Do Home Inspections Really Affect Property Value?

On every occasion where a homeowner wants to sell their home and they have found a willing buyer, there are always unknowns. The buyer does not know if there are issues with the home that make it worth less than the agreed upon sales price. The owner may not know if there are problems with the home beyond the ones he or she has disclosed to the buyer. And the buyer is not certain if the seller has fully disclosed all that they know about the physical condition of the home.

It is these doubts that lead buyers to hire a neutral third party to do a professional assessment of the home before they pay for it. Home inspections are a buyer’s way of seeking answers to their questions. Although not mandatory, as Bighorn Rentals explains, they have become a standard part of the home buying process.

While buyers may waive their right to inspect the home, most of them will do the home inspection because of how much money is at stake in the purchase. And this can be a problem for sellers.

Even if an owner is reasonably sure of the condition of their home, a home inspection can still leave them nervous. That is because no home is entirely perfect and every home inspection is bound to unearth something about the home that is less than satisfactory.

Sellers can never tell how buyers will react to these discoveries. And they are often left wondering if there is a chance that the home inspection will negatively affect the value of the home.

The simple question they ask is “Can a home inspection affect the value of a property?”

The equally simple answer is yes, it can.

How does a home inspection affect a property’s value and what can homeowners do to avoid this undesirable outcome?

The what and why of home inspections

A home inspection helps buyers cast a critical eye on a property they are about to buy. It allows them to look beyond the outward qualities of the home to the actual conditions of its appliances, structures, and systems. Because home inspections are designed to uncover underlying issues with a home, they have the power to affect the property’s sales price. The home inspection itself does not determine the sales price but it can influence what a buyer does.

During the inspection, the inspector focuses mainly on five areas: roof, structures, plumbing, electrical, and heating systems. The issues they uncover may be ranked as insignificant, important, or serious. But regardless of what problems they find, the home inspector cannot make recommendations on whether the buyer should buy the home or not and at what price they should buy it. The inspector only presents the facts to the buyer so that he or she can make an informed decision.

Based on the facts in the home inspection report, buyers can take one of these three actions:

  • They can determine that the cost of fixing the problem is too high or that they do not want to buy a home that has those problems. If they take this position, the buyer is allowed to leave the purchase agreement without any penalties.
  • The buyer may decide that even though there are problems with the home, they still want to buy it. But if they choose this path, the buyer may request that the owner fix the problems to the buyer’s satisfaction before they pay for the home.
  • Finally, even if the buyer decides to buy the home, they may be unwilling to let the seller do the repairs. In that case, the buyer may try to convince the seller to accept a lower price in compensation for what they will spend to repair the damage to the home.

Based on these possible outcomes, the home inspection can affect the home’s value in three ways:

  • It can prolong the property’s time on the market and increase the owner’s carrying cost. Since this money comes from the owner’s pockets, it reduces the amount of money they eventually get for the home.
  • It can force the owner to do unplanned repairs. Although the home’s value is not directly affected, the cost of selling the property becomes higher, effectively cutting into the amount of money that reaches the seller’s pocket in the end.
  • It can directly lower the sales price for the home if the owner accepts to sell at a price less than what they originally agreed with the buyer.

What homeowners can do

There are three things homeowners can do to prevent a home inspection from deflating the value of their home.

  • They can find out about the actual condition of the home by doing a prelisting home inspection.
  • They can carry out repairs to fix all important issues that they have become aware of.
  • They can choose not to do any repairs but be upfront with buyers about the problems of the home.

Taking these steps will help buyers retain control and prevent the home inspection from adversely affecting the value of their home.

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