A bad home inspection gives you leverage, not a dead deal. What to do after a bad home inspection usually comes down to three live options: ask the seller to fix the defects, take a credit or price reduction, or cancel the contract under your inspection contingency before it expires. The contingency window typically runs 7 to 10 days from the accepted offer, and which path makes sense depends on how severe the problems are, what they cost to fix, and whether your lender will approve the loan with them unresolved.
Separate the Real Problems From the Noise
Inspection reports can run 30 or 40 pages, and most of that is routine maintenance: a cracked outlet cover, peeling caulk around a bathtub, a dirty furnace filter. Those findings aren’t negotiation ammunition. What matters are defects that affect safety, structural integrity, or major mechanical systems. Foundation cracks with active movement, a roof with visible leaks, knob-and-tube wiring, a failing septic system, or a furnace nearing the end of its 15- to 20-year lifespan all fall into this category. Real money, real risk.
The practical dividing line is usually around $1,000 to $2,000. Below that, most sellers won’t bother negotiating and most buyers shouldn’t push. Above it, a request for repair or credit is reasonable and expected. Major system failures can run $5,000 to $20,000, which is where the real decision-making happens.
Get Written Estimates Before You Ask for Anything
The inspection report identifies problems but rarely prices them with precision. Before you submit a repair request, get written estimates from licensed contractors for every significant defect. An inspector’s note that the roof “shows signs of wear and may need replacement” doesn’t carry nearly the weight of a roofer’s quote for $11,000 to tear off and reshingle. Contractors can also tell you which repairs are urgent and which can wait a year or two, which helps you prioritize.
Speed matters. Your contingency clock is running, and most contractors need a day or two to visit the property and produce an estimate. If the inspection flagged something the general inspector couldn’t fully evaluate, like extensive water damage behind walls or a foundation issue, you may need a specialist. Schedule those appointments immediately. Every day spent gathering information is a day closer to your deadline.
Negotiating Repairs, a Credit, or a Price Reduction
Once you have estimates, you submit a formal repair request (sometimes called a repair addendum or notice to correct) through your agent. It spells out exactly what you’re asking the seller to do. Three options are on the table, and experienced buyers often combine them.
- Seller-completed repairs. The seller hires licensed professionals to complete specific work before closing and provides receipts showing it was done and paid for. This works well for clearly defined jobs like replacing a water heater or repairing a section of roofing. It works poorly for anything subjective, because you’re trusting the seller to choose the contractor and oversee the quality.
- Closing cost credit. The seller contributes a dollar amount toward your closing costs, putting cash back in your pocket to handle repairs yourself after you move in. If the inspection revealed $12,000 in roof work, the seller might offer an $8,000 credit. You keep liquid cash and control the repair process, but you accept the risk that actual costs exceed the credit.
- Price reduction. The purchase price drops to reflect the property’s actual condition. This lowers your mortgage amount and saves money over the life of the loan. Sellers sometimes prefer this over a credit because it involves no out-of-pocket payment at closing.
Sellers are not required to agree to anything. In a buyer’s market you have more room to push; in a competitive market, requesting $500 in cosmetic fixes can irritate a seller sitting on backup offers. Focus your requests on genuine safety and structural concerns and leave the small stuff alone. The back-and-forth typically takes three to seven days.
When Your Lender Forces the Issue
Even if you and the seller agree to close “as-is” or split the difference, your mortgage lender may overrule both of you. FHA, VA, and USDA loans impose minimum property requirements the home must meet before the loan closes. These are conditions of financing, not negotiation points.
FHA Loans
FHA requires the home to meet standards for safety, security, and soundness. The FHA appraiser will flag defects that must be corrected before closing. Common triggers include peeling paint on pre-1978 homes (a lead hazard), missing handrails on stairs, exposed electrical wiring, a roof with active leaks or insufficient remaining life, inadequate heating, lack of running potable water, and non-functional plumbing. If the property is in such poor condition that repairs would be impractical, the appraiser can recommend rejecting it outright.1HUD Archives. HOC Reference Guide – Repair Conditions The FHA handbook requires every living unit to have safe water, functioning sewage disposal, adequate heating, and electricity for lighting and equipment.2U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
VA Loans
VA loans follow a similar framework. The VA appraiser checks for structural soundness, safe electrical and plumbing systems, a weather-tight roof with reasonable remaining life, permanent heating, and freedom from wood-destroying insects. In most states, the VA requires a separate termite inspection as a condition of the appraisal.3U.S. Department of Veterans Affairs. Local Requirements – VA Home Loans Active pest damage, exposed wiring, non-functional heating, foundation instability, and burglar bars that block emergency exits all trigger mandatory repairs.
Escrow Holdbacks
When a required repair can’t be completed before closing, say a roof replacement delayed by weather, lenders sometimes allow a repair escrow holdback. The lender withholds funds at closing to cover the work. Fannie Mae requires the escrow to equal 120% of the estimated repair cost for postponed improvements, with the work finished within 180 days of the loan date.4Fannie Mae. Requirements for Verifying Completion and Postponed Improvements Not every lender or loan type allows holdbacks, so confirm with your loan officer before relying on this option.
Specialized Follow-Up Inspections Worth Ordering
A standard inspection covers the visible structure, mechanical systems, and major components, but it doesn’t test for everything. Depending on the property’s age, location, and the general inspector’s notes, additional testing during your contingency period can catch problems that dwarf the fee.
Radon
Radon is a naturally occurring radioactive gas that seeps into homes through foundation cracks. You can’t see or smell it, and long-term exposure is the second leading cause of lung cancer. The EPA recommends mitigation when indoor levels reach 4 picocuries per liter (pCi/L) or above, and suggests considering action between 2 and 4 pCi/L.5U.S. Environmental Protection Agency. What Is EPAs Action Level for Radon and What Does It Mean Professional testing runs $150 to $700. A mitigation system averages $800 to $1,300, though complex installations can reach $2,500 or more. Add it to your negotiation.
Sewer Scope
A sewer scope sends a camera through the main drain line to check for root intrusion, cracks, bellying (sagging sections that collect waste), and deteriorated pipe. The inspection costs $270 to $1,000. If the sewer line needs repair, you’re looking at $1,300 to $15,000 depending on damage and pipe depth. Homes built before the 1970s with clay or cast-iron drain lines deserve extra scrutiny.
Lead Paint
For any home built before 1978, federal law requires the seller to disclose known lead-based paint hazards and provide you with an EPA-approved lead hazard information pamphlet before you’re obligated under the contract.6Office of the Law Revision Counsel. 42 USC 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property The seller must also give you at least 10 days to conduct your own lead inspection or risk assessment. If your inspector notes deteriorating paint on a pre-1978 home, a lead-specific test runs $200 to $400. Any renovation that disturbs lead paint must be performed by EPA-certified firms following strict containment procedures,7eCFR. Title 40 Part 745 Subpart E – Residential Property Renovation which increases repair costs and strengthens your negotiating position.
Walking Away Under the Inspection Contingency
If the defects are too expensive, too risky, or the seller won’t negotiate meaningfully, your inspection contingency lets you walk away. That is what the contingency exists for. The standard window is 7 to 10 days from the accepted offer, but your specific contract controls. Some contracts give you broad subjective discretion, meaning you can cancel for nearly any reason you find unsatisfactory. Others limit cancellation to material defects. Read the language carefully.
To cancel, submit written notice of termination to the seller or seller’s agent before the contingency deadline expires. Verbal cancellations don’t count. Once you send timely written notice, the contingency protects your earnest money deposit, which typically runs 1% to 2% of the purchase price.
Recovering the deposit requires both buyer and seller to sign a release of funds. Most of the time this is a formality. A seller occasionally disputes the release, usually claiming the buyer didn’t act in good faith or missed the deadline. If neither party will sign, the earnest money sits in escrow until the dispute is resolved through mediation, arbitration, or court, depending on what your contract specifies. Rare when the buyer cancels within the contingency period with a documented basis in the inspection report, but it happens.
Don’t Miss the Deadline
This is where most buyers get burned. If the contingency expires without you sending written notice of termination or a repair request, you’ve effectively accepted the property in its current condition. The seller has no obligation to negotiate, and you can’t cancel without risking your earnest money. The contingency period is not paused by ongoing negotiations. If you’re still going back and forth on repair requests when the deadline passes, some contracts treat that as acceptance.
If you need more time, ask for a written extension before the original deadline. Most sellers will grant a day or two if you’re clearly working toward a resolution, but they’re not required to. Treat the deadline like a hard stop, because contractually it is one.
What “As-Is” Does and Doesn’t Mean
An “as-is” listing means the seller won’t make repairs. It does not mean you give up your right to inspect the property or cancel the deal. If your contract includes an inspection contingency, you can still order an inspection, review the results, and cancel within the window if you don’t like what you find. The “as-is” label only takes seller-funded repairs off the table.
The trap is waiving the inspection contingency entirely to make your offer more competitive. Without that contingency, you’re obligated to close regardless of what the inspection reveals. If you must waive it, at minimum get an informational inspection, one where you pay to learn the home’s condition even though you can’t use the results to renegotiate. Knowing you’re buying a home that needs $15,000 in foundation work is better than discovering it six months later.