Do Home Inspections Really Affect Property Value?

White and Brown Concrete Bungalow Under Clear Blue Sky

Congratulations! So you’ve found a buyer for your home, agreed upon price with them, and signed the purchase agreement. All that is left is the buyer’s home inspection and you can walk away from the sale a happy person.

After all, the home inspection is a mere formality, right? It shouldn’t affect the deal in any way. Or can it?

Home inspections have become a regular part of the home buying process. They are not mandatory but buyers will order a home inspection in order to get a professional opinion on the actual physical condition of the home. Home inspections protect buyers; as Dawson Property Management explains, they can help the buyer avoid homes that will give them problems in the future.

But what about the seller? Does a seller get any benefits from a home inspection? The home inspection protects the interests of the buyer and not necessarily those of the seller. The reason is that sellers may not disclose important details about the physical condition of their home if they feel the disclosure will scare buyers away or lower the home’s sales price.

This is why some sellers hate the home inspection and will even try to get buyers to waive their right to inspect the home. However, if you have found a buyer who loves your home and is willing to pay the price you asked, can the inspection affect the home’s value? Is there a chance that the home inspection will hurt the transaction?

This is a valid concern because buyers will usually make the completion of the sale contingent on the result of the home inspection. Based on the home inspection report, a buyer can choose to walk away. In other words, the home inspection can terminate the purchase agreement. But can it affect your home’s value?

The answer is yes, it can. And here is how that can happen.

Person Holding PenUnderstanding The Home Inspection

Firstly, what do home inspectors look at when they inspect your home? Home inspections focus on the following:

  • The physical structures of the home

This includes the foundation, roof, walls, floors. and major structural components. The inspector wants to be sure that the home is structurally sound.

  • The home’s major systems

These are the plumbing, electrical, and HVAC systems. A home inspector will examine these to make sure they are up-to-code and working satisfactorily.

  • Appliances

Home inspectors will check the physical condition and functionality of all the appliances in the home.

Cracks on Concrete Wall

In addition to these three, home inspectors may also look for signs of mold or pest infestation.

By examining these different aspects of the home, the home inspection gives the buyer the information they need to make an informed decision on whether the home lives up to their expectations and is worth the agreed sales price.

A home inspector cannot directly/indirectly advise the buyer to buy or not buy a home. But the inspection report can throw question marks on the home’s value. That is because sellers base the value of their home partly on its physical condition. Anything that uncovers problems with the home’s structures, systems, and appliances can cast doubts on the value of the property.

Buyers’ Responses to The Home Inspection Report

There are three ways a buyer may react to the home inspection report:

  • The buyer can decide that they are happy with the condition of the home. Every home inspection will uncover problems, but a buyer may view those problems as insignificant. If the buyer does this, the sale will go forward without problems.
  • The buyer may decide that there are too many issues with the home and terminate the purchase agreement. If the buyer decides to walk away, they will not lose their earnest money, as long as that clause is included in the purchase agreement.
  • The buyer may decide that the problems in the home are significant but not big enough to make them abandon the deal. In that case, they may try to get the buyer to reduce the sales price of the home, to make room for the cost of fixing the identified problems.

If a buyer takes this third option and the seller agrees, then the home inspection has affected the home’s value.

magnifying glass on white tableWhat Can Sellers Do?

 

As a seller, you can prevent this by getting complete information on the true state of your home before you list the property. The best way to do this is to order a pre-listing inspection. A pre-listing inspection is a home inspection, ordered by you – the owner of the home – rather than by the buyer.

A pre-listing inspection will:

  • Help you gain full insight into the condition of your home
  • Create a firm basis for reaching a more accurate evaluation of your home
  • Identify the key areas of the property to focus your repair efforts on
  • Allow you to make a full and complete disclosure to prospective buyers
  • Put you in firm control of negotiations, since you have facts to back your figures
  • Build trust with the buyer because there will be transparency in the negotiations

Finally, a pre-listing inspection will help you avoid the potential disappointment of reducing your home’s sales price because of a buyer’s home inspection.

GUEST AUTHOR:

Derek Dawson- Owner of Dawson Property Management

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