How important is a home inspection?
It has become quite common in recent years for offers to be conditional on the buyer arranging a satisfactory building inspection, failing which the offer may collapse.
This was not so common from 1986 to 1996 when offshore buyers were driving the market, as they were looking more at land value than at the building itself. These buyers were cash buyers in most cases, and if they needed a mortgage, they knew they could get it and did not include a subject to financing or inspection. In that very competitive market, offers with any conditions would simply lose out to cash offers. When the market is slower, buyers are more cautious, and a slower market allows for conditional offers to be taken seriously.
Buyers will sometimes use this subject as a negotiating tool to bargain after an offer has been accepted. They may say that they want the seller to reduce the contract price because the inspection shows the need for a new roof, for example. Fair market value should govern in such cases. If recent sales of similar homes in the area were in the same price range as the seller's and they also had old roofs, then there should be no discount for the buyer, and the seller should not concede this point.
Whether or not to include an inspection clause depends very much on the nature of the market. If a home is very attractive, well priced, with buyers showing interest, it is unlikely that the owner will have to accept an offer subject to inspection, as this clause can allow the buyer to simply walk away from the contract. The buyer will have to assess the property and determine whether it is necessary to use this subject or whether the building and the nature of the market dictate against it. In a fast market, where homes are selling quickly and multiple unconditional offers are common, a buyer really has only three choices: try to arrange an inspection before making an offer, make an unconditional offer, or make no offer at all.
