When it comes to purchasing a home, ensuring its structural integrity and identifying potential issues is paramount. This is where home inspections come into play. A home inspection is a thorough assessment of a property's condition, with the goal of uncovering any hidden problems that might not be apparent during a casual walk-through. Conducted by professional inspectors, these evaluations provide valuable insights that can influence your decision-making process.
Home inspection guide: what are home inspections?
Home inspections stand as a critical pillar in the process of buying or selling a property in the US. A home inspection is a comprehensive, non-invasive evaluation of a property's condition, performed by a certified home inspector. This inspection is designed to uncover potential issues that may not be apparent to the untrained eye. Cosmetic issues are not the focus; instead the goal is to identify structural, safety, and functionality concerns that could impact the property's value, safety, and livability. The insights gained from a home inspection empower both buyers and sellers with the knowledge needed to make informed decisions about a property's condition and any necessary repairs or adjustments.
Home inspections often occur once the seller accepts an offer from the buyer and both parties have signed a sales and purchase agreement (SPA). At this point, the home goes into escrow, meaning that the buyer makes a deposit into an escrow account for safekeeping until closing occurs and the funds are disbursed. The home inspection takes place around the same time or just after the home goes into escrow.
Home inspection vs property appraisal
It's crucial to differentiate between a home inspection and a property appraisal when entering the real estate arena, as they are often easily confused. Both home inspections and property appraisals are examinations of a property by a professional, but serve distinct purposes within the home-buying process.
Assess the present condition of the property for safety and livability purposes, in order to identify potential problems.
Assess the property in order to determine its market value.
Is it required?
No, it is optional.
Yes, it’s often required by mortgage lenders to ensure that the property’s value aligns with the loan amount.
The present condition of the property including the functioning of its systems and appliances, and any issues that are visible (more details below).
Examiner and Attendees
Completed by a home inspector.
The party (buyer or seller) that ordered the inspection can (and often does) attend.
Completed by a licensed appraiser.
Usually completed without the buyer or seller present.
While home inspections are optional, they are highly recommended as they provide buyers with vital information about a property's condition which can help in negotiations and decision-making. 95% of buyers in the US decide to hire a home inspector before they close on a house.
Home inspection checklist: what influences a home inspection?
Inspectors follow a comprehensive checklist during the evaluation in order to identify potential issues and thoroughly assess the property’s overall condition. The inspection typically takes 2-3 hours to complete, depending on the size of the home.
Here are the components that a home inspector may examine:
Roof - check shingles and chimney
Gutters and downspouts
Foundation - check for secondary evidence of cracks or settling
Septic tank - check for leaks
Slope of the yard and subsequent drainage around the house
Exterior door frames and windows
Bricks and/or paint
Plumbing - check bathrooms and kitchen, visible pipes, water heater, water pressure, and hot water temperature
Electrical systems - check lights, switches, wiring, service panel, and cables
Laundry room - check ventilation and exhaust system
Attic - check structure, ventilation, and insulation
Basement - check for moisture, water damage, and sump pump (if present)
Any crawl spaces
Any additional structures - including garage, shed, fence, deck, etc.
HVAC systems - heating, ventilation, and air conditioning
General structural components
Safety features - including smoke detectors, fire alarms, and carbon monoxide detectors
Any major or minor damage, wear, or flaw
It’s important to note that the home inspector won’t detect unseen problems such as hidden pests, mold, asbestos, etc. Home inspectors are generalists so it’s essential to seek out an expert if there are specific issues or concerns with the property. Inspectors also won’t comment on the aesthetics of the property, unless it indicates or relates to a larger issue. As the buyer, it’s best practice to attend the home inspection when possible to see any damage first-hand, get more in-depth information, and ask the inspector follow-up questions.
The Home Inspection Report
After conducting the inspection, the inspector provides a detailed report outlining their findings. This report gives a complete overview of the property's condition with photographs and descriptions of all identified issues. The home inspection report often designates and/or groups issues by their severity to help buyers and other parties understand the urgency of each item.
The report is an invaluable tool for buyers, allowing them to make informed decisions and providing substantive leverage when requesting repairs, negotiating the purchase price, or, in severe cases, walking away from the property purchase. The home inspection report also gives the seller a clearer understanding of potential problems that might arise during negotiations.
Inspectors are often willing to walk the buyer through the inspection report and their findings, highlighting any red flags or serious issues. The home inspection report can vary in detail depending on the chosen inspection company and their protocols. It’s a good idea to confirm with the inspection company which information will be included prior to ordering the inspection – you could even ask for a sample of a completed report. Some companies may provide a simpler checklist while others will give an extensive review, including, for example, the remaining life of the property’s equipment and systems. Inspectors may also provide information about which issues should be closely monitored and other routine maintenance tasks. The report will contain recommended repairs and replacements for the property. However, the fixes listed in the inspection report are by no means mandatory.
To get an idea of the format of the report, below is a sample page from a home inspection report.
Who has access to the home inspection report?
Whichever party orders the home inspection is the only party that is entitled to a copy of the home inspection report.
In most cases, the buyer will order a home inspection so that they can get more information about the property and its potential issues before finalizing the purchase. If this is the case, the buyer orders, pays for, and receives the inspection report from the inspection company. The inspection and report are part of the legal business relationship between the buyer and the inspector, even though the inspection is completed on the seller’s property. It is the buyer’s decision whether they would like to provide the seller or any other parties with the report. However, if repairs need to be made by the seller or there are issues that affect the purchase price of the property, specific sections of the inspection report may need to be shared with the seller.
The seller may request a copy of the inspection report from the buyer. However, professionals often advise the seller against requesting the inspection report. If a seller has received a home inspection report, they may be required to disclose existing issues from the report to potential buyers in the future. Ignorance can be bliss from the seller’s perspective.
There are also cases when a seller might order a home inspection on their property, so that they can make repairs before listing and increase the likelihood of sale. This can be especially valuable for property investors or owners that live out-of-state and don’t reside in the property. Similarly, the inspection report would be theirs and they can choose to disclose it to potential buyers at will.
In cases when the cost of the home inspection is split between the buyer and the seller, they are both entitled to a copy of the report.
Home inspection for mortgage
When getting a mortgage, the lender might require a home inspection as part of the loan approval process. This is to protect their investment by ensuring that the property meets certain safety and livability standards. While the inspection helps buyers understand the property's condition, it also provides lenders with assurance that the home is a sound investment and is a method of safeguarding their financial stake in the transaction. If significant issues are found during the home inspection, the lender may require the buyer to renegotiate with the seller or otherwise address the problems before approving the loan.
It’s worth noting that the lender's primary interest is with the property's value (which is verified with a property appraisal) and its compliance with lending guidelines, rather than identifying every minor issue. The lender may have safety requirements that must be met in order to finance a property with a mortgage, but it’s much more common for the lender to rely on the property appraisal. A home inspection may still provide lenders with valuable insights to support or refute their decision to approve a mortgage.
Home inspection contingency
A home inspection contingency, or simply an inspection contingency, is a clause in the sales and purchase agreement (SPA) that makes the sale contingent upon the completion of a satisfactory home inspection. The SPA is a common real estate contract between the buyer and seller that lays out the terms and conditions of the sale and protects both parties. So while a home inspection may not be required by a lender, it may be a task as agreed upon in the terms of the SPA. After signing an SPA with a home inspection contingency, the buyer typically has a specified time frame of 1-2 weeks during which they must schedule and conduct the home inspection, and any additional evaluations.
This contingency grants buyers the right to have the property inspected and allows them to renegotiate or withdraw from the deal if the home inspection reveals issues beyond a specified severity or comfort level. If the inspection uncovers significant issues, buyers can renegotiate a lower price with the seller, ask for repairs, or back out of the deal within a certain time frame (usually 7 days) and without losing their earnest money deposit. This contingency gives buyers a safety net, ensuring that they have the chance to address unexpected problems before finalizing the purchase and protecting them from hidden, costly defects with the property. Learn more about the importance of sales and purchase agreements, commonly included contingencies, and the overall process.
Home inspection cost
On average, home inspections in the US may range from $200 to $500. As previously mentioned, since the buyer is usually the one ordering the inspection, they are responsible for the inspection cost, unless otherwise agreed upon in the SPA.
Factors that may affect the home inspection cost include:
Location - the average cost varies by state and the cost may depend on how far the inspector is required to travel.
The inspector’s experience level
Any additional services requested
Prospective buyers should do their own research when searching for a property in order to budget for the cost of a home inspection. When deciding on a home inspector to hire, it’s important to always ask for an estimate and/or a quote of how much the inspection will cost. The cost of a home inspection is paid at the time of service, unlike the closing costs associated with buying a home.
While it’s an additional expense on top of other necessary home buying costs, it can save buyers from unexpected and costly repairs later on, and offer peace of mind.
Home inspectors: Top home inspection companies in the US
Selecting a reputable and experienced home inspection company is essential to make sure that the home inspection is done accurately and thoroughly. Real estate agents often have pre-existing relationships with home inspectors and can recommend reputable companies to buyers and/or sellers.
Home inspection is not federally regulated, in fact, many states don’t have any licensing requirements for home inspectors. When looking for a company, you should check that they are bonded and insured (as required by state regulations), and that they are focused on inspections, and not, for example, repairs and renovations (as this could bias their findings/report). Check out the state regulations for home inspectors from The American Society of Home Inspectors (ASHI).
Prior to choosing an inspection company, you should confirm what the inspection covers, how long it takes, and the price, as well as discuss any additional inspections if necessary.
Here are some of the top home inspection companies in the US:
These companies have a track record of providing comprehensive, reliable, and unbiased assessments. Their expertise ensures that the property is thoroughly evaluated while offering buyers and sellers confidence in the accuracy of the inspection report.
You can also check out databases that require members to pass exams, honor a code of ethics, and stay up-to-date on education requirements, such as:
Moving forward informed
The home inspection process, although not always required, is a worthwhile step to take during the home buying journey. It provides detailed insight into a property's condition, safeguards buyers and sellers, and supports the buyer’s decisions going forward. By understanding the nuances of the inspection process, the uses, and the inspection report, individuals can navigate the real estate landscape with confidence and help ensure that their investment is sound and secure.
In order to go through the home inspection process, you first need to narrow in on a property that you want to purchase. The majority of buyers also need to take out a mortgage in order to finance their property purchase. At Kredium, we provide mortgage brokerage services, helping US citizens, residents, and non-residents/foreign investors get mortgage loans for US properties. Our mortgage experts are here to help you along the way, from pre-approval through closing. Discover all you need to know in our comprehensive mortgage guide, explore the top real estate companies in the US, and more.