get some good options.

-Set expectations for both buyers and sellers about this entire process. Help them understand the timelines so they don’t expect a same-day response.

-If you are preparing a list of corrections or repairs, cite the section of the inspection report that relates to the repair so the listing agent and seller can clearly see what the inspector found and what repair is being requested. It can be helpful to include a written summary for the listing agent when submitting the BRI to explain what the buyer is requesting and why.

-Keep in mind that there is a difference between a material defect, deferred maintenance, upgrades, and a system at the end of its useful life. Focus on material defects when guiding the buyer to reply to the inspections. A material defect is a specific issue with a system or component of a residential property that may have a significant, adverse impact on the value of the property, or that poses an unreasonable risk to people.

-Send all of the complete inspection reports to the listing agent/seller when replying to inspections or terminating. Listing agents can request the reports at any time after they are completed, but it is better to wait for the agent to send the BRI before reviewing the reports. If a seller reads the report before they know what the buyers are asking for, they can do a lot of unnecessary worrying. Sometimes they start fixing things immediately, which could be different from what the buyers would like. Therefore, it is best to review the reports and the BRI at the same time.

-Finally, if you are not experienced preparing a BRI or CTA, it is a good idea to ask for assistance or have it reviewed by your broker or manager before signing it.

I am sure there are other tips you may have to successfully navigate the inspection process. If so, I’d love to hear about them.

Facts, opinions and information expressed in the Blog represent the work of the author and are believed to be accurate, but are not guaranteed. The Lancaster County Association of Realtors is not liable for any potential errors, omissions or outdated information. If errors are noted within a post, please notify the Association. Posts represent the author's opinion and are not necessarily the opinion of the Association.