The real estate market has shifted & it’s no longer as common for Buyers to waive Inspection Objections to beat out the competition & get a home for top dollar. But how do you actually get through an inspection? First, remember Home Inspections are designed to focus on Health & Safety Issues and address the major systems in a home (Examples: Structure, roof, HVAC, electrical, plumbing, fireplaces & sewer line).
While home inspectors aren’t required to be licensed in Colorado, you should use a home inspector who is fully insured & preferably certified by their respective professional organizations, like the American Society of Home Inspectors (ASHI) & the National Association of Home Inspectors (NAHI). Your Realtor should refer you to at least two professional companies to best represent your interests. Ultimately, the decision on who inspects your home is up to you!
So, what Inspections should you perform & how much do they cost? A professional General Home Inspection will typically cost $400-$700 & range depending upon the size & age of the home. You will also want to have a sewer scope performed for approximately $150-$250. A radon test is also recommended for $135-$200 & is typically cheaper if it’s performed in conjunction with your General Inspection. You should definitely take advantage of a FREE roof inspection no matter what the age of the roof. Lastly, you may want to consult a structural engineer for approximately $350+. Obtaining a Structural Report will cost several hundred dollars more. It adds up quickly but it’s a crucial step to thoroughly investigate the home during the inspection phase of the transaction so you know what you’re getting in to.
If you’re purchasing a home on a well & septic system, there are a few more steps. A well inspection will take many hours to test the well’s rate of flow/production rate. Lab tests for potability/water quality will also take several business days. Most counties in Colorado require a Seller to have a septic system pumped, inspected & certified at their own expense to transfer ownership to the Buyer. Be sure your Contract deadlines allows for an appropriate amount of time to get these important inspections completed & to have all of the results in hand by your Inspection Objection deadline.
After discussing the findings of the home inspections with your Realtor, you may want to obtain professional estimates to perform repairs you’d like the Seller to address. Having a firm idea of potential costs just makes decision-making easier – for you AND the Seller.
A seasoned Realtor like Jackie has a network of vendor connections to obtain repair estimates, often for free or a small fee. While you may be loathe to pay for an estimate, keep in mind it’s a very small amount compared to the total cost of your investment in a new home!
It’s also critical to have a discussion with your lender regarding potential scenarios to remedy inspection issues PRIOR to submitting your Inspection Objection. Remember, an Inspection Resolution becomes an Amendment to the Contract to Buy & Sell in Colorado and lenders must receive all Contract documents – including a copy of the Inspection Resolution. If you’re requesting an allowance/Closing Cost credit from the Seller to address an item after Closing, be sure the lender not only confirms the dollar amount complies with applicable lending regulations, but the Underwriter will also approve a post-Closing repair.
Depending upon your loan type, certain repairs must be completed prior to Closing. For example, a Buyer purchasing a home with an FHA or a VA loan will be required to have a roof replaced prior to Closing. They’re also sticklers for peeling paint if a home was built prior to Jan. 1, 1978, due to lead-based paint hazards.
So, what are your options to remedy Inspection issues?
- Terminate the Contract. Sometimes the problems are just more than you want to take on or your just can’t come to terms with the Seller.
- Ask the Seller to perform the property repair(s) prior to Closing.
- Ask the Seller to pay a Concession, or Closing Cost Allowance, at Closing to offset the Buyers’ cash-to-close in an amount congruent with the anticipated repair(s).
- Negotiate a modification to the Purchase Price as compensation for the needed repair(s).
- At Closing, the Seller can escrow funds to pay a contractor. (Caution: Lenders have strict rules about escrows & often require multiple professional bids to determine the amount of the escrow. Some won’t even allow it!)
- Have a repair completed prior to Closing & have the Vendor paid by the title company after Closing from the Seller’s net sales proceeds. Sometimes Sellers just don’t have the funds upfront for a costly repair. Lenders are more accepting of a direct payment to a vendor at Closing if it’s fully disclosed to all parties & appears on the settlement statement.
- The Buyer can cover the repair costs themselves & deal with it after Closing. (Again, this ability is determined by the type of repair needed. Talk to your Realtor & your lender!)
Remember, it’s a negotiation. Rarely does one party achieve 100% of their goals. In essence, “you have to give to get.” That said, you need to be comfortable with the Inspection Resolution & any impact to your bottom line to proceed with the transaction.
If you can’t come to a Resolution with the Seller, the option to Terminate the Contract & re-start your home search usually exists. You’ll be out the money you paid for inspections as payment services already rendered, but the Buyer typically receives their Earnest Money back after Contract termination (depending upon the exact Contract terms & what’s already been negotiated with the Seller to get the offer accepted).
Trust your Realtor to guide you & support you through this process! Jackie has helped both home Buyers & Sellers successfully navigate hundreds of inspections. Remember to “Just Choose Jackie!” for a breath of Fresh Air in your real estate transaction!