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Why would a real estate property fail inspection?

On Behalf of | Dec 29, 2023 | Real Estate Transactions

With both residential and commercial properties, a property inspection is an important part of the transaction process. Many buyers will use a contingency clause saying that they can walk away from the deal if the property fails that inspection. They do not want to risk making a binding offer without really knowing what they’re buying.

But why would the property fail inspection? There are many different reasons, so let’s explore some of the more common ones below.

Structural issues

First of all, there could be fundamental structural issues with the house or commercial property. Maybe there are cracks in the foundation or perhaps the building is settling unevenly. Maybe there are issues with the roof, leading to leaks, water damage, rot and mold. Perhaps there are grading issues meaning that water is channeled toward the house and leaks into the basement, rather than flowing away from the building. These issues can be quite expensive to fix.

System issues

Even when the property’s fundamental structure and frame don’t appear to have any major issues, the systems within that house or commercial property could have significant flaws that cause it to fail the inspection. For instance, maybe there are gas leaks, plumbing leaks or an HVAC system that doesn’t work. Perhaps there are issues with the electrical lines in the house or appliances that don’t function. Buyers expect all home systems to be functional and safe at the time of purchase.

Often, a property won’t fail the inspection outright. The inspector will simply indicate the things that need to be addressed before it will be worth the offered price. Buyers and sellers who are going through this process need to know exactly what legal steps to take and what obligations they have.