Nicole Mazzola

858.775.0328
nicole@aare.org

1020 Prospect Street #350
La Jolla, CA 92037

What Happens if the Home Fails the Home Inspection?

November 9, 2018

It’s pretty common for home inspections to be part of the home buying process. In fact, it’s highly recommended that buyers insert a home inspection contingency in their real estate agreements in order to protect themselves should something be found that could sway their decision to carry on with the transaction.

For sellers, home inspections can be a big source of stress. After all, there’s always a chance that an issue may be discovered that could send everyone back to the negotiating table.

So, what happens if your home doesn’t pass the inspection? What if the inspector discovers an issue and the buyers aren’t happy with it? What next?

Offer to Make the Repairs

Depending on what the issues are with the property, you may want to consider making the repairs that the buyer is asking for, within reason. Some buyers might ask for far too many repairs, even for insignificant ones. But when it comes to bigger issues, consider whether or not you think it’s fair to make the repairs yourself before signing the home off to the buyers.

Before you make this decision, however, determine how much it’s going to cost you. Once you’ve got an estimate for the work that needs to be done, factor that cost into the sale price of your home. Make sure that whatever money needs to be spent won’t cost you more than what the home is worth. You want to walk away from the transaction with a good deal, so you certainly don’t want to spend more than you need to.

Offer a Credit

If you don’t want to make the improvements yourself, you could instead consider offering a cash credit that will cover the cost of having the repairs done. The buyer can then use that money to make the repairs themselves once they take possession of the house.

You’d be well-advised to consult with a contractor before the work needs to be done, even though you won’t be doing it yourself. This will provide you with the opportunity to find out how much the work will cost and determine the appropriate credit amount to provide. If you leave it to the buyer to provide you with this amount, you could find yourself dishing out more than you have to.

Renegotiate the Price

Another option that you might have is to go back to the drawing table and renegotiate the sale price. Factor in the cost associated with making the repairs and bringing the home up to par when coming up with a new sale price.

Sellers who are already aware of certain issues with their homes before listing their home for sale will usually factor in the money needed to repair the problems into their listing price. But if you were just made privy to the issues as a result of the home inspection, you’ll have to do that after the fact.

Relist Your Home

After all that work you did to market your home, get it ready for the market, hold open houses, clear the house for showings, and finally negotiate a deal, the thought of having to throw the transaction out the window and start all over doesn’t sound too appealing.

But sometimes that might be what is needed if your inspection fails and the buyer walks away from the deal. These contingencies give buyers the right to toss the deal if they find something in the inspection that is unsatisfactory to them.

If the deal is quashed as a result, the only thing left for you to do is relist. Fixing issues that a home inspector has discovered is often suggested, because you definitely don’t want to run into the same issue the second time around.

If the previous buyer was unwilling to go ahead with the deal because of what was found, odds are other buyers might feel the same way too. In this case, fixing the problem and relisting at an appropriate price is warranted.

That said, if the issue is something that you don’t want to fix, you may want to market your home and specify that it is being sold in “as is” condition and price your home accordingly. That way buyers won’t be surprised to find out that there are potential problems with the home. Just keep in mind that you’ll need to disclose that your home is back on the market as a result of the home inspection.

The Bottom Line

Failing the home inspection is disappointing for everyone involved. You’ve gotten so far, but the home inspection can kill the deal right before escrow closes. If this happens to you, don’t fret. Work with your real estate agent and come up with a plan for how to proceed in order to help you sell your home without losing any more time or money than you have to.