Inspiration & Information Every Wednesday and Thursday I participate in Broker's Caravan.  Caravan is a tour of new residential listings in the area: Wednesday is Montecito, Summerland and Carpinteria: Thursday is Santa Barbara.  I not only love to see what's new on the market, but I look forward to seeing new forms of building, architecture and overall design elements.  This is where I will share what I find along with stories that I think are of interest. &nbsp Enjoy! &nbsp You can also click on each of the following categories to take you right to that posting with photographs: &nbsp Ranges; Stone work; Lighting; Barn Doors; Bathroom trends; Closets; Chicken Coops; Outdoor Fireplaces; Flooring; Water-wise Gardens;

7 reasons pre-listing inspections are an absolute must

Posted on April 17, 2019 by SusyH

Just as a buyer needs to do their due diligence, a seller needs to do theirs so that bad judgement calls don’t derail their deal

BYCARA AMEER

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After several days (or weeks) of negotiating, an agreement between the buyer and seller is finally reached! The buyer is excited that they’ve found their new home, the seller is glad they will be able to move on to whatever is next and the agents are glad that their goals for that listing have come to fruition.

Contrary to what might be depicted on television or what many real estate agents think, when a contract is executed is not the time to begin celebrating. It marks the beginning of a long and uncertain process to a potential closing. There are almost always inspections to go through as well as an appraisal, if the buyer is getting financing. Much can go wrong with so many hands in the pot, and the fear of the unknown is real. Murphy’s Law is alive and well in real estate, and if the other shoe can drop, it will find a way.

The best way to increase a seller’s chances of crossing the closing finish line is to have a prelisting inspection done before ever coming on the market. Here are seven reasons why:

1. What you don’t know can hurt you

Knowledge is power, and surprise is never a good thing. It is easy for sellers to have a superficial and inflated view of their home. What could be wrong, they think? They’ve lived there for x years and if there was something seriously wrong, they would know it. Or, they just bought the home four years ago and had it inspected then — why would they need to do this now?You see, it is those very thoughts that can come back to bite sellers. When was the last time your sellers went on their roof, looked in their chimney, crawled around in their attic or basement or under the foundation? Do they know how old their water heater and HVAC are? If they live in an older home, what about the plumbing and electrical systems?

This is exactly why you should have a pre-listing inspection. So you can get a grip on the physical health of your home.

2. You might not have to fix everything

Having a pre-listing inspection does not mean your sellers have to fix every item that comes up — but they do need to disclose everything. This is where you — the agent — come in to strategize with your seller on a plan of attack and what makes the most sense given the market, your competition, time frame for moving, etc.

Some things might need to be fixed in order to give comfort to a buyer or to qualify for the kind of financing they might be doing. For example, if there are buyers obtaining FHA or VA financing on homes in your area, any wood rot or termite damage will need to be fixed before the buyer can obtain the loan.

There might be items that are major vs. minor that you and your seller will need to take into account when pricing the home as they can definitely have an affect on what a buyer is willing to pay. Homes with older roofs, HVAC’s and water heaters on top of other repairs, coupled with a home that needs cosmetic updates can be viewed as “a money pit” in the eyes of a buyer.

If you are faced with a multitude of expensive items nearing the end of their life, you might need to consider replacing at least one and be willing to offer a home warranty to provide some coverage to the buyer for the first year of their ownership. The 15-year-old HVAC might be working great now, but that does not mean it won’t fail in the near future.

3. Disclosure is not an unpleasant surprise

Many sellers fear that by having an inspection, they will then have to disclose everything to a buyer which may cause them to pay less for the house. The truth is, a buyer is going to find out anyway, but it will be after they’ve already agreed upon a price and terms that they might not want to pay after the outcome of that inspection.

Avoid buyer’s remorse by shifting the knowledge of the home’s condition to the front end of the transaction rather than after the negotiation. Although a buyer will still have the property inspected by their own inspector, the information found will not be a surprise.

All houses have “things” that are found on an inspection. Even new homes that are under construction or nearly complete have items that need correction by the builder after they are inspected — this despite having a project manager who oversees the subcontractors working on the house.

4. Keep the deal together

Back to the “surprise is never a good thing” concept, when you leave discovery of the home’s condition entirely to the buyer is when problems arise. The seller has already agreed upon a price and terms and depending on your home and the time of year it is on the market, the actual time to go under contract may have taken longer than what you thought.

You will have grown weary from numerous showings, second showings and “almost offers” that have never materialized. Now, you finally have a buyer and the transaction may be in jeopardy because of the outcome of the inspection.

The buyer wants to renegotiate the purchase price and/or ask for all repairs to be made or a huge concession to account for what was found. The sellers don’t feel like giving anymore, especially when they might be selling for less than what they thought (which is how most sellers often end up feeling). They could be paying closing costs on behalf of the buyer in addition to agreeing to leave certain appliances, such as the refrigerator and/or washer and dryer.

Everyone goes into full-on crisis mode trying to obtain estimates for the repairs and it is a hurry-up-and-wait game trying to get contractors over to look at the findings and then even more waiting to get their written quotes.

Keep in mind that buyers and their agents don’t always have a realistic handle on the true cost of repairs found from an inspection and might inflate or over-exaggerate the potential costs on purpose as a way to beat down the agreed upon price or force the seller to make repairs. Buyers might seek opinions from overpriced vendors trying to upsell, and sellers will find themselves running interference with this information trying to get their own quotes.

All of this chaos ensues while the clock keeps ticking on the inspection time frame as set forth in the purchase contract. Most contract time frames never take into account the real world of waiting on repair specialists.

Although most transactions are handled this way, it doesn’t mean that they should be. By being proactive, you can help your sellers avoid the stress of the unknown and level the playing field between them and the buyer by recommending a pre-listing inspection. Wouldn’t it be better to have done your homework, know what you will or won’t fix (or in some cases have already tackled it) and obtained estimates on all else?

What is unknown is simply an excuse most times for not taking the time to find something out ahead of time rather than after the fact. Sticking your head in the sand like an ostrich and being in denial of any inspection issues is not going to help get the home sold.

5. Incompetent inspectors

This one is starting to become a serious problem in our industry. Just as the swell of real estate agents has increased as the market has improved over the last few years, so have the number of home inspectors.

What is required to become a home inspector varies from state to state and just because some states require licensure does not automatically grant that inspector sound judgement and the ability to legitimately diagnose/interpret a home’s condition. A license is never a substitute for competence — ask any seasoned real estate agent who has listed properties the amount of times they have had to run interference with an inspector’s report that was full of misdiagnoses.

The prospect of rookie inspectors who have only been functioning as an inspector barely a year or two — and who are running their own shop with virtually no support system and a more experienced inspector to mentor them — is cause for concern. They are crawling through someone’s largest investment and they don’t know what they don’t know and only know enough to be dangerous.

Newer inspectors often discount their fees as a way to build their business, and so what looks like a bargain compared to what more experienced and savvy inspectors charge is often at the expense of the transaction. Buyers might shop by price alone or an agent gives them a “coupon” that the inspector sent out in an email blast to agents hoping that it would generate some referrals. The agent might be newer and might have not vetted the inspector and doesn’t realize all inspectors, like agents, are not the same.

I have run interference with incompetent inspectors more times than I care to remember. It has been as simple as claiming a microwave in a newer home was not operable to the more serious: an allegation that a metal roof was improperly installed on a home that was located across from the ocean and was literally one good storm away (inspector’s wording) from being blown off. The roof was installed when the home was built, and it was a newer home.

After that buyer walked away, a few months later a category 2 hurricane hit(it was projected to be much larger on impact to the area) and the home sustained no damage whatsoever, and the roof was still standing. A roofer came to examine the roof after the first inspection and determined it needed some minor repairs but was properly installed.

An inspector with little knowledge of metal roofs made a bad judgement call. This not only scared the buyer but also the seller who was in “shock and awe” by the discovery and went into a tailspin calling the original builder, the county building department, etc.

My favorite inspector misdiagnosis was an inspector who had barely been licensed about a year claiming a nine-year-old house with a three-tab shingle roof, located 20 miles from the ocean and a 40 minute drive away, needed the roof replaced, because in Florida, those roofs have a shorter life. After that happened, two other home inspectors checked the roof along with a roofer and concluded no such thing.

There were some shingle repairs that needed to be made largely as a result of solar panels that had been installed on the roof about two years ago. That buyer walked after wanting to find a way to claim “hail damage” as a way to get a new roof installed, trying to push the seller to contact their insurance company. We did get another buyer and the second buyer did their own inspection, after which their inspector determined the roof did not need to be replaced.

Although buyers have the right to choose whatever inspector they want, having your own inspection done by a vetted, experienced, adequately insured and credible inspector can be a huge asset when you run into situations like this. That inspector will be available to consult with you during the home sale process and can assist with running interference should an incompetent inspector cross the home’s path.

6. Smoother transaction, faster closing

All parties want a purchase and sale process that is free of hitches and can close within a reasonable period of time. By getting a pre-listing inspection, the risk of the unknown is eliminated and the parties will enter a negotiation feeling confident and empowered.

If a seller is unable or does not wish to take on repairs, the property can be priced accordingly. At the same time, if a seller has replaced a big ticket item, like a roof or HVAC, it might help the home sell faster as the buyer might be willing to make an offer and pay a higher price because of it.

A significant portion of time that is normally eaten up by the inspection period and all of the back and forth trying to resolve repairs is reduced since everyone is aware of the issues and has a handle on what will or will not be done.

7. Insurability

Some repairs might have to be made for the next buyer to get insurance or they will likely need to have them done within the first 30 days of owning the home in order to get a lower insurance rate. If a seller has an an older home with knob and tube or aluminum wiring, for example, a buyer might run into a snag getting insurance or the quote might be much higher than anticipated.

The seller might have lived with older electrical or plumbing and not had any issues, however, this can become an issue for the next buyer. It is easy for sellers to become numb to issues that don’t concern them. Unfortunately, real estate transactions don’t work like that, and these are serious concerns any buyer would have before sealing the deal.

Buyer’s are often hesitant to take on significant projects, like a whole house rewire or re-plumbing, unless they can get it at the right price or a seller is willing to pay a significant portion of their closing costs to offset the amount such a project will cost.

Why risk a seller’s home sale while an unknown inspector could potentially wreak havoc on the home’s condition and ultimately thwart the entire transaction?  Knowledge is power. Just as a buyer needs to do their due diligence, a seller needs to do theirs so that bad judgement calls don’t derail their deal.

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