When home inspections go bad
What do you do when an inspector finds a problem.
Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - You really love the house, the half acre lot and the great neighborhood. The price is right, your offer has been accepted, financing is in place and you're ready to close...almost.

There's one more river to cross: the home inspection. And don't expect the waters to be smooth.

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"There are surprises in every house," says Joe Corcetto, a home inspector in New Jersey and president of the American Society of Home Inspectors (ASHI).

The most common problems inspections uncover include: poor exterior grading, which can lead to basement flooding or leaking; roof leaks; improper wiring; plumbing issues; and heating system malfunctions.

But there can also be some unusual problems uncovered as well.

One time Corcetto was examining the basement of an expensive home in Morris County, New Jersey, one of the have-a-lot suburbs of New York City. The buyer and the buyer's agent trailed him for much of the job, until . . .

"A mother snake slithered out from around the well followed by a baby snake. Then I noticed lots of snake skins hanging in the rafters. The buyer seemed to swoon. Sweat started beading up on the agent's brow.'"

The deal fell through.

Critters figure prominently in the stories of home inspectors. George Harper, the immediate past president of the California Real Estate Inspectors Association says he was being followed around by a whole group of people on one inspection - buyers, their agents, sellers and their agents - 10 or 15 in all.

"As they watched, I took off the main electrical panel in the back of the house and a pretty big raccoon popped out," he says. "All of a sudden, I was all alone."

The more mundane problems, however, can ultimately prove worse. "I often open up the electrical panel and find a box-full of rust," says Corcetto. "Water seeps in from the outside meter along the cables. It can damage circuit breakers, terminals and cause shorts, and cause a fire."

Rust may not be the only thing lurking back there. Corcetto has found rodent nests as well. "Mice nest there and use it as a latrine. I sometimes find them fried after they gnaw through the wires."

Serious problems

Most problems inspectors find are minor and can be easily remedied; all it takes is a little money. But sometimes the expense can be considerable; then what do you do?

Buyers should, when making an offer on a house, make sure the contract always includes a home inspection contingency. That way, if you find an expensive problem you can: Ask the seller to make the repair before closing; negotiate a price reduction to offset your added cost or; walk away from the deal without penalty.

How these options play out is really a function of the strength of the housing market, according to Harper.

"When houses were flying off the market two years ago, buyers often opted to take the property even with significant problems knowing that they would have to pay a whole lot more money a few months later for a similar home," says Harper. "Today, with markets cooler, there's more buyer's resistance."

Buyers have to be prepared to walk away from a deal even if they've fallen in love with the property if the numbers don't add up and they can't get concessions from the seller. It may be tough, but with markets cooling, it may be the most financially responsible choice. There will be other homes for sale.

Not all inspections are equal

The price is right, compared with other home-buying expenses. Inspectors base their fee on the house size and how complicated the job is, but Rob Paterkiewicz, executive director of the ASHI, says the national average is only around $300. That can go up to $1,000 or more for a big job.

Individual inspectors vary in what specific tasks they undertake. Home buyers should inquire before they hire just what the inspector is willing - and unwilling - to do. According to Paterkiewicz, "Some won't walk on a roof, for example. They'll inspect it with binoculars and from the attic. Others insist on going up there and walking around."

Don't expect inspectors to point out every hazard on the grounds either. One New Jersey home buyer reports his inspection only uncovered a dangerous condition involving tall, hollow trees because a arbor-savvy buddy of his came along for the ride - the inspector hadn't intended to examine them at all. The trees would cost in excess of $10,000 to remove.

An inspector should provide buyers with a complete list of what they are planning to do before they start.

There are regional differences in what inspectors must look for. Inspecting for radon presence is needed in much of the North and Midwest, for example, but it's not a problem in Florida and most of the rest of the South, where homes often don't have basements but mold is often found.

Foundations cracks are more common in active seismic areas such as California. Harper says it's also important to test the strapping on water heaters there. "They have to be held fast at the top and bottom to resist horizontal movement."

Finding an inspector

Real estate agent can recommend an inspector, but many buyers prefer to find one themselves. Then the buyer can be sure the inspector is fully objective, that they don't care whether what they turn up causes the buyer to back out of the deal.

To find an inspector, ask friends, neighbors and relatives for recommendations or contact your state or a national organization such as ASHI. Members of these associations generally are required to have experience, pass exams and take continuing education classes.

ASHI also requires its members to adhere to high standards of practice and ethics and will try to moderate complaints from clients.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.