If a home inspector finds problems, you generally have four options: ask the seller to make repairs before closing, ask for a closing credit or price reduction, accept the home as it is, or cancel the contract and get your earnest money back. Which path makes sense depends on the type of defect, how competitive your market is, how your loan is structured, and how many days you have left on the inspection contingency.
Your Four Options After a Bad Inspection Report
The inspection contingency in your purchase agreement is what gives you room to act. It typically runs seven to ten days from acceptance and gives you a defined window to complete inspections, review results, and respond to the seller in writing. If you say nothing before the window closes, most contracts treat the contingency as waived and you have accepted the property in its current condition.
Within that window, the choice is yours. Minor items — a loose handrail, a worn screen door — rarely justify renegotiating. Structural defects, failing systems, and safety hazards are a different story. Foundation cracks, sagging rooflines, aging HVAC units, outdated electrical panels, and corroded plumbing can run from several thousand dollars for a single fix to well over twenty thousand for a roof or sewer replacement. Those are the issues worth putting on the table.
One wrinkle worth knowing: an as-is listing does not necessarily strip you of inspection rights. If your contract still contains an inspection contingency, you can inspect and walk away based on what you find. You simply cannot demand that the seller fix anything.
Requesting Repairs
A repair request, often called a repair addendum, is a written document added to the purchase agreement that lists the specific defects you want fixed and who should do the work. Keep the list focused on structural issues and safety hazards. Sellers are far more likely to agree to repair a leaking roof or exposed wiring than to repaint a bedroom or replace worn carpet.
If the addendum calls for licensed contractor work, make the seller prove it was done. At closing, they should hand over paid invoices, receipts, and any applicable lien waivers. Then use the final walkthrough — your last chance to see the house before signing — to visually confirm the agreed work is finished. If something looks wrong or incomplete, raise it with your agent before you sit down at the closing table, not after.
Asking for a Credit or Price Reduction
Many buyers prefer money over promises. A closing credit is seller money applied toward your closing costs at settlement, which effectively lowers what you pay out of pocket and lets you hire your own contractors on your own schedule after you move in. For example, you might ask for a $5,000 credit to handle a failing water heater and some roof repairs yourself. Submit the request alongside the inspection pages that document the problem and, when possible, a contractor’s estimate.
Before you decide on a dollar figure, check what your loan allows. Lenders cap seller contributions, and asking for too much can blow up your financing.
- Conventional loans (Fannie Mae): with less than 10% down, the seller can contribute up to 3% of the sale price or appraised value, whichever is lower. Between 10% and 25% down, the cap is 6%. With 25% or more down, the cap is 9%.1Fannie Mae. Interested Party Contributions IPCs
- FHA loans: seller can contribute up to 6% of the sale price or appraised value, whichever is lower.
- VA loans: seller can cover unlimited closing costs but is limited to 4% of reasonable value for broader concessions like prepaid taxes or the VA funding fee.2U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs
Any seller contribution that exceeds these limits has to be deducted from the sale price for underwriting purposes, which shifts your loan-to-value ratio and can affect approval.1Fannie Mae. Interested Party Contributions IPCs If a credit would push you past the cap, a straight price reduction may be the cleaner move.
Walking Away During the Contingency Period
If negotiations stall or the problems are more than you want to take on, you can cancel. Cancellation requires a written notice of termination delivered to the seller or the seller’s agent. Only you, as the terminating party, need to sign for the notice to take effect.
Deliver that notice inside the contingency window and you are entitled to a full refund of your earnest money. Earnest money typically runs 1% to 3% of the purchase price, so on a $400,000 home that is roughly $4,000 to $12,000 sitting in escrow. The funds stay there until both you and the seller sign a release authorizing the escrow agent to return the money. Once that is processed, you walk away with your deposit and no further obligation to the seller.
When the Seller Pushes Back
After you send a repair or credit request, the seller usually has a few business days to answer in writing. Three responses are possible:
- Agree to everything. The seller accepts your full list, arranges the work with licensed professionals, and provides documentation at closing.
- Counter. The seller offers to fix some items, or offers a smaller credit. This is the most common outcome. Expect back-and-forth.
- Refuse. The seller declines any concessions, which happens more often in competitive markets.
If the seller does not respond at all before the reply window closes, many purchase agreements treat silence as a rejection. At that point you are back to the same four options: accept the home as it is, keep negotiating, or exercise your contingency to cancel.
Disputes over the earnest money can get ugly. If you terminate and the seller refuses to sign the release — claiming your notice was late or improper — the escrow agent is stuck with conflicting demands and generally will not release the funds to either side. The agent typically sends a letter asking the parties to negotiate or mediate within 30 to 90 days. If that fails, the agent can file an interpleader action, deposit the money with the court, and let a judge decide. That process costs legal fees that can exceed the deposit itself. Your best protection is a termination notice that is in writing, delivered inside the deadline, and timestamped.
When Your Lender Forces the Issue
If you are financing with an FHA or VA loan, the negotiation between you and the seller is not the final word. These government-backed loans require the property to meet minimum property standards, and the lender’s appraiser will flag conditions that have to be fixed before the loan can close.
FHA properties must have an undamaged roof, no exposed or unsafe electrical wiring, surfaces free of chipping or peeling lead-based paint, and no health or safety hazards such as missing handrails on stairways.3U.S. Department of Housing and Urban Development. Minimum Property Standards Resources VA loans require safe drinking water, functional sewer and electrical systems, a roof with reasonable remaining life, and no unpermitted improvements.
These are not optional negotiation points. If the appraiser flags a deficiency, the defect has to be repaired and the property re-inspected before the loan funds, regardless of what you and the seller agreed about repairs. In practice that means the seller fixes it, you pay to fix it yourself, or the deal collapses. Buyers using conventional financing generally do not face these lender-imposed repairs unless the appraiser identifies a condition serious enough to affect the property’s value.
If a Problem Turns Up After Closing
Sometimes a serious defect appears after you have the keys. What you can do about it depends heavily on your inspection contract. Most inspectors include a clause capping their liability at the fee you paid, which may be only a few hundred dollars. That cap can make it hard to recover the full cost of a major repair through a claim against the inspector.
If you believe the inspector was negligent — meaning they missed something a reasonably competent inspector would have caught during a visual examination — have an attorney review the contract and your state’s laws. Some states limit or prohibit these liability caps, and the inspector’s errors-and-omissions insurance may add recovery room. Inspectors are only responsible for conditions that were visible and accessible at the time of the inspection; defects hidden behind walls, under flooring, or underground generally fall outside their scope.4American Society of Home Inspectors. Standard of Practice for Home Inspections
A home warranty bought at closing may cover some post-closing breakdowns, but warranty companies routinely exclude pre-existing conditions. If a system fails and the warranty company decides the problem existed before coverage began, expect a denial. The inspection report itself can help here: if it shows the system was functional on inspection day, you have evidence to push back.