Can You Fail A Home Inspection?

The PropertyClub Team
Jul 7th 2020
While an inspector can't technically fail a house, some things could result in a bad home inspection. Here's what to look out for before committing to buying the property.

A home inspection with a bad outcome is not good news for either a buyer or a seller. The seller might be upset about the amount and cost of unexpected or serious repairs, and a buyer may have to consider forfeiting their dream home because of negative results. But while a home inspection can be stressful for everyone involved, it’s best to bite the bullet. In fact, most lenders are going to require it anyway, because it’s a necessary step in ensuring that the property you’re interested in is safe, habitable, and in good condition.

If you have found a house you’re set on buying, but the home inspection reveals too many negative caveats, it’s important to understand your rights and whether or not it might be best to walk away. It’s wise for both buyers and sellers to know what to look out for when an inspection report comes back, and what repairs might be a major red flag.

What will fail a home inspection?

Firstly, it’s important to note that a home inspection isn’t really a “pass” or “fail” type of situation. Inspectors aren’t out to get you, they’re simply there to report the conditions of the home, list any hazards, and indicate what repairs might be necessary. Consider the inspection report a list of things that a buyer should be aware of that aren’t working well, may pose a safety risk or could be hazardous. That being said, some findings could indicate a big red flag to potential buyers. 

  • Issues with the structure or materials of the roof
  • Asbestos, radon, mold, lead-based paint
  • Rotting wood or termite issues
  • HVAC problems
  • Issues with electrical wiring
  • Leaks near the foundation or through the roof
  • Problems with plumbing
  • Foundational and structural integrity issues
  • Drainage that runs towards the house

The above are listed as problems that could be considered things that fail a home inspection primarily because they can lead to serious safety issues or hazardous conditions. They may also cause problems because repairing them can be expensive and time-consuming. Sometimes a seller won’t want to deal with them and will simply sell the house as-is.

It’s not uncommon to discover a couple of these problems during an inspection, and typically speaking, a seller should be prepared to foot the bill to repair these conditions and ensure the sale goes through. However, if several problems arise, the home is deemed seriously dangerous, or the repairs are estimated to be extremely pricey, a buyer should be prepared to back out of the sale.

Can I back out of buying a house after an inspection? 

In most cases, you will be able to back out of a purchase contract after a home inspection. This is generally done through a contingency clause that will give how much time you have and for what reasons you can back out of buying the house. 

Home Inspection Contingency Clause

A contingency is a specific condition or action in a real estate contract that must be met in order for that contract to be considered binding. Because home inspection results are such a common reason for buyers to get cold feet about a house, there is usually a specific home inspection contingency clause written into the purchase agreement that allows buyers to walk away after a bad home inspection.

If issues come up during a home inspection that the seller refuses to take care of, or that pose too great of a red flag to the buyer, they will usually have the right to back out of the sale without any legal consequences. During a well-conducted real estate transaction, there should be a home inspection contingency included in the signed purchase agreement. This is designed to allow the buyer to back out of the sale should the inspection “fail.” But buyer beware, there’s usually a set amount of time that you have to decide whether or not you want to go through to closing. So don’t rest on your laurels or take your time deciding. Otherwise, you could be legally bound to the contract. 

How long after a home inspection does a buyer have to back out?

The safest way to cover all your bases and make sure that you back out of a sale in time is to read your contract thoroughly or contact your real estate agent. Your purchase agreement should clearly state how long you have to complete a home inspection, and if you don’t like what you see, how long you then have to back out of the sale. The law can vary from state to state, but typically a buyer has 10 days to decide what they want to do. 

For the buyer, there’s more good news. If you back out according to the home inspection contingency and within the legally required amount of time, your earnest money should be safe. Earnest money is designed to indicate to a seller that a buyer is serious about purchasing their home, but if something suspicious crops up during a home inspection, it’s usually within the buyer’s right to take their earnest money and go. 

The purchase agreement is designed to protect buyers and seller’s in cases where certain conditions or actions involved in a sale are not met. Since red flags discovered on a home inspection are not uncommon, the home inspection contingency clause written into your contract is there to protect you from being legally bound to buying a home with potentially dangerous or hazardous conditions. 

Remember, even if you think you’ve found your dream house, it’s important to know when to walk away. Pay close attention to the home inspection report, and to the repairs that the seller is willing to cover. Going through with the sale of a house that has safety concerns or a bucketload of expensive repairs to be made is not always a good idea, and could land you in the deep end later down the line.