Why Doesn't Every Listing Have a Pre-Inspection?

The other day, an agent in our office presented an offer on a older home in our market, for one of our awesome clients. The clients loved the house; the charm, the porches, and even the bright color. As their excitement grew at the thought of their next home, it was quickly turned to worry when the inspections started. Knowing that this was an older home, our clients had a realistic expectations of the condition. They knew that the floors were going to be “a little uneven”, they knew every window may not open, doors were going to stick, and the home was going to take constant maintenance.

What they didn’t expect, however, was for the inspectors to come out from underneath the home shaking their heads, unable to quote the amount of work needed to ensure the safety and habitability of the home. There were several issues with the home that needed attention: structural problems, termites, torn HVAC lines, etc. The inspectors, as they should, recommended additional professionals, more specifically trained in each area. Our clients called on a structural engineer, and paid the bill to get the problems assessed. To our clients dismay, the engineer said that he didn’t even know where to start to describe the issues, and asked what the budget is, because it was going to take a lot of money to fix the problems. As a result of the condition of the home, our clients backed out of the deal, spent more than $1,500 in inspections,  and wasted 3 weeks of their search time to only pull out and begin the search again.

So, we have to ask: what would have happened if the listing agent or seller would have had a pre-inspection conducted before listing the home? Why doesn’t every listing have a pre-inspection? That’s the question that we asked ourselves three years ago. Why not? What are the pros and cons?

Pros:

• Sellers are made aware of any issues with their home prior to listing it.
• Sellers can make necessary repairs prior/during the listing period themselves.
• It allows you to accurately price your home based on condition, location and size.
• Sellers shouldn’t be caught off guard or feel cornered in the transaction.
• Buyers get a full view of the condition of the home, not just a cosmetic one.
• Buyers feel more comfortable with a home, knowing more information about it.
• It allows Buyer’s Agent’s to feel like they are not wasting their time, in the event their buyers discovers something during inspections that they don’t like and want to walk away.
• Sellers feel more comfortable during the inspection period knowing that the majority of problems have been found.
• Some buyers don’t get another inspection, they use the one provided and negotiate from it.

Cons:

• Sellers now know what is wrong with the home, and are required to disclose the issues or fix them.
• Pre-inspections cost money.
• Bringing big issues to the buyers attention may shy them away from making an offer.
• Not all issues are caught by the first inspector (they are human).
• It can cause the sellers agent to have to do more work like: set up contractors for quotes, schedule repairs etc.

After we processed the “pros and cons”, we decided that we were going to provide full home inspections to all of our listing clients (at our cost). There are several reasons behind our choices…

Now Sellers Know – Our main goal at The ART of Real Estate is to make the selling and buying experience as smooth as possible. So why would we wait to see if a buyer finds a problem? Isn’t our job to advise the client? How can we do that if we don’t know the actual condition, not just the color of paint? And the answer is, we can’t. By getting a report outlining any issues, it allows the seller to price their home base off the actual condition, not just the perceived condition.

For example, let’s say one of our sellers has a few settling cracks in their brick facade, and the inspectors recommends a structural company to come evaluate the cracks to see if it’s a big problem. While most structural repair companies don’t have a licensed engineer on staff, they do have the tools and resources to install products to ensure that crack won’t get any worse. They can also help determine whether or not the crack is a major structural issue, or simply a sign of natural settling.

Here is why the pre-inspection is so powerful. If our client has these cracks, we would recommend an independent structural engineer to come out and evaluate it for a fee of around $500. He or she may confirm there is a problem or ensure that it is natural settling. Then, we take the report and display it for the buyer, which says “we know there are foundation cracks, but this report says it’s normal and nothing to worry about”, taking an objection to a purchase and overcoming it with information.

If we weren’t proactive, the buyer’s inspector may recommend the same thing, but this time the buyer calls a structural repair company and not an engineer. It’s possible that the repair company may recommend repairs to support the issue, which might not actually be a real problem. These repairs tend to be very costly, leaving a seller to feel that they were “getting hit sideways”.

Now Buyers Know

Buyers look for a house based off location and price, but they also buy off of their emotions. Imagine that you are a buyer and you pull up to a home that you found online. You are comfortable with the price, you like the location, but the house was built in the 1950’s and you are afraid of the unknown. As you look around the house you are seeing stress cracks, you may think that there is old wiring, plumbing etc. But then you get to the dining room or kitchen and you see a full inspection report outlining any problems, and you may see where the seller wrote on there “done/completed” next to some items. You see where the wiring was updated, and the inspector doesn’t think the cracks are an issue. Don’t you think you would feel more comfortable now? We want the buyer placing their furniture and picking out bedrooms, not looking for problems. We want them to feel comfortable.

Now, on the reverse side, let’s say that your home has knob and tube wiring, asbestos shingles, galvanized pipes and a Federal Pacific panel box. Now the buyer knows about all of these items when they are making an offer. If they make an offer after knowing all of this, they still want the home and they are ok with making some repairs. Why surprise them later with information we already knew?

Sellers Can Fix Problems

Most due diligence repair addendums require a licensed professional to make all repairs that the buyer request. If we knew of a loose outlet, and leaking toilet from our home inspection, our seller can grab a screwdriver and a wrench and fix those items in 10 minutes. If you wait until the buyer to finds the items and request the repairs, it’s going to cost the seller more, because we can’t find plumbers or electricians to make a service call for less than $65.

Agents Love Them

As everyone knows, real estate agents are paid on commission, and they aren’t paid till their client buys a home. It’s reassuring to know, as a buyer’s agent, that if a house has been pre-inspected, your clients are less likely to walk away during the due diligence period as a result of surprises.

We, the Seller’s Agent, Know

Honestly, we don’t want to waste our time and money on trying to sell a home that can’t be sold or a home that will cause us problems down the line. We learned this lesson years ago when we had a listing, during the recession, that was a tough sale. The seller had already purchased another home elsewhere and needed frequent updates on the status of their prior home. We finally got a contract after 6 months on the market, and when the buyer’s termite inspectors gave us their report, they informed us that our client had termites in the attic. We called our client to inform him of the problem, and his response was “we can’t have termites in the attic, I saw a termite tube up there two years ago and I scraped out the tube”. For those of you that aren’t versed in termites and termite issues, all that he really did was piss off a few termites, who probably took a left turn and ate another piece of wood. In the end, the deal fell apart because he couldn’t afford the $20,000 estimate to fix it. From there on out, we decided that we were only going to take on the task of selling homes when we knew that they were able to be sold.