How to Use the Home Inspection Report

Photo: It takes knowledge to get to an agreement where both parties consider it fair.

Abstract: What is the inspection report’s influence on the offer and how best should it be applied? 

Latent Defects vs Patent Defects

First and foremost, every buyer should review the disclosure statement for completeness. Many of the questions target latent defects. A latent defect is a fault that would not readily be revealed by a reasonable inspection. The seller is in the best position to have the answers. Seller’s agents have a responsibility to ensure that the disclosure statement it is answered in full. When answers to important questions are left blank or replied to with ‘don’t know’, then buyers should request that the missing information be provided.
The home inspection is used for identification and description of patent defects and their implications. Patent defects are those that are not hidden and should easily be discovered by a reasonable inspection. As such, it is non-destructive and non-invasive. The report discusses building components, systems, remaining service life and safety concerns. Reported issues have cost impacts.

Information vs Action

In our region, real estate purchase prices are among the highest in the nation. An informational report does not carry the same burden of follow-up as an actionable report. Every report EKAN produces is issued for action. As a buyer why would you not want to make use of the findings?
In our inspection world, we consider defects valued at $1,000 to $2,000 as a minimum threshold for being included in a report. For example, for 10 issues, that cost could be $15,000 to $20,000 for corrections, repairs or end of service life. This is not an unreasonable amount of deficiencies based on our experience.

Follow-up by Buyer vs Seller

The reason that an inspection report is valuable is precisely because major defects and deficiencies are identified. It is up to the home inspector’s client and their agent to determine the appropriate course of action… follow-up by seller, follow-up by buyer or ignore.

As a buyer you have multiple options…

  • Accept the deal as is.
  • Back out of the deal.
  • Ask the seller to make specific repairs.
  • Negotiate a price reduction to cover the repair costs.
  • Negotiate a holdback to be released after a specific date, only if the repairs have been completed.

From a seller’s perspective…

  • You are under no obligation to fix anything.
  • Acknowledge serious issues that were discovered during the inspection.
  • Cut your price rather than fix anything major.
  • Fix minor items to keep a good deal alive.