Dornish Law Offices, PC Dornish Settlement Services, LLC

Business and real estate lawyers. Knowledgeable and efficient closing services.

Home 9 Real Estate Practice 9 Why inspection issues could derail an investment property closing

Why inspection issues could derail an investment property closing

by | Oct 17, 2021 | Real Estate Practice

Most people treat an inspection like a necessary but ignorable step in the home closing process. Especially if you are a real estate investor, you probably expected to spot any major issues and the property before the inspection.

However, sometimes it takes a keen eye and years of professional experience to notice major latent defects in a property. The closer to closing you schedule the inspection, the greater the risk of a significant issue that could stall out your closing.

Inspection issues can alter your attitude about a property

As an investor, you try to make offers on properties where you imagine you can make enough repairs and upgrades to sell the property for a higher price in the future. Alternatively, you may buy a property in good condition because you want to add it to your portfolio of rental units.

When the inspection report comes back with major issues like termite damage to the roof or foundation problems that will require tens of thousands of dollars worth of repairs, the purchase may no longer seem like a good option unless you can renegotiate the terms or price.

How can you keep the transaction moving forward?

After a big shock from the inspection, you and the seller may feel concerned about the transaction. The seller can no longer list the property without disclosing the recently discovered defect, so they might want to work with you to just move on from the property.

Asking the seller to assume the cost of repairs or to split them with you could be a way for you to reach a compromise that still works. Given that turning a profit on the property is very important, if you cannot reach the compromise with the seller, you may have to walk away from the property. That might require that you go to court to recoup your earnest money if the seller is not cooperative.

Exploring your options when an issue arises right before closing can protect you when buying investment properties.