One of the most important revelations of a home inspection I attended recently was that the home, built in the 1940’s, still has some live knob and tube wiring. Why was this important? Well, my client will most likely be unable to obtain basic homeowners insurance on this home as long as this old wiring is still active. No insurance-no loan-no deal!

This wiring type was used in homes built prior to the ’50’s and does not include a ground wire, making it unsafe it the eyes of many insurers, including Citizens, the insurer of last resort in Florida. The cloth insulation deteriorates over time as well, making it a fire hazard.

So where do we go from here? Anytime I represent a client on the purchase of an older home, I make sure to have an inspection contingency that gives the buyer the right to cancel for any reason, based on the results of the inspections, be they a home inspection, pest (termite) inspection, structural inspection, etc. Most sellers, in a strong buyers' market especially, will accept such a contingency as long as the right to cancel period expires after a reasonable amount of time.

But in this case, the seller will not be able to sell the home to a buyer who needs a loan to purchase the home. Without insurance, the loan cannot be obtained and the buyer has an out, and the right to get her deposit refunded.

So the seller has to look for a cash buyer, who would not need insurance prior to closing, or remedy the problem. So the next step is an estimate to replace the old stuff with the new stuff. We’ll then ask Mr. Seller to pay for this replacement. And if the seller refuses? Then we’ll most likely play the right to cancel card and walk away from the deal.

The sellers could have made things easier on themselves by getting a home inspection prior to putting the home on the market. A good inspector would have notified the seller of the problem and the seller could have made the repairs beforehand. I always suggest a pre-listing home inspection. Sure, there is some additional upfront costs, but correcting this problem in advance could go a long way in making the sales process flow much more smoothly.

My client is a first time buyer, so this is something that immediately puts a bad taste in her mouth. The old wiring, along with some of the other old-house issues, may be enough to make her play the right to cancel card without asking for the wiring fix. We’ll see.

Sellers: Consider a pre-listing home inspection. This will give you a more clear picture of the condition of your home, and allow you to resolve any issues that may prevent a sale before putting your on the market.