What Happens After a Home Inspection in Maryland?
Regardless of whether you sell or buy a house in Maryland, negotiating the successful close of that sale begins with price and contract terms and doesn’t end until the deal closes.
One of the most frequently negotiated items, after the aforementioned price and terms, has to do with the home inspection results. Sometimes, they can also be among the most contentious negotiations.
Very few home inspections are “clean,” meaning there’s not a thing wrong with the house. And, many of the items mentioned in the home inspection report are minor.
The home inspector will issue a report that covers many items in the house. Examples of things inspected include: HVAC systems, plumbing, outlets, the functionality of appliances, and if all windows will open, close and lock.
How to Request a Home Inspection in Maryland
Buying a house in Maryland requires many different forms to be prepared and signed. Home buyers often want to know if there is anything wrong with a house, and will choose to have a home inspection, and possibly other inspections as well.
One of the most common forms included in a contract to buy a house, is the “Property Inspections Addendum”. This is considered an inspection contingency. This means the buyer has the option to have the house inspected (at the buyer’s expense), then request any repairs that may be needed. This also allows a home buyer to cancel the purchase if there are any major concerns that can not be resolved. All inspections must take place within a specific time frame, usually within the first 2 weeks after the house goes under contract.
Common types of inspections include: structural and mechanical, radon and chimney. If a house is on a private septic system, a septic inspection is often performed. If a house is on well water, a well yield and water quality test is also often performed. Other less common inspections may include: mold, environmental, roof, and lead-based paint.
What Happens After the Inspections are Completed?
Each inspector will provide a written report of their findings. Home inspection reports, while comprehensive, don’t have to be deal-breakers. The buyers and their buyer’s agent will review the reports and discuss the results. If there are no issues of concern, some buyers will be content and not ask the seller to make any repairs. When there are any issues of concern, the buyers and their agent will make a list on a form known as the “Property Inspections Notice”. This form, along with the relevant inspection report(s), are then forwarded to the seller’s listing agent.
The 3 Most Common Types of Requests from Buyers
When homebuyers find items in the home inspection report that they want fixed, their agents typically counsel them to submit one of the following requests:
1. Ask the seller to make the fixes
This method may delay the transaction, depending on the extent of repairs or replacements required. Usually, though, sellers understand the repairs must be completed before settlement takes place. It’s important that buyers understand one thing…
***the inspection report is not a complete repair list for the seller***
…there is a difference between truly needed repairs and cosmetic issues.
One thing a seller should know is that a buyer’s lender may require certain fixes before final approval of the loan. These include health and safety issues, structural soundness and compliance with the Maryland Smoke Detector Law that went into effect January 1, 2018.
2. Ask the seller for a credit of the funds required to make the fixes
While an adjustment to the closing date may have to be made (depending, again, on what’s required to get the home where the buyer wants it), this method is quicker than the first one.
A good buyers’ agent, however will ask the buyers if they can trust themselves to make the repairs with the cash-back at the close of escrow.
Sellers should be aware that certain fixes are required by the VA and by FHA, before settlement.
Also, some lenders and some types of loans forbid a cash credit at closing.
3. Ask the seller to lower the price of the house
Buyer agents will suggest to their clients that they may want to request a price reduction to compensate for the cost of needed repairs.
What Should a Home Seller Agree to Fix?
After receiving a buyer’s request, home sellers in Maryland have 5 days to make a decision. This allows time to obtain estimates, which helps with a seller’s decision-making. Seller’s should agree to fix anything major that will need to be disclosed if the buyer backs out of the contract. Every seller has a different budget, and their decisions will likely be based on the estimated repair costs.
When the appraiser goes to the property, he or she will not only determine the value of the house, but will also look for anything the lender will require to be repaired. Repairs required by a lender vary depending on the type of loan. VA loans, USDA loans and FHA loans have the strictest standards.
Lender-required fixes must be performed or else the loan won’t be approved and the sale will be terminated. Examples of lender-required repairs include: installation of a handrail when a staircase has more than 3 steps, scraping and re-painting when there is peeling paint in a house that was built before 1978, and repair of any broken windows. Again, this is very specific to each type of loan. Even if a particular buyer walks away, these fixes are now a disclosure item and other lenders will most likely demand them.
What Happens after the Seller Makes a Decision?
Sellers will respond in one of five ways:
1. Agree to complete all corrective action that was requested.
When a seller agrees to complete all of the repairs that were requested, buyers typically have peace of mind and the negotiation of repairs is over. The seller has up until settlement to have the repairs completed. After they are completed, sellers will then provide the receipts as proof the work has been done.
2. Agree to complete some, but not all, of the corrective action that was requested.
When a seller chooses this option, buyers have 2 days to decide if they will accept the response. If they don’t, negotiations for repairs can continue until both buyers and sellers are in agreement. The seller has up until settlement to have the repairs completed, and must provide receipts as proof the work was done.
Buyers can also choose to terminate the contract and walk away from the deal if they aren’t satisfied with the seller’s decision to only fix certain items.
3. Refuse to take any corrective action.
When a seller chooses this option, the house will be sold “as is”. Buyers have 2 days to decide if they will accept the response. If they don’t, negotiations for repairs could possibly continue in case the sellers will change their minds. Otherwise, the buyer can choose to terminate the contract and walk away from the deal.
4. Agree to give the buyer cash back at settlement so the buyer can have the repairs done after they take possession of the house.
When a seller chooses this option, the seller will make no repairs. The buyers will be credited money at the close of escrow (also known as settlement), which they can then use to have the work done themselves.
5. Agree to lower the agreed-upon sales price.
When a seller chooses this option, the buyers and sellers will agree to the amount of the price reduction. This will result in the buyer’s loan being for a reduced amount, and subsequently will result in a slightly lower monthly mortgage payment.
Offering a Home Warranty
A home warranty is a win-win way to address those requests for replacement of an item that, although it may be nearing the end of its functional life, still works.
An aging water heater, for instance, may concern a buyer. A home warranty might ease their anxiety and save a seller money in the process.
As always, consult with your Maryland real estate agent regarding inspection negotiations.
Thinking about buying a house in Maryland?
Search the most up-to-date list of homes for sale!
Get a FREE buyer’s agent who will represent you!
Thinking about selling a house in Maryland?
Experience one of the area’s best seller’s agents!