There is no pass, and there is no fail
The premise of the question is wrong, and correcting it is not pedantry — it changes what a buyer does next. A home inspection has no pass and no fail. There is no score, no threshold, no grade, and no certificate. No inspector working to either dominant standard issues one, because neither standard contemplates one.
Both standards define the deliverable identically: a written report of the defects the inspector observed and deemed material on the day of the inspection — InterNACHI at 1.3, ASHI at 2.2. Both also bar the inspector from advising on whether to buy at all. InterNACHI's limitations state that an inspection "does not determine the advisability or inadvisability of the purchase of the inspected property," and ASHI's exclusions say the same.
Follow that through. A home inspection report obligates nobody to do anything. It does not obligate the seller to repair, the buyer to proceed, or the lender to lend. Its only force in the transaction is the force the purchase contract gives it through the inspection contingency, and the only deadline that matters is the contingency's deadline. An inspector who tells a buyer the house "passed" is using language his own standard does not contain.
Three different things people mean by "failed"
When people say a house failed inspection, they mean one of three distinct outcomes, and separating them makes the rest of this straightforward.
- Findings that make buyers walk or demand major concessions. A purely commercial outcome, driven by the buyer's risk tolerance, the buyer's cash and the market — not by any standard.
- Findings that make a lender condition or refuse the loan. Note carefully that this happens through the appraisal, not the inspection. Lenders do not read home inspection reports. An appraiser flags the condition, the loan gets conditioned, and the transaction stops.
- Findings that make an insurer decline to bind coverage. This halts a closing just as effectively, because no mortgage closes without a bound hazard policy — and almost no consumer content mentions it.
The third category is the one that ambushes people, and several of the classic deal-killers below are insurance problems first and safety problems second.
Water and structure: the findings that compound
An active roof leak, or a roof at the end of its life. Water entering the structure is the archetypal deal-killer because it does not stay a roof problem: it becomes sheathing, framing, insulation, drywall, and eventually mold. On FHA and VA loans, a roof without adequate remaining life is a classic appraiser repair condition. Note the limitation the buyer is working under: the inspector is not required to walk the roof or to predict remaining service life, and a roof examined from a ladder at the eave is a compliant inspection under both standards.
Structural movement. Stair-step cracking in masonry, walls out of plumb, sloping floors, bowed foundation walls, evidence of prior underpinning. Neither standard permits the inspector to opine on structural adequacy, so the finding is always a referral, and what the parties negotiate over is the engineer's letter rather than the inspection report. It is also why "the inspector said the foundation was fine" is not a sentence that can be true as stated.
Foundation heave on expansive soils. Distinct from settlement and often worse, because heave is driven by soil moisture cycling that continues after any repair. It is the finding most likely to require a geotechnical engineer as well as a structural one — and evaluating soil conditions for geotechnical or hydrologic purposes is expressly outside the ASHI standard.
The electrical findings that are really insurance findings
Three legacy electrical conditions dominate this category, and the accuracy points matter because the internet gets them wrong in both directions.
Federal Pacific Electric Stab-Lok and Zinsco panels. The critical fact: no recall was ever issued. The Consumer Product Safety Commission closed its FPE investigation on March 3, 1983, concluding that "the data currently available to the Commission does not establish that the circuit breakers pose a serious risk of injury to consumers" — and stated in the same release that fully assessing the risk "would cost several million dollars," against an agency budget for that fiscal year of $34 million. That is a statement about burden of proof and budget, not an exoneration. The adverse findings came from litigation: an August 15, 2002 partial summary judgment in Yacout v. Federal Pacific Electric Co. found that FPE had "knowingly and purposefully distributed circuit breakers which were not tested to meet UL standards."
Insurers reached their own position independently. One carrier's technical bulletin recommends that all Stab-Lok panels and breakers be replaced with UL Listed equipment, and states that replacing the breakers alone is not recommended. Zinsco's documented failure is at the breaker-to-bus interface — oxidation, arcing, burned aluminum bus — and because bus damage cannot be repaired, the finding drives panel replacement, not breaker replacement.
Aluminum branch-circuit wiring. CPSC Publication 516 reports that homes built before 1972 and wired with aluminum are "55 times more likely to have one or more wire connections at outlets reach 'Fire Hazard Conditions'" than copper-wired homes. Read that precisely: it measures connections reaching a defined hazard condition, not fires. CPSC never obtained a recall; it sued 26 manufacturers seeking an imminent-hazard declaration and did not obtain a nationwide remedy. The transaction problem is again insurance, and remediation — a full repipe in copper, or approved pigtailing such as COPALUM or AlumiConn — is expensive enough to become a real negotiation. See CPSC Publication 516.
Knob-and-tube wiring. Ungrounded, and designed to shed heat into open air, which makes it incompatible with the blown-in attic insulation every energy retrofit adds. Many carriers will not write a policy on an active knob-and-tube circuit at all.
The common thread across all four is that the deal risk is insurability, and insurability runs on a different clock from inspection. The carrier reads the report, or asks for a four-point form, days or weeks after the contingency has closed. A buyer who resolved the electrical finding to his own satisfaction inside the window can still be stopped at underwriting, with no contractual exit left.
Polybutylene supply piping
Polybutylene supply piping, installed roughly from 1978 into the mid-1990s, deserves its own treatment because its failure mechanism defeats the premise of a visual inspection. The pipe and its acetal insert fittings degrade under oxidative attack from chlorinated water — from the inside out. Exterior examination tells an inspector essentially nothing about remaining life. The pipe that fails next month looks exactly like the pipe that will last another decade.
The remedies buyers expect do not exist. The class settlement funds associated with the historic polybutylene litigation are exhausted, so a buyer today has no settlement recovery available. Carriers respond by declining, non-renewing, excluding water damage originating from the polybutylene, or requiring a repipe as a condition of binding. And home service contracts treat systemic polybutylene failure as a pre-existing condition, because the defect is inherent and well known rather than sudden and accidental.
The result is a finding that is minor in the report's severity ranking and enormous in the transaction. A competent inspector will identify the material. He is not permitted to predict when it will fail, and nobody else can either.
Termites, septic, and radon
Active termite infestation. This is not reported by the home inspector. It is reported on Form NPMA-33, the Wood Destroying Insect Inspection Report, by a licensed pest professional — and the form's own disclaimers are the point worth reading. It states plainly that "This is not a structural damage report," and that it "is not a guarantee or warranty against latent, concealed, or future infestations or wood destroying insect damage." Active infestation is a routine lender condition on VA loans and in designated FHA areas. Damage from prior infestation is a separate question and requires an engineer, not a pest operator.
Failed septic systems. A failed or undersized system — or a cesspool, which most modern codes treat as failed by definition — can require a complete replacement and a health-department permit that may not be issuable on the lot at all. That last possibility is what ends transactions: not the cost of the system, but the discovery that no compliant system can be permitted on the available soil and setbacks. Septic is excluded from both standards of practice, so this is always a separate evaluation, and EPA's baseline expectation is inspection at least every three years.
Elevated radon. EPA recommends that homes be fixed if the radon level is 4 pCi/L or higher, and suggests considering mitigation between 2 and 4 pCi/L. Radon rarely kills a deal by itself, because mitigation is a known and bounded cost. Its real danger is procedural: real-estate protocol calls for duplicate short-term tests of at least 48 hours under closed-house conditions maintained for at least 12 hours beforehand and throughout, and a test invalidated because a window was opened has to be re-run. That restart can blow a contingency deadline.
Unpermitted work, mold, and buried oil tanks
Unpermitted work. A finished basement, an addition, a converted garage, or a deck with no permit of record. Neither standard requires the inspector to determine code compliance or to research property history, so a report may say "appears to have been added" and stop — a complete discharge of the inspector's duty and a wholly inadequate answer for the buyer. The consequences arrive from three directions: the appraiser may refuse to count the unpermitted square footage, moving the value; the municipality may require retroactive permitting or removal; and the insurer may exclude the unpermitted portion.
Mold. Explicitly outside both standards — InterNACHI excludes determining the presence of mold, mildew or fungus, and ASHI's current edition names molds among the life forms the inspector need not identify. The inspector can report water staining, elevated moisture readings and visible growth, and recommend evaluation; identification requires sampling and a laboratory. The strategic point is that mold is a symptom. The negotiation that matters is over the water intrusion causing it, and remediating growth without fixing the source buys nothing.
Buried oil tanks. The ASHI standard excludes underground items and storage tanks, and its superseded 2000 edition was more explicit still, naming underground storage tanks "whether abandoned or active." A leaking abandoned tank is an environmental remediation liability that attaches to the land, and in parts of the Northeast and Mid-Atlantic it is a well-known closing-table catastrophe. It is found by a tank sweep — a separate service no general inspection includes, warranted on any pre-1975 house that ever had oil heat.
Lender-required repairs, where the buyer's opinion is irrelevant
Everything above is negotiable between buyer and seller. Lender-required repairs are not, and that is what makes them a separate category.
If an FHA or VA appraiser conditions the appraisal "subject to the following repairs," the loan does not close until the work is done and certified, commonly on Form 1004D. The buyer's willingness to accept the condition is not a factor; neither is the seller's unwillingness to fix it. On conventional financing the analogous rule is in the Fannie Mae Selling Guide: a property rated C6 — defects severe enough to affect safety, soundness or structural integrity — is ineligible, and the deficiencies must be repaired to a resulting minimum rating of C5 before the loan can be sold.
Combine that with an as-is contract and the arithmetic is unforgiving. The contract says the seller performs no repairs; the loan says repairs must precede closing. Unless the buyer pays to repair a house he does not yet own, the transaction ends. This is the most common way an as-is sale with government-backed financing dies, and it dies late.
The repair request addendum
The buyer's response to a report is normally a repair request addendum — named variously Amendment to Contract, Buyer's Repair Request, Request for Repairs, or Notice of Buyer's Objections. The mechanics are consistent.
- It must be delivered in writing, by the contract's notice method, before the contingency deadline. A verbal request preserves nothing.
- It usually opens a short response window, often three to five days, in which the seller may accept, reject, or counter. In many forms seller silence counts as rejection, which re-arms the buyer's termination right for a further short period. That secondary window is the last exit.
- Anything the buyer does not ask for is, practically, waived.
- Requests should be specific and defect-based, referencing the report page. "Fix everything on the report" is the fastest route to a flat rejection, and under some forms an overbroad demand is treated as a rejection of the contract terms rather than a request under them.
Four mistakes recur. Asking for cosmetic items, when both standards exclude aesthetics — pairing a paint request with a failed furnace tells the seller the whole list is soft. Sending the seller the entire report, which hands him a disclosure document he must give every subsequent buyer. Demanding dollar figures against estimates the buyer never obtained, when both standards exclude repair cost estimates, so the report is not evidence of cost. And treating a seller-paid home service contract as equivalent to a repair — it is a negotiable line item often accepted when cash is refused, but its waiting-period and pre-existing-condition language has to be read first.
Repairs, credits, or a price cut — and why a lender blocks one of them
| Consideration | Seller performs the repair | Closing cost credit | Price reduction |
|---|---|---|---|
| Who controls the work | The seller, who is leaving and has every incentive to take the cheapest bid | The buyer, after closing, on the buyer's own schedule | The buyer, after closing, funded from savings rather than from the deal |
| Cash to the buyer at closing | None needed — the work is already done | Yes, applied to the buyer's closing costs | None |
| Capped by the lender? | No | Yes — Interested Party Contribution limits apply | No |
| Satisfies an appraiser's repair condition? | Yes, and it is the only currency that does | No | No |
| Effect on the seller | Cost of the work, plus schedule risk | Cash at closing, but the headline sale price is preserved for comparables | Full reduction in proceeds and in the recorded sale price |
| Main drawback | Quality control; insist on licensed contractors, permits, invoices, and a re-inspection right | Capped, and unusable beyond the buyer's actual closing costs | Delivers no money to a buyer who needs cash to make the repair |
The cap on credits is what buyers and agents most often discover too late, and it has a precise name. Fannie Mae calls them Interested Party Contributions — "contributions made by third parties with a vested interest in the transaction ... used to cover costs that are typically the buyer's responsibility." For a principal residence or second home the maximum is 3% above 90% LTV or CLTV, 6% from 75.01% to 90%, and 9% at 75% or less; investment property is capped at 2%. IPCs may not fund the down payment, meet reserves, or satisfy minimum borrower contribution requirements, and concessions exceeding the limits become sales concessions that "must be deducted from the property's sales price." The rule is at Selling Guide B3-4.1-02.
Two consequences follow directly. A low-down-payment buyer at 96.5% LTV is capped at 3% — on a $300,000 house, $9,000, which is frequently less than the repair ask. And a credit larger than the buyer's actual closing costs is simply lost, because an IPC cannot be handed to the buyer as cash at the table.
The choice of currency is therefore not a matter of taste. It is set by whichever constraint is actually binding: if the appraiser has conditioned the loan, only a completed repair works; if the buyer is cash-poor, a price reduction is the wrong instrument; if the credit needed exceeds the IPC cap, it has to be restructured or split. And all of it must be agreed inside the contingency period. The report is leverage only while the clock is running.
Frequently Asked Questions
Can a house fail a home inspection?
No. There is no pass, no fail, no score and no certificate. Both dominant standards of practice define the deliverable as a written report of the material defects the inspector observed and deemed material on the day of the inspection, and both expressly bar the inspector from advising on whether the purchase is advisable.
What people describe as failing is one of three things: findings serious enough that the buyer walks or demands concessions, findings that cause an appraiser to condition the loan, or findings that cause an insurance carrier to decline coverage. Only the second and third involve a party other than the buyer saying no.
What are the biggest deal-breakers on a home inspection?
The recurring list is active roof leaks, structural movement and foundation heave, problem electrical panels, aluminum branch-circuit wiring and knob-and-tube, polybutylene supply piping, active termite infestation, failed septic systems, elevated radon, unpermitted work, mold, and buried oil tanks.
What unites them is not repair cost. It is that each one either compounds over time, cannot be assessed visually, triggers an insurance refusal, or requires a specialist and a permit that the transaction has no time for. A $12,000 furnace is a negotiation; a septic system that cannot be permitted on the lot is not.
Does a home inspection affect my mortgage approval?
Not directly. Lenders do not read home inspection reports and do not condition loans on them. What conditions a loan is the appraisal. On a conventional loan, the Fannie Mae Selling Guide makes a C6 property — one with defects severe enough to affect safety, soundness or structural integrity — ineligible until repaired to a minimum rating of C5. On FHA and VA loans, an appraiser flags readily observable violations of the minimum property requirements and conditions the appraisal on repair.
The practical link runs the other way. An inspection can reveal a condition that the appraiser will later flag, which is useful early warning — but the inspection report itself has no standing with the lender.
Why would an insurance company refuse to cover a house after an inspection?
Carriers underwrite on their own criteria, and several conditions that are perfectly financeable are effectively uninsurable. Federal Pacific Stab-Lok and Zinsco panels, aluminum branch-circuit wiring, active knob-and-tube circuits and polybutylene supply piping all draw declinations, non-renewals, exclusions, or a demand that the condition be remediated before the policy will bind.
The timing is the danger. No mortgage closes without a bound hazard policy, and underwriting typically reads the report well after the contingency has expired — leaving a buyer who resolved the finding to his own satisfaction with no contractual exit.
Were Federal Pacific Stab-Lok panels ever recalled?
No. The Consumer Product Safety Commission closed its investigation on March 3, 1983, stating that the data then available did not establish that the breakers posed a serious risk of injury, and noting in the same release that fully assessing the risk would cost several million dollars against an agency budget of $34 million that year. That is a statement about evidentiary burden and resources, not a clean bill of health.
The adverse findings came from litigation instead: a 2002 partial summary judgment in New Jersey found the manufacturer had knowingly distributed breakers not tested to meet UL standards. At least one carrier's published technical bulletin recommends replacing all Stab-Lok panels and breakers with UL Listed equipment, and states that replacing the breakers alone is not recommended.
Should I ask the seller for repairs, a credit, or a price reduction?
It depends on which constraint is actually binding, and the three are not interchangeable. A completed repair is the only currency that satisfies an appraiser's "subject to repairs" condition or an FHA or VA minimum property requirement — a credit will not clear it. A credit gives the buyer cash and control of the contractor, but is capped by the lender's Interested Party Contribution limits and cannot exceed the buyer's actual closing costs. A price reduction avoids the caps entirely but hands the buyer no money at closing.
A buyer who is cash-poor and needs funds to fix the thing is served worst by a price reduction, which is the concession sellers most often propose. A buyer at high loan-to-value is capped at 3% in credits, which on a moderately priced house is frequently smaller than the repair request.
What happens if a problem is found after the inspection period ends?
The contractual remedies are generally gone. In most forms the contingency is satisfied by silence when the deadline passes, and a defect discovered afterwards does not reopen the window. Whatever other contingencies remain alive — financing, appraisal — are the only exits, along with terminating anyway and forfeiting the deposit.
There is also normally no remedy against the inspector merely because a defect exists. Both standards describe the inspection as based on observations made on the date of the inspection, exclude concealed and latent defects, and disclaim warranties and guarantees outright. The report was a snapshot, and the contingency period was the interval in which it could be acted on.