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Indianapolis, IN 46227

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The home inspection on the house I am buying came back with a bunch of problems, what do I do now?

So the home you are wanting to buy has a lot of problems showing up on the home inspection report. What do you do now?

Well the first thing you want to do is thank your home inspector, because if they listed problems (especially the ones you didn’t notice), then they did their job. The second thing you want to do is sit down with your realtor and discuss the issues, the potential ramifications of them, and what options you have to deal with them.

Before we get into the nitty gritty of what options you have, I want to talk about what the purpose of the home inspection actually is. To do that, I am going to quote the actual language from the purchase agreement used by the Indiana Association of Realtors.

“If Buyer reasonably believes that the Inspection Report reveals a DEFECT with the Property (under Indiana law, “Defect” means a condition that would have a significant adverse effect on the value of the Property, that would significantly impair the health or safety of future occupants of the Property, or that if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises), and after having given Seller the opportunity to remedy the defect Seller is unable or unwilling to remedy the defect to Buyer’s reasonable satisfaction before closing (or at a time otherwise agreed to by the parties), then Buyer may terminate this Agreement or waive such defect and the transaction shall proceed toward closing. BUYER AGREES THAT ANY PROPERTY DEFECT PREVIOUSLY DISCLOSED BY SELLER, OR ROUTINE MAINTENANCE AND MINOR REPAIR ITEMS MENTIONED IN ANY REPORT, SHALL NOT BE A BASIS FOR TERMINATION OF THIS AGREEMENT.”

So in layman’s terms the home inspection is to protect the buyer from major issues that were not disclosed or the buyer did not notice when looking at the property. That said, here are some key points we should address in that language to make sure we are clear.

  • What “defect” means under Indiana law

The language used makes it pretty clear that a defect does not include many of the minor issues that are likely to come up in a home inspection. What it does include is any issue that would significantly affect the value of the property, place the health or safety of the occupants at risk, or shorten the normal life of the property. Some examples of this would be a leak in the roof or walls, foundation issues, electrical problems, plumbing problems, and the like.  That does not mean that you cannot request a seller repair minor issues in your inspection response, but it does mean that you will be unlikely to be released from the purchase agreement with your earnest money being returned to you for those minor issues.

  • What remedies a Defect offers the buyer

Before discussing the actual remedy I want to note that just having the defect does not create a situation where this remedy is available until AFTER the seller has been given the opportunity to address the defect and is unable or unwilling to do so. Now, if the seller has refused to correct an issue that is defined as a defect under Indiana law, the buyer has some options. Those options are they may terminate the agreement (and have their earnest money returned) or they may waive the defect and buy the house anyway.

  • Issues which may not allow for termination of the purchase agreement

There are times when even a legally defined defect would not give the buyer an “out” of the purchase agreement. The first of them is when the defect was previously disclosed by the seller. This is the reason that Indiana uses a residential property sellers disclosure form. If the issue is on the disclosure form, and you did not request it being repaired in the purchase agreement, you can request its repair in the inspection response…but it will not be grounds for release from the purchase agreement.

The second is when an issue is considered routine maintenance. A great example is wood trim which needs painted to seal around windows or door frames. Sure the issue could risk the long term value of the home, but painting is considered routine maintenance and would not provide for a release from the purchase agreement. Again, you can still request that the issue be repaired and the seller very well may agree to…but it would not create an escape that returned your earnest check to you.

Now that we have a better understanding of what protections the home inspection does and does not provide, we can answer the original question. How will you and your realtor move forward to resolve these issues so you can buy the house and not be saddled with a bunch of pending repairs?

The first thing to do is to give your realtor a copy of the inspection report and sit down and go over it with them. Make two lists.

  • The first will be actual defects which have not been previously disclosed and could result in you terminating the agreement. These will obviously be included on the inspection response.
  • The second list is of things that showed up on the report, and you feel the seller should repair before you buy the house. You should have an understanding that the seller is under no obligation to repair the issues on the second list, but they frequently will just to get the deal done…and it never hurts to ask.

What will happen now is your realtor will submit an inspection response to the sellers realtor and negotiations over how to address the issues sent will begin. If you have made reasonable requests it is most likely that the seller will agree to correct all the issues in one way or another. There are three primary ways of doing that.

  • The first is simply having them repaired prior to closing.
  • The second is to reduce the purchase price by the estimated cost of the repair. (Usually there will be negotiation over this amount)
  • The third would be for the seller to create an escrow account for the repairs. This would usually happen if the necessary repair is not seasonally possible. ie. roof in winter

In the event that you the seller is unable or unwilling to satisfy your requests, you will have a decision to make. Do you walk away, or do you close the deal anyway? What do you need to consider?

  • Are the issues “defects” which will allow you to walk away without losing your earnest money?
  • Are the defects enough of a financial burden that it would be worth your loss of time, and the expense of the appraisal and inspections you have paid for?
  • Are you emotionally attached to this house enough to just buy it anyway?
  • What is the worst case scenario if the repairs are not made and you still buy the house?

Once you have thought about that; you can agree to buy the house without the missing repairs, counteroffer the seller for the repairs, or walk away (with or without your earnest money, depending on the situation.)

Hopefully this clears up the question of what to do when your home inspection comes back with a bunch of issues. If not feel free to ask me more detailed questions.

To ask those questions, or if you want to hire the kind of agent that will actually walk you through this entire process please call me at 317-657-8059, email robb@your realtylink.com of fill out our handy submission form…

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