Home Inspection

A home inspection is a visual, non-invasive examination of a property's structure, systems and finishes, performed for a fee by an inspector the buyer hires. Its purpose is to inform the buyer before they are committed: in HUD's words on the form FHA borrowers receive, "The purpose of a home inspection is to inform and educate you about the property before you make a financial commitment."

It is the step in a purchase with the least government machinery behind it. The appraisal is ordered by the lender and governed by federal regulation; the disclosures are federally prescribed; the inspection is a private contract between a buyer and an inspector. HUD's form is explicit that "A home inspection will only occur if you arrange for one; FHA does not perform home inspections."

HUD prints the correction to the appraisal confusion in capital letters: "Appraisals are NOT Home Inspections!" The same form continues: "An appraisal is required to estimate the home's value for your lender and does not replace a home inspection." A property can appraise at or above the contract price and still need a roof.

Who the inspector answers to depends entirely on who hired them. An inspector engaged by the buyer owes the buyer their report. An inspection arranged by a seller before listing is a different document with a different audience, and a report handed over by an agent or a seller is worth reading for what it does not cover as much as for what it found.

Licensing is a state and private-body matter rather than a federal one. There is no federal home inspector license and no federal standard of practice, and HUD's own form reflects that by pointing buyers toward "local licensing authorities and organizations that qualify and test home inspectors" and by telling them to "ask the prospective inspector for their Standards of Practice (SOP) or for a sample home inspection report." Asking for the standard before hiring is the practical version of that advice, because the standard defines what the inspector has agreed to look at.

A general inspection excludes several of the most expensive problems, and the exclusions are where money is lost. HUD's form names radon specifically, noting that "The Environmental Protection Agency and the Surgeon General recommend that all houses be tested for radon", and then tells buyers to ask whether additional health and safety tests are relevant, "such as mold; air or water quality; presence of asbestos, lead paint, or urea formaldehyde insulation; or pest infestations." Sewer line scopes, chimney and septic evaluations and structural engineering reviews are commonly separate engagements too. A buyer who assumes one fee covers all of them will find out afterwards.

The inspection is usually tied to a contingency, and the deadline is the part that decides the outcome. An inspection contingency lets a buyer withdraw, or ask for repairs or a price adjustment, if the report turns up something specific, but only within the window the contract sets. HUD's form makes the sequencing point neatly: "If you request an inspection early in the process, you may be able to make your purchase contract contingent on its results." Waiving the contingency does not remove the risk; it moves the repair bill from the negotiation to the buyer.

You hire an inspector, usually within days of an accepted offer, and normally attend. They examine the roof, exterior, structure, foundation, plumbing, electrical system, heating and cooling, insulation and ventilation, and the interior, to the extent their standard of practice requires and the property allows. You receive a written report identifying defects, items near the end of their useful life, and safety concerns. You then decide whether to proceed, ask for repairs or a credit, or exercise the contingency.

A hypothetical example of the arithmetic that makes the fee easy to justify. Dev pays $450 for an inspection on a house he has agreed to buy. The report finds a furnace at the end of its service life and active moisture at a basement wall. He asks for a $6,000 credit toward the two items, and the seller agrees to $4,000. The inspection returned nine times its cost in this instance, and the more important outcome is the one that does not show up as a number: he now knows the furnace is a near-term expense rather than discovering it in the first cold week.

The same arithmetic runs in reverse and is worth stating honestly. Plenty of inspections find nothing that changes the deal, and the fee buys information rather than a discount.

Pros

• It is the only step in the purchase commissioned by the buyer, for the buyer, which makes it the one place a buyer's questions are the subject.
• It converts unknown future repair costs into a dated list, which is what makes a negotiation or a reserve fund possible.
• The report is useful long after closing as a maintenance plan, since it flags what is close to the end of its life.
• It is inexpensive relative to the transaction and relative to a single system failure.

Cons

• It is visual and non-invasive, so an inspector who cannot see behind a wall or under a slab cannot report on it, and a clean report is not a warranty.
• Qualifications vary, because there is no federal license or standard, which puts the burden of checking credentials on the buyer.
• The most expensive risks are commonly excluded and priced separately, so the headline fee understates full diligence.
• In a competitive market, sellers may favor offers that waive the contingency, which prices the protection in a way that has nothing to do with the inspector's fee.