How Often Does a Home Inspection Kill a Deal?

A home inspection is a standard component of many real estate transactions, providing a thorough review of a property’s condition. It offers an objective assessment of visible areas, aiming to uncover issues not obvious during a casual viewing. The inspection report can influence the sale, sometimes leading to renegotiations or deal termination.

The Purpose of a Home Inspection

The primary goal of a home inspection is to provide buyers with comprehensive information about a property’s overall condition before finalizing a purchase. An inspector examines the home’s structure, systems, and components, looking for significant defects or safety concerns that could impact the property’s value or habitability. This evaluation helps buyers make an informed decision, protecting them from unexpected and costly repairs after closing. The resulting report details any findings.

Frequency of Deal Termination Due to Inspections

While a home inspection is a routine step, it can sometimes lead to a transaction falling through. Industry estimates suggest that approximately 20% to 25% of real estate deals encounter issues during the inspection phase, with some buyers walking away from a purchase contract because of inspection findings. However, less than 1% of all real estate transactions are canceled solely due to a home inspection. Most buyers utilize the inspection results to negotiate repairs or price adjustments rather than immediately terminating the agreement.

Common Issues Leading to Deal Termination

Certain significant issues discovered during a home inspection are more likely to cause a deal to fall apart than minor cosmetic flaws. Major structural problems, such as foundation cracks, can be extremely expensive to repair. Extensive roof damage, including missing shingles, leaks, or a sagging structure, often necessitates costly replacement. Significant plumbing issues like leaky pipes, failing water heaters, or sewer system problems, along with outdated or faulty electrical wiring, are also frequent deal-breakers due to their high repair costs. Other concerns include severe pest infestations, such as termites, which can cause extensive damage, and environmental hazards like mold, asbestos, or elevated radon levels, which require specialized and expensive remediation.

Buyer and Seller Responses to Inspection Findings

Upon receiving the inspection report, buyers typically have several options, often governed by a home inspection contingency clause in their purchase agreement. This contingency usually grants buyers a period to review the findings and decide on a course of action. Buyers can request that the seller complete specific repairs, ask for a credit at closing to cover future repair costs, or negotiate a reduction in the purchase price. Opting for a credit or price reduction can be advantageous for buyers, allowing them to control the quality of work and contractor selection after closing.

Sellers also have various responses to buyer requests. They can agree to perform the requested repairs, offer a financial concession or credit to the buyer, or refuse to negotiate. While sellers are generally not legally obligated to make repairs, refusing to address significant issues increases the risk of the deal falling through. If an agreement cannot be reached, the buyer may exercise their right to terminate the purchase agreement without penalty, provided the contract’s contingency terms are met.