The simplest approach to deficiencies found in a house inspection is to ask for a price reduction. There are also other approaches. Photo by Getty Images

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Home inspections are not simply pass or fail. They are an inspection of the current condition of the home by a trained and licensed professional.

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The home inspector will provide a thorough report on the overall condition of the home and on items the inspector can observe and report on.

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No home is perfect; even new homes will have some issues or deficiencies.

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When the inspection is complete and the visible deficiencies are discovered, the buyer has a number of options for how to address them with the seller.

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Keep in mind that the seller would have to agree to renegotiate, and some sellers may not, as they might say that the home was priced accordingly to its present condition. At this point, the buyer can either proceed with the purchase or walk away, based on the inspection condition they included in their offer, and receive a refund of their deposit held in trust.

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When renegotiating, the simplest option is often to request a price reduction on the home to compensate the buyer for the repairs. The advantage of this is the buyer is in control of who is doing the repairs, the repair timeline and to what standard the repairs are completed.

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The disadvantages are that the buyer will have to pay out of pocket or secure another loan to cover the repairs, in addition to their down payment and all their closing costs. If the purchase price is reduced and an amendment or addendum is made to the original contract, the buyer must notify their mortgage broker or lender to have the mortgage loan amount adjusted.

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Angela Robinson, an Edmonton mortgage broker with BRX Mortgage, says that in some cases, especially if the price reduction is significant due to inspection findings, the lender may request to see the inspection report and reevaluate the application. She also notes that in many residential purchases, the inspection itself falls under the due diligence of the buyer and is not a lending requirement.

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The second option for renegotiation is to require the seller to make the repairs or deal with any deficiencies by a qualified person and provide receipts and/or proof that the deficiencies have been remedied.

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The disadvantage to this approach is the buyer will not necessarily have complete control over exactly who is doing the work and to what standard it is completed. The advantages of this approach are that the buyer does not have to come up with the money to complete the work, does not have to go through the hassle of finding contractors to get the work done, or the inconvenience of having workers in the home after they take possession.

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A third option is to amend the purchase contract to provide the buyer with a cash refund at closing if repairs are not completed at possession. This approach can provide buyers with the funds necessary to repair any defects themselves.

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If this option is considered, I strongly advise the buyer to first check with their lender before signing the amendment to ensure the lender is comfortable with the cash back at closing.

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Each lender will have its own policies regarding the allowable amount of cash back, if any, that can be provided to the buyer at closing. Some lenders do not allow any cash back at closing.