Table of Contents:
- Types of Inspections in Maryland
- How to Request Inspections in Maryland
- What Happens During a Home Inspection?
- What Happens after the Inspections?
- What Should a Homeowner Agree to Fix?
- What Happens after the Homeowner Makes Their Decisions?
- Backing Out of a Contract of Sale in Maryland
PART 1: INSPECTIONS
When a house is for sale in Maryland, there are certain types of inspections that typically take place. Some inspections are required by the lender in order for the loan to be approved. Other optional inspections are performed because buyers want to know the condition of what they are buying.
The inspection period runs from the time the purchase contract is signed by both the buyers and sellers, until a mutually agreed upon date. 14 days is the usual timeframe to not only have all inspections completed, but to also obtain the inspection reports.
While many sellers in Maryland cringe at the thought of inspections, it can actually be a blessing. Inspections help buyers learn the condition of a house upfront which can give them peace of mind. And, can help homeowners learn some things about their own house they weren’t aware of!
Common Inspections in Maryland
1. The Whole-House Inspection
Call this one the mack-daddy of inspections. Home buyers pay for this inspection, and as a result, receive a copy of the inspection report after the inspection is completed. Carried out by a professional, all of the home’s systems will be checked, from the HVAC to plumbing and electrical. Remember, however, that this is a visual inspection. The inspector cannot tell you what might be hiding behind the walls or in areas of the home’s system that aren’t visible to the naked eye.
The inspector will also make note of potential problems – those that may occur in the near future. Examples of this include faulty grading of the landscaping and possible moisture intrusion.
In addition to noting any problems, home inspectors also point out the positives! They will note excellent maintenance that may have been done. They will inform buyers of things that won’t likely need to be replaced anytime soon. They will point out the “good things”, that in turn make buyers feel comfortable and reassured about the house they want to buy.
Additionally, home inspectors educate buyers! They will explain to home buyers what they should do to maintain the house. They will explain how the heating and cooling systems work. They will provide tips for homeownership. All in all, home inspections can be nerve-racking for both buyers and sellers, but they don’t have to be a totally negative experience.
2. Pest Inspection
Most lenders require a “wood-destroying insect inspection” in order to approve a loan to buy a house. They want to be sure there is no structural threat to the house, as well as any pests that can cause damage. Homebuyers pay for this inspection. The exception in Maryland is the buyer who is using a VA loan. In this instance, the seller is required to pay for the inspection. Most of the time, the pest inspection is paid for at settlement instead of being paid in advance.
Some creepy crawlies are benign – staying put in their hiding places, causing no problems. Others, however, can wreak enough havoc to eventually bring a house crumbling down around its occupants. These are wood-boring insects, such as powder post beetles, carpenter ants and termites.
Unless you know what to look for, evidence of a pest infestation and even the damage caused by these pests can be difficult to find. The fix, when caught early, is far less expensive than if the problem is left to fester. Most homeowners in the U.S. spend between $237 to $847 for termite control service. An extensive infestation, however, can be substantially more expensive to cure.
3. Well and Septic Tests
Purchasing rural property comes with a whole different set of considerations. Typically located away from public services, water is supplied by a well and sanitation from a septic system.
Since problems with both are almost impossible to determine otherwise, an inspection is always a good idea. Buyers in Maryland who have a well and/or septic inspection also pay for these inspections themselves. The typical septic system inspection includes pumping out the system so that a visual inspection of the tank and distribution box can be performed. The inspector will look for signs of decay, including missing or broken parts.
Lenders also frequently require to have the water quality tested. Contaminants obviously pose a risk and you won’t necessarily see, taste or smell their presence. The U.S. Environmental Protection Agency suggests the water be tested for nitrates/nitrites, coliform bacteria, lead and pH.
4. Radon Testing
Radon is an odorless, colorless, and radioactive gas that is also a carcinogen. It is the second leading cause of lung cancer in the country, according to the National Cancer Institute.
Certain areas in Maryland are known for having elevated levels of radon in homes. Most home inspectors also perform the radon testing. Testing involves the placement of either 2 charcoal canisters or a digital device that are placed in the basement. Air samples are collected for several days, then evaluated. Any readings above 4.0 are considered elevated.
4. Chimney Inspection
Many houses for sale in Maryland have fireplaces, which of course have chimneys. Houses with oil heat also have chimneys. As a result, people who want to buy a house with a chimney often have a chimney inspection.
Chimney inspections typically involve the placement of a camera down the chimney , to look for cracks or other evidence of damage. They can even detect if there had been a chimney fire. If there is a chimney liner, they will see that also. Not all buyers have a chimney inspection, but some do.
5. Other Inspections
Of course, these are not the only inspections buyers may have completed. If they suspect structural problems, they may consult with an engineer. Roof questionable? They may have the roof inspected. An older house with possible lead paint? They may want the house tested for lead paint. Regardless of the requested inspections, it’s the buyers’ right when buying a house in Maryland. Fortunately for home sellers, the buyer pays for most, if not all, inspections. The exception, as discussed above, might be the Pest Inspection.
PART 2: HOW DO I 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.
Your real estate agent will be able to provide a list of recommended inspectors. It is advisable to call the inspectors on the list, ask about their inspection process, ask about prices, and ask about their availability. Remember: inspections must be completed, and the results obtained by the deadline in the home sale contract. During busy seasons, some inspectors may not have availability during your time frame.
What happens if an inspection is completed, or the report is obtained AFTER the deadline in the contract? In this instance, the buyer will not be able to ask the sellers to repair anything. The buyer will be obligated to continue on with the home purchase, and will be buying it “as it is”. The buyer’s real estate agent is responsible for making sure the inspections are scheduled in time so this scenario doesn’t happen.
PART 3: WHAT SHOULD I EXPECT AT A HOME INSPECTION?
If you are the seller, you should expect to leave your house during all inspections. The buyer pays for their inspections, and therefore, the inspection and the results are “belong to them”. The buyer, their real estate agent and the inspector appreciate the privacy to talk and inspect without a nervous homeowner lurking nearby.
Believe it or not, occasionally a homeowner will refuse to leave their house during an inspection. They have the best of intentions, but will sometimes interject and say something that may scare the buyer and derail the home sale. If you are the seller, it is better to steer clear of inspections. If there are any concerns, you will receive a copy of the report when the buyers submit their list of repairs, and will know the results of the inspection.
If you are the buyer, you should expect the inspection to take anywhere from 1-3 hours, depending on the size of the house. A 2-bedroom condo will take less time to inspect than a 4-bedroom, 3,000 square foot house.
A good home inspector will not rush through the inspection, but rather will take the time to be as thorough as possible. The inspector will not only check out various things in the house, but will also take the time to educate and explain. A home inspection isn’t necessarily a “nit-picking” session, but is also an educationalist session.
The inspector will share maintenance tips as well. For example, the inspector will provide an estimate of how long the water heater should last, or how long a heat pump might last. This allows the buyer to plan ahead regarding budgeting for replacements. The inspector will also share how the heating and AC system work, and will show the buyer where filters are located so they can be replaced as needed.
PART 4: WHAT HAPPENS AFTER INSPECTIONS IN MARYLAND ARE COMPLETED?
It’s a toss-up whether the home inspection or the appraisal induces more nail-biting. Homebuyers, sellers and the agents involved await the results of both with a mixture of anticipation and fear. The key is to not allow fear to sink in, but rather to realistically work together towards a solution of any issues that might arise. That is exactly why negotiating inspection results is a part of the home selling and buying process.
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 actually minor.
So, what do you do after a home inspection? What is the next step? Each inspector will provide a written report of their findings. Inspection reports, while comprehensive, don’t have to be deal-breakers. What to you do after the home inspection report is available? After the home inspection results are received, 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 satisfied and not ask the seller to make any repairs. But what happens when there are things on the report that concern buyers? How long after a home inspection does a buyer have to decide what to do? The answer is in the contract the buyers and sellers signed. The typical timeframe is within 14 days of the “contract acceptance date”. Although sometimes the timeframe is different. Whatever timeframe was agreed upon in the contract determines how long a buyer has to respond.
What should buyers ask for after a home inspection? 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. Buyers should “choose their battles” when deciding what to do about inspection findings. Nit-picking and asking for everything on the inspection report is not advisable, and will frequently make negotiating with the seller quite difficult. The buyer’s agent should be able to lend guidance in this part of the process.
Buyers Have the Following Options After Receiving Inspection Reports:
There are some repairs, such as electrical, roof, the HVAC system and plumbing, that Maryland home buyers can reasonably expect the seller to make.
In fact, anything that presents a health and safety concern or that negatively impacts the use of the home is not only something that the lender may require, but that, should the buyer walk away from the purchase, the next buyer will likely expect as well.
It’s the little things, though, that bog down transactions, sometimes bringing them to a halt. If a buyer really wants the home, they should ignore the small stuff and fight for what actually matters.
Items to ignore include anything of a cosmetic nature and problems that are inexpensive to remedy. Save the big guns for the major repairs.
It’s important for buyers to understand the following:
- inspection reports are not complete repair lists for sellers
- there is a difference between truly needed repairs and cosmetic issues
1. Do Nothing
Occasionally, inspection reports are positive, with no real issues or concerns. Houses that have been well-maintained may fall into this category. In this instance, buyers may be very pleased with the inspections reports and be ready to move forward with the purchase of their new home in Maryland.
2. Request Repairs After the Home Inspection
When faced with major repair or replacement costs, many homebuyers ask the seller to make the repairs before settlement. Who pays for the repairs after a home inspection? Sellers arrange to have the repair work completed, and sellers pay for the repairs. Some sellers may balk at the repair requests, because they will cost money, and they often need to stay within a certain budget. However, when they’re reminded the next potential buyer may make the same reasonable request, they frequently agree to make the repairs.
3. Ask the Seller for a Credit
Rather than ask the seller to make the repairs, ask that he or she credit you with the cost of the repairs at closing. This way, the seller avoids the hassle of having to hire a contractor and the inconvenience of home repair work happening while he’s trying to pack up for the move. However, be aware, some types of loans will not allow this option. Buyers should discuss with their real estate agent whether this will be permitted in order to obtain their loan.
4. Renegotiate the Price
Another option is to amend the purchase agreement with a reduced price, reflecting the deduction for the cost of the repairs. Bids from contractors to determine the cost of fixing or replacing whatever is at issue may be necessary, but adjusting the purchase price remains an option.
5. Switch the Type of Financing
Switching to a Renovation Loan is a way to buy a house in Maryland that does not meet the requirements for other types of loans (such as: USDA, FHA, VA and some conventional loans). The 203K Loan and the Homestyle Renovation Loan are two types of renovation loans available in Maryland. Both of these loans rolls the cost of the repairs into the mortgage, but only make one payment will be due every month.
Renovation loans are a bit complicated and the loan takes time. It will slow down the purchase process. Both the buyers and the sellers will likely need to agree to extend the settlement date.
What Should a Home Seller Agree to Fix?
After receiving a buyer’s request, what should a seller do? How long does a home seller in Maryland have to respond to the home inspection report?Home sellers in Maryland have 5 days to make a decision. This allows time to obtain estimates, which helps with the decision-making. Sellers 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.
At some point, usually during the first 2-3 weeks a house is under contract, an appraiser will go to the house to provide an accurate value. 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 repairs are mandatory fixes that must be performed or else the loan won’t be approved and the sale will be terminated. Common 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, the covering of any open electrical junction boxes if there are loose wires hanging anywhere, and the 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?
Do home sellers in Maryland have to fix whatever a buyer asks them to fix? The answer is NO. Sellers can 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 “back out”, terminate the contract and walk away from the deal if they aren’t satisfied with the seller’s decision to only fix certain items. Typically, negotiations will continue until both the buyers and sellers come to an agreement.
3. Refuse to take any corrective action.
When a seller won’t make any repairs after a home inspection, 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 “back out”, 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.
Can I Back Out of the Contract After A Home Inspection?
The purpose of inspections when buying a house in Maryland is to learn as much as possible about the house after going under contract. Occasionally, there are inspection results that cause buyers to change their minds. When this happens, the ability to back out of the contract is determined by the terms of the contract itself.
There are several ways a buyer can back out of a contract after receiving the results of inspections. A Maryland contract of sale is a legally binding contract. It is important to back out based on the terms.
Backing Out When Buying a House “As-Is” in Maryland
Some houses are sold “as is”. Foreclosures, short sales, and estates are typically sold “as is”. Homeowners who know they will not make any repairs will also their their homes “as is”. This means buyers know up-front that no repairs whatsoever will be made by the seller. In this instance, buyers have the option of buying “As-is without inspections” or “As-is with inspections and right to terminate”.
If you are buying a house “as-is without inspections”, you are obligated to continue forward with the home purchase, regardless of the results of inspections. Buyers are permitted to have any inspections completed that they desire, but the inspection results are strictly for their own knowledge. Backing out of the contract due to the inspections is not allowed.
If you are buying a house “As-is with inspections and right to terminate”, you have the ability to back out, but must do so within a specific time frame. Your contract will specify the timeframe, which can vary from one contract to the next. Depending on the type of sale, the typical timeframe is either 7, 10 or 14 days. As long as inspection results are received within the specified time frame, buyers have the unconditional right to terminate the contract and back out. The inspection results do not have to be shared with the seller.
Backing Out When Buying a House with the Right to Ask for Repairs
If you aren’t buying a house “as-is”, the ability to back out of the contract after inspections is not as simple as just changing your mind, and is also directed by the terms of the contract. Here are 3 ways buyers can back out of a Maryland Real Estate Contract of Sale after a home inspection when it’s not an “as-is” purchase:
The “Buyer’s Right to Terminate Contract” was agreed to in the contract. Quite honestly, this portion of the contract is rarely included in the Maryland Contract of Sale for Residential Real Estate. When this part IS included, buyers have the unconditional right to terminate the contract and back out for no stated reason whatsoever, based upon the buyer’s general dissatisfaction with the inspection results. Most sellers will not agree to include this part of the contract. They want the ability to make repairs based upon inspection results. This part of the contract is either included or excluded when buyers make their initial offer to buy a property. It can not be added after the property is under contract.
When buyers ask sellers to make repairs, the sellers have 5 days to issue a written response. If the sellers do not respond within those 5 days, buyers can back out of the contract. This is because the sellers did not honor their obligation to respond in time. When a house is listed with a Realtor®, that agent will usually ensure the sellers respond in time. However, if the house is being sold For Sale By Owner, the owners may not know they must respond in 5 days, which gives the buyer an easy way to back out.
When buyers ask the sellers to make repairs, and the sellers respond within the required 5 days, backing out can become more difficult. If the sellers do not agree to fix everything on the repair list, buyers can terminate the contract and back out. However, if the sellers agree to fix everything on the list, buyers can not terminate and back out of the contract. Typically, when sellers don’t initially agree to fix everything on the list, negotiations take place until both the buyers and sellers come to an agreement. The goal is for the buyers and sellers to reach an agreement so both sides are pleased with the resolution.
Ultimately, inspections are a means for buyers of a property in Maryland to learn about the overall condition of the property. The inspection report will point out any immediate issues, as well as future items that may need to be addressed or replaced. Inspections are not designed to be scary or to discourage buyers from buying a property. Inspections are simply the opinion of the inspector in regards to the overall general condition. When the inspection results are alarming, there are legal ways to terminate the sales agreement. A buyer’s agent is paramount to writing an offer that will provide protection.
Another Option for Buyers & Sellers: The 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. The same goes for aging appliances. Buyers often fear they won’t be able to afford to replace an aging item after it breaks. A home warranty might ease their anxiety and save a seller money in the process. Buyers may ask for a home warranty to be included in the sales purchase. In addition, sellers may offer a home warranty to give peace of mind to the buyers of their house. The home warranty can be paid for at settlement, it doesn’t have to be purchased in advance. Paying at settlement will allow the the cost to be deducted from a seller’s proceeds, as opposed to having the extra money to pay for it out of pocket.
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