Property Inspection: Role, Importance & Process

Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Smart buyers require a professional property inspection when purchasing real estate, with satisfactory results as a contingency for the sale to close. In this lesson, you'll learn about the role of property inspections, the process of executing them, and their importance.

Property Inspection Contingency

Valerie is a first time homebuyer who has found a house she likes, and she wants to make an offer. She has the assistance of her real estate agent, Oliver, who helps her determine an appropriate offer price. He also convinces Valerie to include a home inspection contingency in the offer.

A contingency clause is a provision in a real estate contract which states that if a certain condition occurs, or in some cases fails to occur, then the contract can be terminated without further obligation. This contingency is also known as an escape clause, or a get-out-of-sale clause. An inspection contingency empowers the buyer to obtain a professional inspection of the property; if the inspection results are unacceptable, the buyer may elect to terminate the contract.

Importance of Property Inspections

Like Valerie, most real estate purchasers have little to no prior knowledge of, or expertise in, real estate and construction. Professional inspectors have the knowledge, skills, and experience to detect costly problems, so it is very important to include an inspection in the home buying process (particularly when buying a home built on improved land).

Most of the value of residential land comes from the house. A house with one or more severe structural, electrical, heating, or plumbing problems can cost tens of thousands of dollars or even more. Consequently, spending a few hundred dollars on an inspection is worth the investment.

Inspection Contingency to Property Inspection Completion

Let's walk through how inspection contingencies and property inspections are carried out. First, the contingency must be written into the contract. Valerie asks Oliver to write an inspection contingency that permits her to terminate the purchase contract if the inspection reveals any problem with the home. Sometimes a cost of repair contingency will be used, which states that the buyer can only terminate the contract if the repair costs meet a set threshold; for example, $5,000. Valerie wants more control over her decision, so she asks Oliver not to include this provision in the contract.

Next, the inspection must take place. Home inspections are usually completed relatively quickly, because sellers want their properties back on the market as soon as possible if the buyer backs out of the deal. Valerie's inspection contingency states that she must have the inspection performed and her decision made within five days of the acceptance of her offer. Therefore, she should retain an inspector who can inspect the property and submit a report to Valerie in a timely manner, so that she can assess it and make a decision if the report discloses problems.

Valerie may be present at the inspection. During the inspection, the inspector will examine the property and structures. This can include, but is not limited to:

  • Internal/external structural integrity of buildings
  • Foundation
  • Electrical
  • Plumbing
  • Heating and air
  • Ventilation
  • Roof and gutters
  • Grounds (for drainage problems or evidence of environmental hazards)
  • Interior finishes and fixtures (floors, ceilings, walls, cabinets, sinks, etc.)

Like many property inspections, Valerie's inspection report included some issues. The house has a leaking pipe, an electrical outlet in the master bathroom that is a safety hazard and is not up to code, and some water intrusion from a minor leak in the roof.

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