How To Inspect Tankless Water Heaters

by Nick Gromicko and Ben Gromicko

Join the discussion.

A tankless water heater is an efficient, space-saving solution for heating potable water. They differ from traditional storage water heaters in design, operation, and installation requirements. The following information provides operational details, safety considerations, inspection steps, and compliance with plumbing and mechanical codes to provide a general reference for home inspectors. 

Below is an illustration of the common components of a tankless water heater provided by Rinnai. 

What is a Water Heater?

A water heater is any heating appliance or equipment that heats potable (drinkable) water and supplies it to the building’s potable hot water distribution system. There are a few types of water heaters, including storage, circulating, solar, point-of-use, and tankless. 

How Tankless Water Heaters Work

When a hot water fixture opens, cold water flows into the heater. A gas burner or electric element heats water as it flows through the unit. Dual heat exchangers may preheat water for greater efficiency. The system adjusts flame or heating output to maintain a consistent temperature. The heated water exits the unit and supplies the open outlet. When the fixture closes, the heating process stops. 

Recirculating System

A recirculating system on a tankless water heater ensures hot water is quickly available at fixtures, reducing water waste and improving convenience. This system is especially useful in larger homes where fixtures are far from the water heater, as it eliminates long wait times for hot water to travel through the pipes.

The illustrations below show how there can be a few different ways hot water can be distributed and recirculated to the fixtures using a tankless water heater as the hot water source. 

There may be a dedicated return line. A dedicated pipe returns unused hot water from fixtures back to the water heater. A check valve prevents backflow, ensuring water flows in the correct direction. A timer or sensor controls when the recirculation pump operates, optimizing energy efficiency. 

There may be a bridge valve at the farthest fixture. It may not be easy to determine during a home inspection.

Some tankless models have built-in recirculating pumps, while others require an external pump. The picture below is of an internal recirculating pump and buffer tank.

The pump circulates water through the hot water distribution pipes. 

Basic Components

Below is an image of a Navien NPE-240A2 tankless water heater with a few components identified. 

1. The low exhaust gas temperatures allow the use of PVC exhaust pipes, including schedule 40 PVC, CPVC, polypropylene (rigid and flexible), and stainless steel venting.
2. The dual-fuel system runs on either natural gas or propane. 
3. The built-in recirculating system includes a buffer tank, a recirculating pump, and controls. 
4. The dual heat exchangers are made of stainless steel.
5. Easy-to-use operating and temperature controls with built-in software. 
6. 1/2-inch gas pipe location.

Backflow Prevention and Thermal Expansion

Tankless systems operate in an open system where water flows directly to fixtures. No significant pressure buildup occurs, eliminating the need for check valves or thermal expansion devices in typical installations. (2024 IRC P2903.4.2)

For tankless (nonstorage) water heaters, pressure control for thermal expansion is generally unnecessary because they heat water only when it flows to an open outlet (e.g., a faucet or dishwasher), avoiding pressure buildup in an open system.

However, some tankless systems are configured to supply hot water to a storage tank, typically for a closed recirculation system that delivers instant hot water to fixtures. In these cases, since the system is closed, thermal expansion pressure control is required.

Certain hybrid tank-tankless water heaters include an integrated storage tank, where the tankless unit heats and circulates water until the desired temperature is reached. These systems, operating as closed systems, also require thermal expansion control unless built-in by the manufacturer. Installation should always follow manufacturer instructions, including provisions for thermal expansion tanks if necessary.

Backflow prevention devices or check valves that create a closed system require pressure control for thermal expansion. Tankless systems without storage generally do not need these measures because they avoid pressurization during operation.

Drain Pan Requirements

Unlike storage water heaters, tankless water heaters are not required by code to have a drain pan. If the manufacturer specifies a drain pan, it must be installed according to instructions.

If a drain is required, it should comply with 2024 IRC Section P2801.5, which describes required drain pans.

Venting Options

There are a few venting options for tankless water heaters. Specific details will be described in the manufacturer's installation manual. Below are some general options illustrated by Rinnai.

A is a concentric pipe for an indoor installation, where the intake air and exhaust vent through a single concentric pipe connection. B is a twin pipe for an indoor installation, where the intake air and exhaust gent through separate pipes. C is for an indoor installation, where the room air is used for combustion while the exhaust vents to the outside. D is an outdoor installation where an outdoor vent cap is installed on top of the water heater.

Safety Considerations

Check for proper venting of the appliance. Immediate action is critical if the inspector detects gas odors.

To prevent scalding, factory settings typically limit the temperature of tankless water heaters to 120°F (49°C). Temperatures above 125°F (52°C) can cause severe burns.

Do not touch the appliance with wet hands. The appliance must be properly grounded.

Checklist Items:

• Inspect the type of water heating equipment.
• Check the appliance exterior for physical damage, corrosion, or indications of a water leak.
• Check the mounting, attachment, and clearance. Refer to the manufacturer's installation manual.
• Inspect the energy source. 
• Describe the location of any observed fuel-storage system.
• Identify the fuel supply shutoff valve. 
• Check the gas pipes for adequate support. 
• Inspect the venting connections.
• Check the electrical wiring for damage and look for grounding. Extension cords are not permitted.
• Inspect the temperature- and pressure-relief (TPR) valve. It should be rated up to 150 psi and (at least) the maximum Btu/hr of the tankless water heater. Its discharge should be piped to the ground or into a drain system. 
• Describe the capacity of the water heating equipment, if labeled.
• Inspect water inlet and outlet pipes and connections for leaks or improper installation. 
• Check the water shutoff valves.
• Check for a thermal expansion tank or other pressure control device such as a TPR valve for hybrid or recirculation systems with water storage components. The TPR value would be used for pressure relief. 
• Check the condensate drainage. All condensate must drain and be disposed of according to local codes. 
• Check for indications of scaling or corrosion. Scale build-up is caused by hard water and can be accelerated if the water heater is set at a high temperature.
• Review service logs for maintenance history. Cleaning the water filter, flushing the system, and descaling the heater are recommended maintenance tasks. Most heaters have service indicators or reminders. The control display may indicate that it is time to flush and service the water heater. Failure to flush the appliance will cause damage to the heat exchanger. Damage caused by lime or scale build-up is not covered by the water heater’s warranty. Heat exchangers may last 15-20 years. 
• Open hot water fixtures to test for consistent temperature and flow. Run water at a fixture to check the flow and the supply of hot water. Observe the response of the burner or heating element to changing flow rates. 
• Water temperatures over 125°F (52°C) can cause severe burns or scalding, resulting in death. Hot water can cause first-degree burns with exposure for as little as 3 seconds at 140°F (60°C). Children, the disabled, and the elderly are at the highest risk of being scalded. 
• Observe the control panel for indications of the unit operating. Look for damage to the control panel.
• Check the burner flame for proper combustion. A steady blue flame is recommended for gas-fired heaters.
• Look for error codes.
• Look for an abnormal or inadequate supply of hot water while running water at a fixture. Common issues include ignition failure, overheating, or low flow. Refer to control panel error codes and manufacturer’s instructions for diagnosis. 

The inspection image below is of a tankless water heater. The pipes for the natural gas supply, the TPR valve, its extension pipe, pressure regulatory, shutoff valve, electrical line, and insulation hot and cold water pipes are all observable in this inspection image. No major defects were observed. 

When indications of defects are observed at the tankless water heater, a licensed plumber qualified to work on tankless water heater appliances is recommended to evaluate further and make corrections.