The Home Inspection Process
A home inspection is always a good idea to have, especially when buying an older property (condo or house). In today’s escrow transaction, the home inspection report has become the “second round of negotiations”, in which buyers will select various items they would like to ask the seller to pay for, repair or credit them in escrow. During the 17-day due diligence period, the buyer performs their investigations on the property including: Review of seller disclosures, HOA documents (if applicable), any permits for additions, remodels, etc., and having inspections conducted. For condominiums, only the “walls in” are inspected by a home inspector. What this means is that only the area that the buyer is purchasing will be inspected. Shared walls, roofs, decks, walkways, etc. belong to the association. Essentially, the inspector will provide a thorough analysis of any and all findings – scuff marks on walls, minor cracks in drywall, discolored wood due to sun damage, whether the required smoke detectors are present, CO detectors, leaks, mal-functioning appliances, water heater strapped and braced, faulty wiring, etc. They will not inspect plumbing, roofs, sewer systems, crawl spaces or other parts of the common area (owned by the HOA – Homeowner’s Association). Where a home inspection is indispensable is for the purchase of a single family residence or multi-family. You never know what may be looming upon examination of the structure, foundation, roof, walls, electrical systems, plumbing, crawl space, etc.
In general, the function of the home inspector is to inspect all areas and to advise if further evaluation is recommended by the appropriate specialist. For example, if he finds evidence of a leak in the roof, he will recommend a roofing contractor to further evaluate. If he finds evidence of moisture intrusion, faulty electrical system, etc. he will recommend further evaluation by each of those specific trades. A buyer must be allowed to conduct all investigations on the property prior to being pressured to remove the physical inspection contingencies by the seller, even if this time period goes beyond the allotted 17-day due diligence period. Typically, an extension of time addendum is completed by the buyer for the seller’s signature referencing the amount of time needed and reason in order to extend any of the contingencies. Accordingly, the physical inspection contingency should never be removed until the buyer has finished performing all inspections on the property and has come to terms on any requested repairs.
Although the seller is not obligated to perform any repairs, if the seller does not agree to take care of any “life, health or safety” issues noted in the inspection findings, he can potentially open himself up to future liability, in the event that the new owner becomes injured after the close of escrow (as a result of one of these safety items) and decides to sue. What I will always recommend to sellers is to get an estimate by a general contractor or handyman for the requested repairs and provide a flat fee credit to the buyers in escrow to cover part or all of the estimated repairs. This allows the buyer to assume responsibility and repair the items with the contractor of his choice after close of escrow. What this also does is release the seller from any future liability, which the buyer acknowledges this by agreeing to the seller’s credit and signing acceptance in the Request for Repair. If the seller performs the repairs and the problem occurs again after closing, the buyer can go after the seller to re-repair the item as there is an “implied warranty” by the seller since he took the responsibility to repair the items prior to closing.
More often than not in a condo purchase, the findings are mostly cosmetic in nature, which is especially true for condo hotels and newer construction properties, but buyers will typically still ask the seller to repair cosmetic findings. Usually, if it is a strong buyer’s market, then the seller will have to decide whether they want to risk having the transaction cancel over not wanting to credit the buyer in escrow or take care of some of the requested repairs. It is common for the seller to take care of some of the requested items, but if the findings are minor or cosmetic, then it would be unreasonable to expect the seller to take care of all items referenced in the report. If it is a strong seller’s market, then chances are they will not entertain a request for repair that contains mostly cosmetic items and will move onto the next buyer as they know there is demand.
So, what is customary to request the seller to repair in an escrow? I’ve had clients who have handed over the entire inspection report and asked for every single item to be repaired – sort of like a punch list of items to restore the property to “like new” condition. It is unreasonable to expect the seller to repair all findings. Even new construction will have small miscellaneous items that will be found in an inspection. What is customary is to request any required items, such as having smoke detectors added to each of the sleeping areas, CO detectors for each level of the home, strapping and bracing the water heater to earthquake safety standards, and any other “life, health and safety” items. Obviously, any findings of moisture and/or potential mold would be a strong negotiating point for the buyer, as the seller will have to deal with this on any future escrow as well.
If both parties have the same goal in common, which is buying and selling the property under contract, more than likely they will come to a “meeting of the minds” and both will reach a mutually beneficial outcome on any requested repairs or credits in escrow.
For questions about home inspections, or to request additional information on any Mammoth Lakes MLS listings, please feel free to contact me directly.
Verena Robinson, Broker & Owner
BRE Lic. 01512209
Mammoth Lakes Resort Realty
Tel. (760) 924-8521