What to do about SMART errors in OS X
One error you might run into when attempting to install OS X on your computer is a claim by the installer that the hard drive has SMART errors and will not allow you to install to the selected drive. When this happens, the system will claim the drive cannot be repaired and recommend you back it up as soon as possible and replace the disk.
Self-Monitoring, Analysis, and Reporting Technology (aka, SMART) is a feature built into hard disks to monitor the heath status of the drives and provide the system with a method to detect an impending failure or other problem with the drive that might need to be addressed. The SMART attributes are a standard that monitors a variety of metrics such as disk surface error rates, spin up times, data throughput, write head stability, and rpm variation, among many other options. When the drive is operational it monitors how often these metrics hit a warning threshold, and if they do so repeatedly or for prolonged periods of time then the drive will issue a warning to the system that the SMART is detecting a potential error.
While hardware errors such as those measured by SMART are generally a cause for alarm and the general recommendation is to replace the drive, it is not always necessary to do so. In some cases, as with the OS X installer, the specifics of the SMART error do not matter and the program will just detect the error and give you a warning, even if the error is relatively benign. For instance, a collection of bad blocks can be enough to cause a SMART error, or if the drive's temperature gets too high because of poor ventilation or other environmental conditions, then SMART may issue an error.
In addition to potentially insignificant error reporting, SMART technology may throw a false alarm or just be a temporary situation that will clear by itself. In personal experiences, I have had some drives issue SMART warnings and then continue to work for years after.
Sometimes in these cases, the error can be addressed by simply formatting the drive, changing the location of the system to increase air flow, or simply by ignoring it. However, despite these possibilities, you do have to weight them against how the drive is going to be used. If you plan on relying on the drive as a main boot device or for one that will store important information, then you might wish to play it safe and replace the drive, but if not then you can investigate the SMART status a bit more to see if you can discern the exact problem.
To do this, first be sure to play it safe and back up the contents of the drive, and then get a robust and dedicated SMART tool such as SMARTReporter or SMART Utility that will tell you the exact error the drive is reporting and whether it is a critical error or one that is less important. You can also try basic drive-conditioning routines like repartitioning and formatting (writing to zeros to force the drive to substitute bad blocks) to see if this clears the SMART warning.
By using a good drive diagnostics and repair tool such as Drive Genius or Tech Tool Pro, then another approach is to run benchmarks and integrity tests on the drive to ensure it works properly and is performing optimally before putting it to use (the more extensive of a test you can run, the better).
If you manage to clear the SMART error then you might be able to get the OS X installer to recognize the drive as a valid installation destination and continue the install; however, do keep in mind that the error may still persist and only be temporarily averted, so even after testing the drive you might still consider replacing it with a new one and only using it as a spare storage space or as a diagnostics drive.