Pre-purchase inspections are usually conducted based on the Home Inspection Condition stipulated in an Agreement of Sale and Purchase. Such condition usually refer to "Major Deficiencies". So, what exactly are "Major Deficiencies"?

There is no uniform or official definition of this term, and this ambiguity frequently leads to disputes between parties. Therefore, some agreements provide a clear and specific definition. Some include "structural, mechanical, and water leaking" issues. Others set a cost threshold (e.g., > $1,000). Some explicitly exclude certain items (e.g., old roofing, or aging furnace). From my long-term observations, the more specific and clear the definition, the more likely it will help avoid disputes later on. This benefits everyone involved.

In the real estate industry, it is widely accepted that serious structural problems and basement water leakage qualify as "Major Deficiencies". I agree with this view. Why?

Let's first talk about structural issues. The structure is the most important and fundamental supporting system of a house. Serious structural issues refer to those that significantly affect the safety and stability of the entire structure or specific parts. These include:

• Obvious shifting or tilting of the house or walls;
• Uneven foundation settlement;
• Severe cracks in foundation and walls (wide, penetrating, continuous, shearing, or progressive type);
• Damage or instability of key structural components such as roof trusses, main beams, or columns - breakage, shifting, tilting, or severe sagging;
• Termite damage to wooden structural components.

These issues have widespread implications and serious consequences, and reduce the resale value of the home. They often involve high repair costs or are difficult to fix completely, and repairs may not restore the original condition. That's why they are top priorities during inspections. Older homes (such as those in Downtown areas with brick or stone foundations) and homes with dramatic changes in outdoor topography (e.g., homes built on slopes) are more likely to have these issues.

However, minor/typical cracks on foundation, exterior walls, or concrete floors are quite common, and do not usually qualify as major structural problems - a separate article discusses this topic in detail. So, we cannot treat all structural issues as major ones. Rather, we should assess each case individually based on the location, pattern, cause, and impact to make a targeted judgment.

Now let's talk about basement water leakage. This is a very common - and very frustrating - problem. According to statistics, more than 80% of houses have experienced basement leakage at some point to varying degrees. At least, I've found that a high percentage of basements show elevated moisture levels during my inspections. The causes include:

• Defects with outdoor storm water discharging are common;
• Underground drainage pipes and pathways are prone to clogging/blockages;
• Cracks and holes on basement walls provide water infiltration pathways;
• Current building codes require only damp-proofing of basements, not full waterproofing.

Many leaks only occur during heavy rain, snowmelt, or pipe blockages, and may not leave any visible trace afterward - making them hard to detect during inspections. Severe basement leaks can cause significant damage: rotting wood/furniture, moldy carpets, rusted appliances, and an overall uninhabitable environment that frustrates homeowners. That said, if the cause and extent of leakage can be identified, current repair methods are capable of resolving the problem, and the repair costs are generally predictable. Buyers need not overreact to this issue.

From the analysis above, we can see that the term "Major Deficiencies" refers not only to the technical severity of a problem but also considers its impact on the transaction, difficulty and cost of repair, and so on. Technically speaking, many problems in a house could be seen as "serious" and potentially lead to serious consequences - for example, an exposed electrical wire may pose an immediate life-threatening risk. However, such issue can be easily fixed with a minor cost.

Other issues commonly identified during inspections that involve significant costs (typically > $1,000) include:

• Replacing old roof shingles ($2,000-$4,000 or $2.0-$3.0 per sq. ft.);
• Replacing an old furnace ($1,800-$3,500);
• Replacing an old air conditioner ($1,500-$2,500);
• Upgrading from 60-amp to 100-amp electrical service ($1,000-$1,300);
• Upgrading low-pressure water supply lines ($1,500-$2,000).

In addition, there is a range of issues related to insurance coverage and health and safety risks (to be discussed in separate articles), which may raise bigger concerns for buyers. As these problems are relatively common and the costs are usually predictable, whether they qualify as "major deficiencies" is subjective, with no general consensus. The best approach is for the buyer and seller to negotiate in advance on how to handle such matters.

This article was originally published in "Real Estate Weekly", Issue #34, September 02, 2005.