While in escrow: the home inspection, step by step
Escrow is the stretch between a signed contract and closing day. The home inspection is the buyer's best chance to find problems while there is still time to act.
Key points
- Your contract sets the time you have for inspections. Book the inspector as soon as you sign.
- A general inspection looks at the visible condition of the home. Some problems need a specialist.
- For homes built before 1978, federal law gives buyers a chance to test for lead-based paint.
- Put every repair or credit agreement in writing, signed by both sides.
What "in escrow" means
After you sign the purchase agreement, a neutral third party, usually a title company, escrow agent or attorney, holds the earnest money and the documents. The deal closes only when both sides meet the conditions in the contract. The inspection is one of the first of those conditions.
The inspection contingency
An inspection contingency lets the buyer inspect the home and then accept it, ask for repairs or a credit, or cancel, within a set time. The contract states that time. Missing the deadline can cost you the right to cancel, so put the date in your calendar the day you sign.
Choosing a home inspector
- Check your state's rules. Some states license home inspectors and others do not; your state's licensing board or real estate commission can tell you. The ARELLO directory lists each state's real estate regulator.
- Ask for a sample report, so you know how clear it will be.
- Ask what is included, what is not, and how long the visit takes.
- Choose your own inspector. The seller should not pick or pay for the buyer's inspection.
- Go along if you can. You will learn how the home works and where the shut-off valves are.
What a general home inspection covers
- Roof, gutters and drainage you can see.
- Foundation, structure and signs of water entry.
- Heating and cooling equipment.
- Plumbing: supply, drains, water heater and visible leaks.
- Electrical panel, outlets, switches and visible wiring.
- Windows, doors, attic, insulation and ventilation.
- Built-in appliances, in many inspections.
It does not see inside walls, under floors or inside sewer lines, and it is not a code inspection. If the inspector flags something, a specialist may need to look closer.
Specialist inspections to consider
- Radon. Radon is a radioactive gas you cannot see or smell. EPA explains how to test and fix high levels (EPA radon).
- Lead-based paint (homes built before 1978). The seller must give you a 10-day period to test for lead-based paint, unless you agree in writing to change it or waive it (EPA).
- Wood-destroying insects, such as termites; some lenders ask for this check.
- Sewer line camera for older homes or big trees near the line.
- Well water and septic system for homes off city water or sewer.
- Roof, chimney, foundation or mold specialists when the general report raises questions.
Reading the inspection report
Reports often list many items. Sort them into three groups: safety issues, major systems (roof, foundation, heating, plumbing, electrical) and routine upkeep. Focus your requests on the first two. Every home, even a new one, has some upkeep items.
Your options after the inspection
- Accept the home as it is and move on.
- Ask for repairs before closing, by licensed contractors where needed, with receipts.
- Ask for a credit or price change instead, so you control the repair.
- Cancel within your contingency period, as your contract allows.
Write any agreement into a signed addendum to the contract. A friendly phone call is not enough.
Inspection or appraisal: what is the difference?
An inspection is about condition and is ordered by the buyer. An appraisal is about value and is usually ordered by the lender. You need both for most mortgage purchases, and one does not replace the other.
Before closing: the final walk-through
Visit the home shortly before closing. Check that agreed repairs are done, that the receipts match and that nothing new has gone wrong. The CFPB's closing checklist lists other last steps.
For sellers: handling inspection requests
Expect a list. Reply in writing and stay calm. A credit is often simpler than arranging repairs yourself under time pressure. Anything new you learn may also affect your disclosure duties, so ask your attorney. Our seller disclosure guide explains the basics.
Sources
- EPA: Real estate disclosures about potential lead hazards
- EPA: Radon
- CFPB: Mortgage closing checklist (PDF)
- CFPB: Buying a house
- ARELLO: directory of real estate regulatory agencies (every US state)
This page continues a topic from the earlier Learning Center at this web address. We wrote it from scratch with current rules and sources.
How we write: we check every legal and money statement against the official sources above. Read our process or report a mistake.