Understanding the Importance of a Pre-Settlement Inspection When Buying a House

an old manor house with rose bushes growing up the walls

Over 60% of Americans are homeowners. That equates to nearly 230 million people. But, among this massive number of homeowners, many may not be aware of one critical step before they step into a new home: the pre-settlement inspection.

If you’re scratching your head, wondering, “Pre-settlement what?” don’t worry. This often-overlooked step is something every home buyer needs to know about. So, are you ready to learn more about it? 

What Is A Pre-Settlement Inspection?

A pre-settlement inspection, often called a final walk-through, is exactly what it sounds like. It’s your last opportunity to walk through your soon-to-be home before finally sealing the deal.

It’s like a final quality check to ensure that everything is exactly as you agreed upon when you signed the contract.

But how is this inspection conducted?

It is typically done a few days before or on the day of settlement. It’s not a detailed examination like your home inspection, where you check for issues like leaks or structural problems. Instead, it’s more about making sure that the property’s condition hasn’t changed since you last saw it and that any agreed-upon repairs have been made.

On a final walk-through of the house, the buyer’s agent often accompanies the buyer during the pre-settlement inspection. They can offer valuable insights and advice, particularly if they have experience in home construction or property management.

They can also assist in identifying any issues that might need to be addressed.

You will then be able to confirm that the sellers have left the property, taken their belongings and that the house is clean. That’s the basics of a pre-settlement inspection.

Depending on the specifics of the contract and the property itself, other professionals might be involved. If major repairs were supposed to be made, a professional inspector might be brought in to confirm that these were done properly.

The primary goal of the pre-settlement inspection is to ensure that the property is in the agreed-upon condition prior to the final settlement. As the buyer, you have the right to thoroughly inspect the property before taking ownership.

Why Are Pre-Settlement Inspections Important?

a desk with paperwork on it

Here are four key reasons why pre-settlement inspections are important:

1. Final Check

A pre-settlement inspection is your last chance to ensure everything is as per your contract. Remember that fancy chandelier in the dining room that was included in the sale? Or the repair of the leaky faucet in the bathroom that the seller promised to fix?

A pre-settlement inspection helps you verify that everything is in order and as promised before the keys are handed over.

2. Completion of Agree Repairs

If the purchase agreement included stipulations for the seller to make certain repairs or improvements before closing, the pre-settlement inspection allows the buyer to verify that these have been completed to their satisfaction. While understanding the importance of a pre-settlement inspection, it’s also essential to know how to repair and mend infrastructure in your home, such as how to thaw pipes naturally. You can find valuable tips on thawing pipes without chemicals or damage.

3. Avoid Surprises

There’s nothing worse than walking into your new home to find unexpected changes. The seller might have accidentally damaged a wall while moving furniture, or perhaps a storm led to a leak in the basement. These things happen. With a pre-settlement inspection, you can spot such issues before the final transaction.

4. Legal Leverage

If the property’s condition differs from the terms outlined in the contract, the pre-settlement inspection provides a legal basis for potential negotiations or even delays the settlement if necessary.

In essence, a pre-settlement inspection serves as a buyer’s final line of defence against potential issues with the property. While it might seem like a formality or an extra step in the process, it can actually be a crucial tool in protecting the buyer’s interests. It’s a final opportunity to ensure that the significant investment being made in the property is a sound one.

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What To Look For

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Pre-settlement inspections are all about detail. But what exactly should you look out for?

Here’s a rundown of a pre-settlement inspection checklist:

  1. General Condition of the Property – Look for any changes in the property’s condition since your last visit. This includes checking the walls, ceilings, and floors for any new damage or signs of repair. Also, look for signs of any new water leaks or damage.
  2. Included Extras – These might be appliances, light fixtures, window treatments, or any other feature explicitly mentioned in your contract. Ensure they’re all there and in the same condition as when you last saw them.
  3. Appliances and Systems: Test all appliances and systems (HVAC, security system, garage door opener, etc.) to make sure they are all functioning correctly. This is also a good time to ask about any warranties on appliances or major systems that will be transferred with the property.
  4. Electrical and Plumbing: Check all the light switches, outlets, and plumbing fixtures (including faucets, showers, toilets, etc.) to ensure they are all working properly.
  5. Windows and Doors: Open and close all windows and doors to make sure they function correctly and that no repairs have been overlooked. Look for any broken seals on windows or other signs of damage.
  6. Repairs – If the seller agrees to make any repairs, check that they’ve been completed satisfactorily. Don’t hesitate to ask for invoices or receipts related to the repairs for future reference.
  7. Cleanliness – The property should be in a reasonably clean and tidy condition. It doesn’t have to be spotless, but there shouldn’t be any rubbish or large amounts of dirt or garbage left behind.
  8. No Unwanted Leftovers – Ensure the seller hasn’t left behind any unwanted items. If the seller leaves a pile of junk inside, you’ll want to know before you take ownership.
  9. Exterior: Don’t forget the outside. Look for any changes or damage to the home’s exterior, including the siding, roof, gutters, and downspouts. The yard should be in the same condition as when you made the offer.

Make sure to use the final house inspection checklist from Westpac so you don’t miss anything important. Remember, this is your last opportunity to identify any potential problems before the sale is final. If you do find issues, they can potentially be addressed before closing, saving you time, money, and stress in the future.

To ensure you’re thorough during a pre-settlement inspection, here are some tips: 

  • Come prepared with a sales contract and other documentation
  • Take your time
  • Follow a checklist
  • Check major systems and appliances
  • Test everything 
  • Look for changes in the property’s condition
  • Document issues
  • Ask questions!

What To Do If You Find Damage Or Faults?

It’s very possible to stumble upon damage or faults during your pre-settlement inspection final walk-through. If that happens, you will first need to document any issues you find. This could be through photographs, videos, or detailed written notes. This evidence will be crucial if disputes arise later.

Next, share the findings with your real estate agent. This is a major reason to hire a real estate agent, as they will likely take the lead in discussing the findings with the seller’s agent.

Proceed as Planned

If the issues found are minor or cosmetic, the buyer might decide to proceed with the purchase as planned. This could be the case if the cost or effort to fix the issues is relatively small, or if the buyer is confident they can address them after moving in.

Request Repairs

If more significant problems are found that weren’t apparent or didn’t exist during the initial inspection, the buyer might request that the seller make the necessary repairs before closing. This could delay the closing date, but it ensures that the issues are addressed without additional cost to the buyer.

Negotiate a Price Reduction or Credit

If there are issues that need to be addressed but don’t necessarily need to be completed before closing, the buyer and seller might negotiate a reduction in the purchase price or a credit at closing to compensate for the cost of repairs.

Delay the Closing Date

If substantial problems are found and the buyer still wants to proceed with the purchase, they might request to delay the closing date. This would provide time for the seller to make necessary repairs or for the buyer to conduct further inspections.

Terminate the Contract

In extreme cases where serious issues are found during the pre-settlement inspection, the buyer might decide to terminate the contract. This is usually a last resort and may depend on the specific terms and conditions of the contract.

Remember, the exact process and potential outcomes will vary depending on the specifics of your contract and local laws and regulations.

If you encounter issues during a pre-settlement inspection, it’s important to consult with your real estate agent or a lawyer to understand your options and rights.

The pre-settlement property inspection is a crucial yet often overlooked step in the home-buying process. It allows the buyer to ensure the property’s condition has not changed since their last visit or since the initial home inspection. This includes checking for any new damage or signs of wear and tear.

By thoroughly inspecting the property before finalizing the purchase, the buyer can help safeguard their investment, potentially avoiding costly repairs or issues down the line.

By knowing what to look for and understanding how to handle any issues that may arise, you can confidently take ownership of your new home. Good luck!

Disclosure: Some of the links above are affiliate links, meaning that at no additional cost to you, I will receive a very small commission if you click through and make a purchase. These links help to pay the editorial costs of writing a blog. For more information, please read my full affiliate disclosure here.

I also use Artificial Intelligence Image generators to create some of my images. These are to show you examples of my ideas and inspiration when I cannot produce the real images myself.

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