No general law requires a house to pass a home inspection before it can be sold. A standard inspection is a voluntary, informational step the buyer pays for, and its report has no pass or fail. That said, the answer changes in two specific situations: when the buyer is using a government-backed or conforming mortgage, the property must meet the lender’s minimum condition standards before the loan will fund; and in some municipalities, a local ordinance requires the home to pass a city inspection before the sale can close at all.
Why a Standard Home Inspection Has No Pass or Fail
A standard home inspection is a visual, non-invasive walkthrough of the property’s major systems and structure. The inspector looks at the foundation, roof, plumbing, electrical wiring, and heating and cooling equipment, and writes up material defects and safety concerns. Fees generally run between $300 and $600 depending on size and location.
The report belongs to the buyer. It doesn’t grade the home on a pass-fail scale. It describes what’s there, separates routine maintenance from significant problems, and gives the buyer a realistic picture of what they’d be taking on. Sellers don’t automatically see it. Nothing about the inspection itself blocks a sale, because the inspection isn’t a gate. It’s information.
What the inspection does do is give the buyer leverage under the purchase contract. If the report turns up problems and the buyer’s contract includes an inspection contingency, the buyer can ask for repairs, a price reduction, or a credit, or walk away and recover their earnest money. But that’s a negotiation between two private parties, not a legal requirement that the house meet any particular standard.
When a Mortgage Lender Effectively Requires the Home to Pass
This is where a house can genuinely be required to meet a standard before it changes hands. Federal law requires the lender to obtain a written appraisal of any property securing a mortgage.1Office of the Law Revision Counsel. 15 USC 1639h – Property Appraisal Requirements An appraisal is not a home inspection; its main job is to establish market value. But depending on the loan program, the appraiser also has to confirm the property meets minimum condition standards. If it doesn’t, the lender won’t fund the loan until the problems are fixed.
FHA Loans
Federal Housing Administration loans carry the most prescriptive standards. Under HUD Handbook 4000.1, the appraiser must confirm the home has a continuing supply of safe drinking water, a functioning bathroom with at least a toilet, sink, and shower or tub, adequate heating for comfortable living, working electricity for lighting and appliances, and a structurally sound foundation expected to last the life of the mortgage.2U.S. Department of Housing and Urban Development. HUD Handbook 4000.1
FHA appraisals also flag roof deficiencies, evidence of pest damage, and safety hazards like exposed wiring or missing handrails. For homes built before 1978, peeling or chipping paint triggers a specific concern because it may contain lead. Defective paint must be addressed using lead-safe work practices before the loan can be endorsed. The lender holds the closing until the appraiser confirms the repairs are complete.
VA Loans
Department of Veterans Affairs loans impose their own minimum property requirements. The VA checklist requires all mechanical systems to be safe and in working order, the roof to prevent moisture entry, and heating capable of maintaining at least 50 degrees Fahrenheit in areas with plumbing. Every unit needs electricity, hot water, and a sanitary sewage disposal system.3U.S. Department of Veterans Affairs. VA Basic MPR Checklist Crawl spaces must be accessible, properly vented, and free of debris. Attic ventilation must be adequate to prevent moisture damage.
If the VA appraiser identifies deficiencies, the lender requires repairs before closing. Sellers who refuse to fix the issues effectively kill the deal for that buyer unless the buyer can switch to a different loan type or pay cash.
Conventional Loans
Conventional loans sold to Fannie Mae also have property condition standards, though they’re less granular than FHA or VA. The appraiser rates the property’s condition on a scale from C1, meaning new construction, to C6, meaning the home requires substantial rehabilitation. Fannie Mae will not purchase a loan secured by a C6 property. Any deficiency affecting safety, structural soundness, or integrity must be repaired to reach at least a C5 rating before the loan can close.4Fannie Mae. Property Condition and Quality of Construction of the Improvements
The appraiser must also report evidence of pest infestation, abnormal settlement, dampness, or hazardous conditions. If any of these are present, the lender typically requires a professional inspection and proof the issue has been corrected before funding the loan.4Fannie Mae. Property Condition and Quality of Construction of the Improvements
Municipal Point-of-Sale Inspections
Separate from anything a lender requires, some cities and municipalities have their own ordinances mandating a property inspection before a sale can close. These are often called point-of-sale inspections, and they’re conducted by the city’s building or housing department rather than a private inspector.
A point-of-sale inspection evaluates the property against local building and safety codes. Inspectors commonly check for working smoke and carbon monoxide detectors, properly grounded electrical outlets, adequate handrails on stairs, code-compliant plumbing, and the absence of illegal additions or zoning violations. If the home fails, the city issues a list of required repairs. The seller must complete the repairs and pass a re-inspection before the city issues a certificate allowing the sale to proceed.
Not every jurisdiction has these requirements, and the scope varies widely. Some cities allow the buyer to assume responsibility for repairs through an escrow agreement if the seller can’t complete them; others won’t issue the certificate until every item is addressed. If you’re buying or selling in a municipality with a point-of-sale ordinance, this is one situation where a house genuinely must pass an inspection to be sold.
Selling As-Is Doesn’t Remove the Rules
When a property is listed as-is, the seller is telling buyers upfront that no repairs will be made and no credits offered, regardless of what an inspection reveals. This is common with quick sales, inherited homes, and properties the seller can’t afford to repair.
An as-is listing does not remove any of the requirements above. If the buyer uses an FHA, VA, or conforming conventional loan, the property still has to meet that program’s condition standards, and the seller either fixes the problems, drops the price enough that the buyer can pay cash, or waits for a different buyer. Municipal point-of-sale requirements also apply regardless of an as-is designation.
Seller disclosure obligations are the other thing an as-is label doesn’t erase. Most states require sellers to give buyers a written disclosure of known material defects: problems serious enough to affect value or safety, such as foundation damage, chronic water intrusion, significant mold, or unpermitted structural work. A seller who knows the basement floods every spring can’t hide behind an as-is label. The disclosure duty applies to hidden defects the seller actually knows about; a buyer’s general responsibility to inspect before purchasing does not protect a seller who concealed or failed to mention a known hidden problem.5Justia. Disclosure Requirements for Home Sellers Under State Laws – Section: Liability for Inadequate Disclosures
Cash Sales: Where the Requirements Fall Away
Cash transactions strip away most of what makes an inspection matter. With no lender involved, there are no appraisal mandates, no minimum property standards to satisfy, and no underwriter requiring proof of repairs. The sale is a private agreement between buyer and seller, and if both parties are satisfied with the terms, the deal can close regardless of the home’s physical condition.
Two things still apply. Seller disclosure obligations don’t go away in a cash sale, and municipal point-of-sale inspection requirements, where they exist, apply regardless of how the buyer is paying. But the substantial gatekeeping role that lenders play disappears entirely. That’s why distressed properties, teardowns, and major fixer-uppers so frequently sell for cash. It’s often the only practical way to close when the home can’t meet any lender’s minimum standards.