Everything You Need to Know About the Home Inspection

Oil tank sweep

You’re under contract on your first property – congrats! Now, the big wildcard – the home inspection. 

The home inspection is your best chance to peek behind the curtain before you buy the property. That’s because every standard real estate contract includes a “home inspection contingency” – a crucial clause that allows the buyer to hire a professional, licensed home inspector to conduct a thorough inspection of the property under contract and to present the findings on any defects detected. You, the prospective buyer, can then use that report to either ask for repairs, a price reduction, or, if no agreement is reached, to cancel the contract.

Important note: The seller is entitled to cancel the contract as well if they choose not to make requested repairs or re-negotiate the price. A seller is more likely to cancel a contract if they deem the inspection requests unreasonable and they are in a seller’s market (i.e. a market in which there are more buyers than sellers, like the one we are experiencing now in many parts of the country near large cities, including New York City).

Why the Home Inspection Is Crucial:

The home inspection is vital in any transaction, but especially if you’re a first-time home buyer purchasing an older home. That’s because only newly constructed houses come with warranties. In NJ, for example, newly constructed residential properties are protected by a requisite 10-year Builder’s Warranty. But if you’re buying a home that’s a resale (e.g. anything that’s not newly built), that property would normally be sold “without warranties”. In other words – caveat emptor, or “buyer beware” applies.

While the home inspection will never provide 100% protection against defects (after all, inspectors are human and sometimes miss things or make mistakes), at least you’ll know what you’re getting yourself into. After all, before you get to this point, you will have spent about 30 minutes or so looking at the property (during the initial showing) – maybe an hour, tops.

There is only so much you can detect in such a short time frame, especially if you’re not an experienced real estate investor, don’t have a background in construction and renovations, or simply put – don’t know what to look out for. In fact, if you’re like most first-time buyers, you’ll probably spend most of your time during a showing checking out the cosmetic features of the home, gauging room sizes and layout, and determining if the home has enough curb appeal.

If you’re a first-time investor or house-hacker, you may also think about how rentable the units are and what kind of rent you can get for them. But either way, you’re probably not “getting under the hood.”

If you’ve seen a property and decided to make an offer, that decision was usually based on your cursory observations during the initial viewing, as well as your agent’s opinion and the comps he or she sent you (if you planned well and found a good buyer’s agent before making offers). But neither you nor your buyer’s agent are licensed home inspectors. And you’re not allowed (or not likely to want) to do the things that a home inspector is allowed to do, like remove covers from furnaces and electrical panels, climb into crawl spaces or onto roofs, and walk around checking every electrical outlet.

So in some sense, you’re partially flying blind when making offers, since you don’t really know the true condition of the property. Your initial offer is usually based on the assumption that the house you’re bidding on is structurally sound, everything is in working order, and there are no major defects.

That’s why the home inspection contingency is so important, and why you should choose your home inspector after doing some due diligence (no, they are not all created equal, much like the fact that not all agents, lenders, and lawyers are the same).

A typical home inspection on a residential property usually takes about 2 hours – longer for larger multi-family properties, shorter for condos. During that time, the licensed inspector will check the house from “head to toe” to the extent possible. I say to the extent possible, because not everything will be accessible or visible. For example, certain pipes and wires may be covered up by drywall, crawl spaces may be too small to access, and HVAC equipment may not be operational at the time of the inspection.

Why the Buyer Should Attend the Home Inspection:

I strongly advise that you, as the prospective home buyer, attend the inspection, if at all possible. If you need to take a half day off from work, do it. A real estate purchase, especially the first one, will probably be one of the most important decisions you’ll ever make, and the inspection is a unique opportunity to see it through the eyes of the professional inspector.

If you’re present at the inspection, you’ll have the advantage of getting the inspector’s “play-by-play” commentary if they’re the chatty type, or at the very least, a verbal summary of top issues at the end of it. This is extremely helpful, because it offers you a sense of what’s really a big deal and what’s not. The inspector will oftentimes literally tell you, “listen, I have to put this in the report, but it’s not a big deal. A plumber can fix this for a couple hundred bucks.”

Trust me, you want to hear this stuff ahead of time, because when you get the report, it can sometimes sound scary. That’s because the inspector’s role is to list every defect, large or small. In fact, the inspector has every incentive not to miss anything, lest they expose themselves to future liability for overlooking a problem that later ends up costing you a lot of money to fix.

So just keep in mind that the verbal play-by-play may differ in tone and substance from the written report. That’s why it’s good to be there in person and to walk away knowing what your “real” issues are. It also gives you extra time to reach out to contractors to get quotes, without having to wait 2 to 5 days for the report (which is usually the time it will take to receive the formal report).

For example, if the inspector stated that the roof is past its useful life and it’s a wonder it’s not leaking yet, or that the boiler is on its last legs, you can immediately reach out to roofing and HVAC contractors to get quotes on repairs, because you’ll need them if you want to ask the seller for a price reduction in lieu of repairs and get a positive response.

And you don’t have that much time to work with, since the typical home inspection period in the contract is 14 calendar days (from the date you officially get under contract). That sounds like a lot of time, but it’s actually not. Really good inspectors are usually very busy (thanks to referrals and online reviews), so they may not be available for several days or even a week. Then, if it takes a few days to get the report, suddenly, you’re pressed up against the 14-day cut-off for you to submit the report and any related requests you have (either for repairs or a price reduction).

What’s Included in the Home Inspection:

Now, what exactly is the inspector looking at during a typical inspection? The short answer – everything. His job is to inspect the house from top to bottom and inside and out. This includes:

- Plumbing (including a check for lead water pipes, corroded pipes, leaks, and general working condition).

- Electrical (including a look at the wiring, age of panels, service capacity, and a test of all electrical outlets).

- Mechanical (i.e. heating and cooling, which includes boilers, water heaters, vents and ducts).

- The structural integrity of the home (does it appear structurally sound?).

- The condition of the roof, chimney and siding.

- The quality of the drainage system (gutters and downspouts) and waterproofing, if any

- The presence of mold, rot, or termite damage.

- The level of radon gas in the home (usually offered as an “add-on” service for an extra fee or outsourced to a radon measurement technician). More on radon below.

- The presence of an abandoned underground oil tank (also offered as an “add-on” or sometimes outsourced to an oil tank professional). More on oil tanks below.

- The presence of asbestos insulation.

- Signs of flooding, water intrusion, or leaks (either from the roof or the ground).

- The condition of the kitchen, including a test of all appliances.

- The condition of the bathroom, including a test of all faucets and fixtures.

- A review of cosmetic issues (flooring, walls, ceilings, etc).

If you review the list above, and if you’re familiar with how homes are typically structured, you’ll notice that a lot of this stuff would be found in the basement. It’s no surprise then that about a third of the time it takes to do the inspection will be spent in the basement. That’s where you’ll typically find many of the defects that could actually prove very serious or expensive to address. Termite damage in the floor joists? Clear signs of mold on the drywall next to the foundation walls? Leaky pipes? Unsafe or improperly installed electrical wiring? An ancient boiler manufactured when Richard Nixon was President? Pools of water on the floor after heavy rain? Signs of old oil tank feeder lines? Old pipes wrapped with asbestos insulation?

All this and more will be found in the basement, so be prepared to spend more time that you’d like in the least attractive part of the property.

What Is NOT Part of the Home Inspection:

Now, it’s worth mentioning what the inspector is NOT there to do. First, a licensed home inspector is not the same as a city inspector. He will not be checking if the home meets code requirements in the town it’s located in. That’s the job of the city inspector (i.e. plumbing, electrical, HVAC, etc).

Second, the home inspector is not there to give you estimates on repairs. Your job will be to take his findings and contact contractors for official quotes for specific repairs.

Third, don’t ask the inspector if he thinks you’re getting it at a “good price”. Inspectors are there to inspect not to comment on the market value of the property.

So then, what should you ask the inspector?

4 Questions to Ask the Home Inspector:

Here are a few questions always worth asking during or at the end of the home inspection:

1. What are the major issues I should be aware of?

2. Have you seen any potential deal-breakers or serious red flags?

3. What repairs or replacements should I expect to make in the next couple of years, if I buy this house?

4. What potential issues should I be aware of that you couldn’t inspect?

The last question applies to elements of the house that the inspector either couldn’t access or that were not turned on/working during the inspection.

Latent Issues:

Almost every house has some latent issues that will come to the surface down the road, after you’ve already closed on the property. This is to be expected. Things break or fall out of alignment, wood rots, screws and nails sometimes pop out, pipes can be dry today and leak tomorrow. You just never know.

This is an important point to keep in mind, especially if you’re buying your first property. Hope for the best but plan for the worst. The inspector will not catch every little thing (and sometimes, he will miss big things too). For example, he may run a shower or bathtub for a few minutes or longer to test for leaks and may discover none. Then you close on the house, move in, and start taking your famous 25-minute morning showers only to discover to your horror that the shower is leaking onto the living room ceiling below.

I don’t mean to sound alarmist or to discourage first-time buyers. I’m just trying to paint a realistic picture shaped by my own experience both as a busy agent working with a lot of first-time buyers and as a property owner/real estate investor with two properties under my belt.

Lastly, I want to cover a few key inspection items that are usually not included in a standard home inspection but are worth considering.

Top 3 Add-On Inspection Services:

1. Radon Gas Test

2. Underground Oil Tank Test

3. Sewer Line Test

Radon Gas: 

Radon is a naturally occurring radioactive gas that’s omnipresent, invisible, and has no smell. It is a byproduct of the natural decay of uranium deposits in the soil and the largest source of natural radiation in the environment. When levels of it are consistently high in a confined space like a home, radon poses serious health hazards. What makes it dangerous, specifically, is that it is a known human carcinogen. In fact, radon is considered the second leading cause of lung cancer in the United States and the number one cause of lung cancer in non-smokers, according to the EPA. All homes have some level of radon, but if it’s above an “acceptable” in a home, it could significantly elevate the risk of lung cancer for its inhabitants.

The general cut-off for what is considered an “acceptable” level, according to the EPA, is 4 picocuries per liter (written as “4 pCi/L”). If the level is above that, radon remediation is recommended. If you’re under contract to buy a property with elevated levels, you could ask the seller to pay for the remediation or to provide you a credit towards the cost of it. You can also choose to back out of the contract based on this finding, although, the root causes are usually treatable and may not be reason enough to back out.

This is why it may be worth shelling out an extra $150 or so for a radon test during your inspection period. Many home inspectors are also licensed radon measurement technicians, or they can connect you with one. There are simple short-term tests that can be done to check the levels of radon in a home you’re planning on purchasing (or a home you already own). This usually involves leaving a small metal canister filled with charcoal in the basement of a home for 2 to 3 days, then sealing it and mailing it to a specialized lab that will use the canister to measure the level of radon in the home during the time of the test.

If the level is below 4 pCi/L but close to it, you may want to retest again after you close, since radon still poses a health risk even it it’s below 4. One option would be a longer-term home test that’s conducted over months instead of just a couple of days. But again, you have to own the property at that point to be able to conduct a longer-term test.

A final note on radon – many prospective buyers forgo this “add on” inspection item because they don’t want to spend the extra money, especially at a time in the transaction when there is still uncertainty about the ultimate outcome (will you close on it or will the deal fall through?), because they are not aware of the risks posed by radon gas, or because they would rather deal with radon testing and possible remediation after closing. There is no “right” answer here. It’s really up to you. But if you don’t test during the inspection period, I strongly advise that you at least test after you close on the property. This also applies to investment properties you plan to rent out, because you should know what health risks you’re exposing your tenants to.

To learn more about radon, check out A Citizen’s Guide to Radon, published by the EPA.

Underground Oil Tanks:

A century ago, homes were either heated by a coal furnace in the basement or by burning wood. Then, in the first half of the 20th century, thanks to the development of the oil industry in the United States and the infrastructure to support the distribution of it, oil became the most popular source of heat for residential homes. And because steel oil tanks were huge and ugly, they were typically buried underground somewhere on the property – usually in front of the house but other times in the back or on the side.

A fill valve was added to the surface for easy access when the oil delivery truck pulled up and the oil tank was plumbed to a furnace in the basement. Suddenly, homeowners didn’t have to shovel coal or chop wood! But….

It turned out that the steel tanks of old (which were not double-walled) tended to rust and corrode after being constantly exposed to moisture in the soil day after day and year after year. And what happens when a large steel tank starts to crack? Its contents leak out in the soil. Not good!

By the late 20th century, natural gas had become a cheaper and cleaner source of heating energy anyway, so underground oil tanks became a thing of the past. The trouble was, they were already in the ground. The solution was to properly decommission them or to remove them and remediate any soil contamination, if found. And it’s the last part that makes underground oil tanks so problematic when buying property. The “responsible party” for soil remediation (if oil contamination is found) is the one that owns the property at the time of the tank removal. So if you buy a home without having tested for the presence of an oil tank and you decide to sell it in 5 years, a prospective buyer might test for an oil tank, find it, and ask you to remove it. You’ll then either have to rip up the deal with that buyer (and hope that you can find a buyer willing to purchase a property with a buried oil tank, or pay for its removal.

The cost to remove the tank is not particularly excessive – usually a few thousand dollars, tops. The real monetary risk lies in what the environmental engineer (required on site during a tank removal) finds underneath. If there is minor soil contamination, they’ll have to excavate the contaminated soil, dump it into a dump truck, cart it off, then fill the hole with clean soil. That might cost you another few thousand dollars. But if they find extensive contamination, you’re on the hook, and you can’t hit the PAUSE button at that point. There have been cases where the contamination had spread to neighboring lots, polluting the soil under multiple adjacent properties. Guess who was on the hook?

So it may be well worth spending the $250 or so on an oil tank sweep to save you a lot of potential trouble in the future.

Sewer Line Test:

If you’re buying a home connected to a municipal water source (“city water”), you may want to consider spending a few hundred bucks on a test during which the inspector sends a thin wire with a video camera on its end down your main sewer line to check for signs of cracks, leaks, and other serious issues that might cause you headaches or financial harm. Sewer lines are buried underground, and if they ever need to be replaced or repaired, it is usually costly. That’s because breaking and digging up concrete to get to the pipe is expensive, as is backfilling and pouring fresh concrete. The labor cost of replacing a damaged pipe beyond its useful life isn’t cheap either. In all, you’re probably looking at thousands of dollars.

This test is especially worthwhile for old homes – say 100 years or older. For all you know, you may discover that the sewer line is original (circa 1900 or 1920, for example) and made out of clay.

Now imagine you close on the house and the sewer line bursts a few weeks later (an extreme case, but not out of the realm of possibilities). You’ll need emergency plumbing services and maybe even some HAZMAC cleanup, depending on where the pipe burst and if any human waste got into, say, your basement! Thousands of dollars and a lot of stress later, you may be looking back wishing you’d spent the $300-400 on a sewer line test.

Conclusion:

In summary, the inspection is a crucial step in any real estate transaction, so it behooves you to be there in person and to pay careful attention -- that means, put away your phone for a couple of hours, if possible, and just focus on what the inspector is looking at and commenting on. Those emails and texts can wait, but you can’t “rewind” the inspection.

Take note of the major items, ask the right questions, and, most importantly, just listen. Then, based on the verbal findings, reach out to contractors, if necessary, to get a head start on professional quotes, since your time window for post-inspection requests will be fairly narrow.

And remember, there is no such thing as a perfect property with no issues. A home is comprised of countless components, is built by many hands, and is exposed to the elements 365 days a year. So there is plenty of room for human error, as well as the detrimental impact of the environment (wind, rain, heat/cold cycle, flooding, ice, snow, etc).

Even newly built homes have issues. I’ve learned that from experience representing buyers who purchased brand-new homes (as well as those who’ve purchase gut-renovated homes). Of course, the older the home, the more likely it is to have numerous issues and for some of them to be serious. But it all comes down to numbers. Most things can be fixed or addressed – it’s only a matter of how much it will cost and who is willing to pay for it.

But even with all these warnings and scary-sounding topics, don’t fret. People have been buying and selling homes for centuries, so you won’t be the first. I hope this article will help you understand what’s involved, what to look for, what questions to ask, and what to prepare for.

Now go out there confidently and start making some offers!