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A home inspection contract is a legally binding agreement that enables a buyer to discover any significant problems with a property through a home inspection. The fact that a home inspection can be utilized as a contingency in your agreement with the seller is your first indication that it is crucial. This contingency stipulates that you may withdraw your purchase offer within a certain amount of time without penalty if a home inspection reveals material flaws. If a house allows you to back out of such a big deal, it must have some serious issues.

Options for Your Home Inspection Contract

The buyer may include any one type of home inspection contingency when drafting the home inspection agreement.

  • The standard inspection contingency allows the buyer to hire a licensed home inspector to inspect the property and, based on the results, either negotiate repairs or terminate the agreement.
  • A contingency with a right to void only or an "up or down" inspection contingency is the second type. This implies that the buyer cannot negotiate for repairs but can still terminate the contract if they are unhappy with what they discover during the inspection.

During either contingency period, the buyer can also conduct additional inspections, such as mold or radon tests and roof, pool, and chimney inspections. If neither of these contingencies is met, the buyer may still inspect their own informational needs (provided the seller permits it). Still, they cannot back out of the deal or demand repairs if they are unhappy with what they discover.

What Happens at the Actual Home Inspection

The buyer, the inspector, and the buyer's agent attend the home inspections.

  • If you are the seller, we understand that you have neglected maintenance on your under-contract home, but now is the time to get everything back in show-ready shape! Clean up the dishes, change the HVAC filter, swap out burned-out lightbulbs, and ensure the electrical panel, crawl space, or attic access are all reachable. Now is a good time to install smoke detectors if you do not already have any in your bedrooms, on every floor, or if they do not have batteries.
  • If you are purchasing, make plans to attend and pay attention. The inspection can get a bit drawn out because it lasts three hours, but this is a great chance for the inspector to give you information about your new home. If you have kids, it is important to find a babysitter off-site or at a local park so you can concentrate on the inspection.
  • The inspector will advise you on how often to change filters, how to maintain appliances, where to find key system access points (like the water shut-off valve), and other cost-effective seasonal maintenance tips. Additionally, the inspector will highlight any maintenance issues or safety hazards that the buyers may wish to bring up with the seller as soon as they buy the property.
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Exterior Inspection in a Home Inspection Contract

The inspector will thoroughly inspect the outside of the building. This will entail using a ladder to reach the roof and other areas of the house and crawling into any crawl spaces beneath it.

  • Exterior Walls: The inspector will look for signs of missing or damaged siding, cracks, and whether the soil is too close to the house's foundation, which could attract insects that eat wood. But the pest inspector—yes, you should hire one, not the home inspector—will look for real termites and other damage. The inspector will disclose which issues are merely cosmetic and which may be more serious.
  • Foundation: The inspector will not be able to directly inspect the foundation if it is not visible, which it usually isn't. Nevertheless, they can look for settling or cracks as secondary indications of foundation problems.
  • Grading: The inspector can tell you if the grading properly slopes away from the house. If it doesn't, water may enter the house and cause damage. You should install a drainage system or adjust the yard's slope to prevent this.
  • Garage or Carport: To prevent unintentional carbon monoxide poisoning, the garage door inspector will verify that the garage door opens and closes correctly, examine the garage's ventilation system, and determine whether the visible garage framing is present. The inspector will ensure that the water heater if it is located in the garage, is positioned high enough off the ground to reduce the possibility of an explosion caused by gasoline fumes combined with the heater's flame.
  • Roof: The inspector will look for areas like loose, missing, or improperly fastened shingles and cracked or damaged mastic around vents where roof damage or poor installation could allow water to enter the house.

Interior Inspection in a Home Inspection Contract

The inspector will thoroughly inspect the house's interior, examining everything, including the cabinets beneath the sink and the ceiling.

  • Plumbing: The home inspector will test the water pressure, examine all faucets and showers, and search for obvious leaks. If any pipes are visible, they will also identify the house's type of pipes. If the pipes are old, the inspector might advise a second examination to see whether or not they should be replaced and how much the work would cost.
  • Electrical: The inspector will determine the home's wiring type, test all of the outlets, and ensure that ground fault circuit interrupters—which can prevent electric burns, electrocution, and shock—are installed in the kitchen, bathrooms, garage, and outside. In addition, they will inspect your electrical panel for any problems and your outlets to ensure there is no fire risk.
  • Heating, Ventilation, and Air Conditioning (HVAC): The inspector will examine your HVAC system to determine the age of the air conditioner and furnace, assess its functionality, and recommend maintenance or repairs. An inspector can also tell you how old the ducting in your house is, if there are any potential leaks if there is enough insulation to save energy costs, and if there is any asbestos insulation.
  • Water Heater: The home inspector will determine the heater's age and check to see if it is securely fastened and installed. The inspector will also inform you of its condition and estimate how many years it will last.
  • Kitchen Appliances: While not always included in the inspection, the kitchen appliances that come with the house will occasionally be tested by the inspector to ensure they are in good working order. Make sure to find out which ones are left out so you can test them out for yourself if you decide you want to keep them.
  • Laundry Room: The inspector will verify that the laundry room has the appropriate ventilation. An improperly maintained dryer exhaust system poses a significant risk of fire.
  • Fire Safety: If the house has an attached garage, the inspector will verify that the wall has the appropriate fire rating and has not sustained any damage that would jeopardize it. The smoke detectors in the house will also be tested.
  • Bathrooms: The inspector will look for obvious leaks, securely fastened restrooms, sufficient ventilation, and other problems. Moisture can cause wood cabinets to warp over time, and mold and mildew can grow in a bathroom without a window or ventilation fan.

Key Terms for Home Inspection Contracts

  • Contingency: A contingency is the possibility of a future unfavorable event, like a pandemic, natural disaster, economic downturn, fraud, or terrorist attack.
  • Appraisal: An appraisal is a dispassionate, expert opinion on the value of a home. In-home transactions and appraisals are almost always used and frequently used in refinance transactions.
  • Collateral: In finance, collateral is a priceless item that a borrower pledges as security for a loan.

Final Thoughts on Home Inspection Contracts

Depending on the size and location of the home, hiring a home inspector can come at a very different cost. Ask the inspector what they will be looking at and will not be looking at during the inspection. Following a home inspection, you can request that your broker work with the sellers to negotiate any necessary repairs or to reduce the asking price so that you can take care of the issues yourself.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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