What are unreasonable home inspection requests and why does it seem buyers are asking more of sellers than before?
By Ilyce Glink and Samuel J. Tamkin
Q: Why do so many buyers, agents and inspectors have the impression that home inspections are designed to develop ‘punch lists’ of minor issues they expect sellers to remedy before closing? It seems that many of these are unreasonable home inspection requests.
My understanding is that per the standard real estate contract language inspections are simply to guarantee ‘habitability,’ i.e., integrity of the structure and major systems such as plumbing, electric and climate control.
Is the seller justified in keeping the buyer’s earnest money if a buyer backs out of a contract based on an inspection that did not reveal such major problems but merely the purported need for minor repairs that the seller was not willing to do at the contracted selling price?
A: Good question. We’ve often wondered the same thing.
Back when Sam started his career as a real estate attorney, it seemed that buyers were focused on making sure that things that were actually broken were fixed by a seller. Now buyers often ask sellers to not only fix things that are broken but want many items (like appliances) to be new. Sometimes buyers make unreasonable home inspection requests.
Forty years ago, professional home inspections were different from what buyers today experience. Back then, a home inspector walked around a home with a home inspection checklist. They would note things that were wrong with the property. At the end of the home inspection, the home inspector would hand the original of the home inspection to the buyer. The inspector would keep a carbon copy of the report. (Yes, back then inspectors used carbon copy paper for their reports.)
Improvements in home inspections over the years
Inspectors didn’t use infrared cameras, digital cameras, humidity sensors, radon detectors, lead based paint testors, or any other similar testing devices. Those technologies didn’t exist. Inspectors simply used their eyes and years of experience to assess potential problems.
While home inspectors still use their eyes and years of experience, they (and their clients) also benefit from new technology to assist them in their home inspectors. Today, most home inspectors don’t deliver a home inspection report at the end of the inspection. Instead, they go back to their offices and prepare a report that is full of notes. These inspection reports will also have a list of qualifications, observations, pictures and even videos. Sam sees many inspection reports in his practice that are quite thorough and detailed. These reports are great for home buyers.
Detailed home inspection reports that include videos
But the more detailed the inspection, the more items that surface as potential problems. The typical inspection report might note dozens of deficiencies. The buyer then needs to decide what to do with that information. Some real estate contracts might limit the home inspection clause to “major mechanical” issues. These contracts may specifically exclude cosmetic or even routine items from the home inspection. And, yet, home buyers often request that the seller fix all of the items in the report. Or, they will ask for a cash credit for the home’s deficiencies.
We don’t know why buyers feel they have a right to ask for all of these items. Why make all of these unreasonable home inspection requests. Perhaps when home buyers receive the home inspection report and they realize all the possible or actual problems the property has, they feel the seller should take care of all of these issues. It’s also possible that years of watching television shows about buying properties and fixing up homes has given viewers an unrealistic perspective of how “perfect” or “like new” their new property should be.
Market driven forces and home inspections
As with many things in real estate, we also think that these issues are market driven. As the housing market has picked up pace, sellers are less likely to agree to repair items listed in the inspection report when there are multiple other buyers willing to swoop in and purchase the home in “as is” condition. Likewise, when buyers know that sellers have multiple offers, many buyers will limit their request. These limited requests may relate to significant deficiencies in a home, or do away with the home inspection contingency altogether.
What can buyers and sellers expect going forward? Well, when buyers look for a used car, or a used item on an online marketplace, they either pay for the item in the condition it is in, take a pass or ask for a reduced price due to the condition. In residential real estate transactions, buyers will usually negotiate a price for the home and then inspect the home. This scenario gives buyers a chance to cool down after price negotiations. Negotiations are emotionally draining. The buyers may take a second look at the home. Once they do, they make requests of the seller based on the inspection report.
Justification for any type of home inspection request
Sam’s perception is that once the buyers have the inspection report, they feel justified in asking that all of the items listed should be repaired or replaced. And, he’s noted that buyers don’t tend to care whether the item in the report is noted as broken or beyond its useful life. The buyers simply want to move in and not have to deal with any issues relating to the home. (This is also why existing home warranties have become a much bigger business over the past decade or two.)
First-time home buyers are often the most insistent that sellers fix items listed in an inspection report. Perhaps because it’s taking every last cent for them to be able to buy homes at today’s higher prices. Sam sees many second and third time buyers willing to let the small things go. These buyers focus on the big picture items. But over the years, he has noticed that even more experienced or older buyers will ask the sellers to fix even the smallest of items. They will also request money for older appliances and fixtures that the inspector notes are beyond their “useful” life.
Buyers that believe they are deserving of perfect homes
It’s the “I’m paying all this money and I deserve a new [fill in the blank]” attitude that’s tough to swallow.
The only way this attitude will change is when sellers simply refuse to make any of the repairs that buyers request, cancel their contracts and move onto the next buyer. This pushback is happening in the hottest markets. But at the end of the day, most housing markets aren’t that hot. Most sellers just want to close on their sales. These sellers will finalize the sale and give the buyer a bit more in the end.
We suppose buyers could pay for an inspection before negotiating the price, but most buyers wouldn’t be willing to shoulder the cost of multiple inspections. So, the status quo means buyers, sellers, agents and real estate attorneys (in states that use them) will continue to negotiate inspection items for now.
As for keeping the earnest money, as long as the inspection falls within the contingency period, the buyers have the right to walk away from the deal if they and the sellers fail to reach a deal over inspection items, taking their earnest money with them. Once the contingency period expires, the seller might technically be able to keep the earnest money, depending on the language in the contract.
Home inspection deficiencies and Seller disclosure laws
As a final thought, if the inspection uncovers and the seller refuses to fix a major item, say a crack in the foundation, and the buyers walk away, the sellers will have a disclosure issue. The seller will need to disclose this problem to future buyers. That disclosure issue can change how future buyers perceive the property and how much those buyers will pay for the home.
©2021 by Ilyce Glink and Samuel J. Tamkin