After the Home Inspection, What’s Next for Sellers?

Whether you’re buying, selling, or refinancing a home, you’re probably going to have to endure a home inspection. About 95% of buyers hire a home inspector prior to closing. It can necessitate a lot of preparation and cause a certain amount of anxiety, but a home inspection is an important part of the process when you’re selling a home. But what’s inspected? How can you prepare? And after the home inspection, what next?

Because it can be a complicated process, we researched the subject and spoke with Clarissa Marshall, who is in the top 1% of all real estate agents in her area in Asheville, North Carolina.

What does the inspection cover?

It’s basically a visual examination of the home’s structure and systems. An inspector will look at the roof and the foundation — and everything in between. Safety issues are key items.

The list of things you can expect to be covered by an inspection report include:

• HVAC
• Plumbing
• Electrical system
• Roof
• Attic, including visible insulation
• Walls
• Ceilings
• Floors
• Windows
• Doors
• Foundation
• Basement
• Structural components

For more details about what to expect during a home inspection, consult the Standard of Practice and Code of Ethics published by the American Society of Home Inspectors.

Although the emphasis will be on these items, inspectors will also see if things like garbage disposals and carbon monoxide detectors are operational. They will also look for leaks, mold, and signs of water damage.

Prepare for an inspection

There are several things you can do that will make the inspection go more easily — and may earn you a better report. Try to look for what home inspectors look for.

Provide access. Make sure interior doors are unlocked and clutter is cleared from everything the inspector needs to see, such as the furnace and under sinks.

1. Clean house. The inspector’s job will be easier and more pleasant if your house is tidy and clean.
2. Replace burned-out lightbulbs. To avoid any question of faulty wiring or bad outlets, make sure all the lightbulbs work.
3. Clear around the house. Trim shrubs and move trash cans so the inspector can get a good look at the siding, trim, and windows.
4.  Flush the toilet. If it runs, get it fixed.
5. Test the pilot lights. These can be on your water heater, fireplace, and stove. Make sure they all work.
6. Tighten the hinges on cabinet doors. Make sure they hang straight and close well.
7. Shut the doors. Like with the cabinet doors, make sure they hang straight and latch properly.
8. Replace the furnace filter.
9. Label the fuse box. Make sure it’s accurate and legible. This will help you in an emergency as well as the inspector.
10. Check for leaks. Look under sinks, around faucets, at the base of the toilet, bathtub, and shower, and under the dishwasher and refrigerator.
11. Look for signs of water damage. Examine walls, ceilings, and floors for warping, sagging, and buckling. Check the exterior for leaks and pooling water.
12. Eradicate bugs. Eliminate wasp nests and get rid of ants and any other noticeable insects.
13. Check the roof. Look for missing tiles. Clean out the gutters. Ensure the downspouts are positioned properly and functional.
14. Produce receipts for maintenance, updates, and other service done to your home, such as an HVAC service, a chimney sweeping, a water heater service.

Be prepared for the inspector two hours before the scheduled appointment. Leave all utilities on and make sure the inspector has access to all areas. Take your pets with you when you leave.

Next steps after the inspection

Once your inspection is completed, the inspector’s report will be sent to whomever paid for the

inspection. Usually, it’s the buyer, but the seller may schedule a pre-inspection before listing the home.

So, after the home inspection, what is next?

1. Buyer will review the report with their agent

The buyer’s agent will help the buyer understand the inspection report and decide whether to buy the house, ask for repairs, or cancel the purchase contract based on the inspection findings. The inspection report can be 30 to 40 pages long, says Marshall, so having an agent to help understand the results is helpful.

It’s important to note, the inspection report belongs to the buyer who paid for it. It’s part of a legal business agreement between the buyer and the home inspector. Even though it’s your house, the only thing the seller receives is a repair request, if the buyer creates one.

Unless there is an extraordinary exception, sellers will generally only get a copy of the inspection report if they paid for part of it, which can sometimes happen through shared closing costs.

2. List of repair requests sent to seller 

A buyer typically has two to three business days to review the home inspection report and ask for repairs.

Just about every report contains a list of suggested repairs, as well as health and safety issues. It’s up to the buyer and buyer’s agent to determine which are reasonable to request the seller to fix.

Generally, cosmetic issues, renovations or updates you want to do, landscaping, and repairs to outbuildings are considered unreasonable repair requests. You should stick to health and safety issues. Anything related to the electrical system (faulty breakers, improper or defective wiring, rusted panel boxes), plumbing (leaks), HVAC (damaged ductwork, inoperable system, faulty thermostat), roof (leaks, damage to shingles, chimney, flashing), or structural defects (wood rot, broken framing) may be fair game.

Buyers can also ask for removal of asbestos, lead paint, mold, and mildew.

3. Seller reviews and crafts response 

The seller’s options to the buyer’s requested repairs are:

• Make the repairs
• Negotiate which repairs to do
• Refuse to do any repairs

According to the National Association of Realtors (NAR), about one in 20 real estate transactions fails to reach completion, with one-third of them not making it to closing because of something discovered during an inspection.

In many states, nothing is labeled as a “must-fix.” Therefore, the seller is under no obligation to perform any repair. “The seller doesn’t have to fix anything,” Marshall says — at least in North Carolina, which is a “buyer beware” state in which the seller doesn’t even have to disclose any issues. It’s all up to the buyer to perform due diligence.

When the seller isn’t legally required to make repairs, the decision to do so often relates to the market. In a buyer’s market — or any time the seller is eager to sell — it’s more likely that the seller will agree to make at least some of the requested repairs. Even so, Marshall says the buyer should “pick a few important things” to focus on. The buyer may have added contingencies in the offer whereby if the inspection revealed flaws, the buyer can back out of the sale.

In a seller’s market, the seller may have less inclination to fix anything — and may have other offers already on the table without contingencies. “Because of the [current] market conditions,” Marshall points out, “sellers are less willing to fix things.”

A seller may offer a credit or financial concession, reducing the price of the home to allow for the buyer’s cost to fix any issues. However, some lenders require specific issues (such as rot, insect damage, or moisture problems) be addressed before a loan is funded. Nevertheless, if the seller refuses, the buyer can walk away and usually get their earnest money returned.

4. Buyer and seller make agreement

Once the buyer and seller have come to terms with any repairs, they make any necessary updates to the agreement of sale (aka contract of purchase, contract for sale, sale agreement, or contract agreement).

5. Sale moves forward to appraisal and closing

Once the inspection period is finalized, the sale will move forward into the appraisal and closing stage.

Lenders require an appraisal to determine the current value of the property. The sale price and other terms can change or be negotiated if the appraisal is low.

The closing process also includes a title search and the buyer’s mortgage underwriting before the closing date. Any one of these steps can delay or even undo the closing, so make sure to keep up with any requests from your agent during this time.

What happens if problems are discovered

A thorough home inspection will list items of concern in and around the home. Inspections can uncover a myriad of concerns, from minor issues to major problems. Some of the more common findings include:

Structural damage

The inspector will look for things like cracks in the home’s foundation, drainage issues in the basement or crawl space, and deteriorating brickwork or masonry. These issues could be costly to repair and are mandatory in some states.

Roof damage

Another costly item is roof repair. An inspector will look for missing or broken shingles, tilting and other damage. The inspector will also inspect the gutters to see if they are clogged.

Chimney issues

The inspector should look for damage to the bricks, mortar, and flue. It’s also critical to make sure the interior is free of blockages. Fixes could range from a simple chimney sweep to major structural repair.

Wildlife and pest infestation

While inspectors are examining the foundation and the chimney, they will also be on the lookout for a pest problem. If there are any signs, the homeowner should consult a pest inspector to assess the extent of the issue.

Dead trees

An inspector may note numerous large trees near the house, especially if they’re dead because they pose a potential danger as they deteriorate. If limbs fall, they could take down power lines or damage the house.

Trip hazards

If there’s an abrupt change in the vertical or horizontal separation of 1.5 inches or more in the walking surface on a normal path, it could cause a trip hazard, according to HUD.gov. Fixing it depends on the cause. Uneven or broken pavement can be relatively inexpensive to repair, but tree roots can be more costly.

Plumbing and septic problems

An inspector should check for broken, rusted, or corroded pipes, as well as cross connection problems and whether the right type of pipe was used. They’ll look for water damage around plumbing fixtures and hookups, water stains on the ceiling, and other signs of water damage, including mold and mildew. If the home has a septic tank, it will need to be inspected for leaks, drainage issues, and to assess the level of solids in the tank.

HVAC issues

An inspector will examine the HVAC system to make sure the ventilation is working properly, the wiring is safe, and the systems — furnace and air conditioner — are working properly. Replacing a furnace or AC unit is expensive, but having your ducts cleaned out isn’t going to hurt too badly.

Electrical hazards

An inspector can check to see if ground-fault circuit interrupter (GFCI) outlets are working, if three-pronged outlets are grounded, and if outlets are painted (which can lead to overheating). They’ll check the circuit panel for modifications and live wires. If problems are suspected, a buyer may ask for an electrician to inspect the home’s electric system to make sure everything is up to the National Electric Code’s standards. Electricians charge a high hourly rate, so any significant electrical repairs are going to be costly.

Fire hazards

Since most fire hazards are related to electrical problems, an inspector is already looking at this, and if the home has a fireplace, the inspector is taking note of fire hazards related to that. In addition, the inspector will verify working smoke and carbon monoxide detectors. Functioning doors and windows can also be considered a fire safety issue.

Non-working appliances

An inspector will likely confirm that major appliances, such as the stove and hood, dishwasher, and garbage disposal, are in working order. Some may also check to see if the refrigerator and freezer maintain proper temperature.

No money to fix big issues? Sell ‘as is’

If you’re in a hurry to sell or you don’t want to spend money fixing up the place you’re leaving, you may be able to sell the house as is. Be advised that if you do sell as-is, most times, you will have fewer offers (sometimes because the lender won’t approve the loan without repairs) and they will typically be for less money because you are taking the needed repairs into account in offering a lower price.

An alternative is HomeLight’s Simple Sale. This can introduce you to a broad network of pre-approved cash buyers and investors. You can save money on selling costs because Simple Sale doesn’t involve open houses, staging, agent fees, or closing costs.

How a seller can respond

If the inspection uncovered issues that the buyer requests you to fix, you have a few options, each of which has some positives and negatives. Ultimately, you should do whatever is best for your situation. An experienced real estate agent may be able to guide you with input on where the market is, so you’ll have information to help make the right decision.

Deny the repair request

Most of the time, a seller isn’t required to make any repairs requested by a buyer, but some counties and cities in California require certain fixes before the transaction can go through. In addition, FHA, VA, and USDA loans may require specific mandatory repairs — usually in these seven areas:

• Water damage
• Structural issues
• Damaged roofing
• Damaged or old electrical system
• Plumbing problems
• Insect and pest infestation
• Issues with the HVAC system

It’s a risky strategy, but in a seller’s market (when there’s high demand for properties but low inventory), declining to make requested repairs may just work. Keep in mind that your contract might outline repairs you must do. Even if it doesn’t, the buyer may be able to walk away — with the earnest money.

If that occurs, the house, which was marked as a pending sale or under contract on the MLS, will go back on the market. However, some buyers consider that a red flag and may be wary of issues.

The seller can also deny the request by simply not responding to it.

Make a counteroffer

The seller can offer to fix only some of the items on the buyer’s fix-it list. Many real estate agents advise against fixing certain things, such as:

• Cosmetic flaws
• Minor electrical issues
• Driveway or sidewalk cracks
• Removable items such as window treatments
• Appliances
• Anything under $100

Sellers should put themselves in the buyer’s shoes, Marshall advises. Big items should probably be repaired, but “silly things” should be rejected.

After the seller makes a counter offer, the buyer typically has three days to agree, continue negotiations, or walk away from the sale.

Any agreement about which repairs the seller will do requires an amendment or an addendum to the contract.

Agree to request

If the seller agrees to the buyer’s request, the seller will then proceed to make the agreed-upon repairs.

Offer a credit

Rather than make the repairs, the seller can offer a credit or a concession, allowing the buyer to fund the necessary fixes. It can be an appealing way to handle repairs for the seller because rather than paying out of pocket, the seller allows funds to be taken from the sale profit to be used for repairs.

However, it may not be possible to offer credits for home repair concessions in some cases, based on lender rules.

One way to offer a repair credit is to reduce the sale price by the amount of the credit and make that amount the new purchase price.

Another possibility is to do a “hold back,” in which escrow holds back 1.5 times the repair estimate. The work must be completed soon after the buyer takes possession, with the seller being responsible for payment. It’s a gamble for the seller because more issues may be uncovered once work begins, with the seller possibly on the hook for them.

Perform the work before closing

Repairs can be made before or after closing. Marshall, however, says there’s “no time to do them before closing” because most contractors are scheduling quite a way out. Either way, the buyer should schedule the inspector to verify as soon as possible after completion.

If the seller does not complete agreed-upon repairs before closing, the seller may be in violation of the contract. In that situation, the buyer could potentially sue for damages due to breach of contract, termination of the contract, and return of deposit (and possibly expenses).

Sellers are not typically liable for any unknown, unagreed-upon repairs after closing.

Role of the real estate agent

There’s some disagreement about whether the seller’s agent should be present during the home inspection. One argument is that, as the seller’s representative, the real estate agent should be present to advocate for the client. The counter argument points out that the buyer is paying for the inspection and deserves to conduct it without the prying eyes of the seller.

Whether or not the agent is present at inspection, there are still ways to assist the seller during the process. For example, an agent should:

• Advise the seller on how to deal with repair requests — whether to do the work, deny the request, negotiate a compromise, or sell as-is, based on the findings of the home inspection.

• Read the market in order to determine if it’s a buyer’s market or seller’s market.

• Determine how eager the buyers are, and how much leverage the seller has.

Stress reducer

Home inspections can be stressful. The listing agent can help a seller in numerous ways, including:

• Prepare for an inspection
• Help the seller understand the inspection report
• Determine which repairs may need immediate attention—or need to be made at all
• Consult local laws about any mandatory repairs
• Know the market, which helps in making decisions about repairs
• Negotiate with the buyer’s agent about repairs

Rely on a good agent to help guide you through an inspection and the steps that come after it so you can get your house sold, lower your stress level, and move on to your next home.

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