- 84% of all home purchases in North America involve a home inspection.
- Of the 16% that don’t the majority of these are where the home is new, direct from the builder, or less than 5 years old.
Our recommendation is that these homes should also be inspected. That is a subject matter for another time.
- 60% of all deals that fail, after an home inspection, involve an unnacceptable price re-negotiation.
- 95% of all deals that fail because the contents of an inspection report indicate material defects could have been salvaged if the issues where known and fixed prior to listing.
Most home inspections are performed on behalf of the buyers of properties, and this seems natural because they want to have identified any issues that are going to cost them time and money repairing these issues. However this can cause problems when it comes to closing.
Imagine if you will, a 20 year old home selling for $225,000, that looks to be in pretty good shape to the untrained eye. The price seems comparable to other properties of the same age and type in the area. The Realtor selling the property trusts the homeowner to give them all the relevant information with regard to the home and sometimes even asks for a SPIS to be filled in. (Again, the subject matter of another post)
Along comes another Realtor with a prospective purchaser, who loves the property and puts an offer in subject to a satisfactory inspection. The Inspection report comes back, and unfortunately in this case a couple of material defects were found.
- The deal in now in jeopardy!
- The purchaser is now wary that there are details about the house that have not been openly conveyed, and it is going to cost them time and money to fix if they go ahead with the deal.
- Both Realtors are likely to wonder if pushing the deal through might make them liable to a negligence suit after the fact.
- The vendors, who have fixed a price, usually after a lot of counselling with their agent, are faced with the possibility of having to either drop their price, this means re-negotiation, some which all Realtors know can be a deal killer, as the Vendors and Purchasers both have a stake in getting the best deal and tend at this point to get entrenched in winning the deal rather than seeing the bigger picture.
- If the solution is for the Vendors to fix the problems for the sale to proceed then this generally takes time and extends the closing. This is something that the purchasers may not be prepared to do, and if they are and their loan commitment from the mortgage provider expires before these fixes are complete the deal collapses anyway.
How to take the surprise out of the sale process.
We strongly encourage people who are looking at putting their home on the market to have a full inspection prior to even looking to go to a Realtor. This sounds like a strange recommendation but there are very good reasons for it.
The current market has been coined a Buyer’s market without buyers. Ask any Realtor and they will tell you the DOM (Days of Market) for properties are increasing. Having a deal collapse because information about your home is discovered after the buyer has been found, and having the deal subsequently fail, can increase that DOM exponentially where it starts to look like DOOM.
Having an inspection prior to the selling process beginning tells you, as the Vendor what might be perceived as a problem with the property, and allows you to either price the property accordingly, or fix the problem. It also allows you to then get involved with a Selling Agent and discuss the property with known facts rather than guesstimates. Certified Home Inspectors are well trained with skills that far outweigh that of Realtors and even general contractors in identifying issues with a property, and can allow this information to best advise the Realtor as to the true worth of the property.
The Inspection report also helps you in selecting a Realtor. When you interview a Realtor to see if you want them to act for you, without the report you can only gauge what they will do for you from the Interview and maybe marketing or word of mouth recommendations. With a report, you can judge from their analysis of the report whether they are truly committed to helping you sell your property or just topping up their listings.
This is not a general practice, but it does happen, as some Realtors believe that selling is a numbers game, more product = more sales. You want the Realtor who understands your needs, your property and the efforts that it is going to take to sell it in a very harsh climate.
A word of advice.
Good Realtors, like a good Certified Home Inspectors know their job well. Listen to them, hear what they say and if the Realtor prices your house significantly below what you expected, it’s generally for a reason. Ask them what the reason is, is it to encourage a quick sale or if it is because of the Inspection report. They are bound by their code of practice just as much as we are, so must tell you the truth. If it can be proved afterwards they did differently they are leaving themselves open to legal action.
Another reason for having a pre-sale inspection is it offers rebuttal to the prospective purchaser’s inspection, which they will in 84% of the cases, more than likely have. Asking someone to lower a price 10, 15 or even 20% because of a negative inspection can very quickly be reversed if you have a home inspection of your own, especially if your inspection is from a Certified Home Inspector.
Their have been a number of cases where, working for the buyers, non-Certified inspectors or inspectors who are not following the code of ethics and are looking for other work have padded out their reports with material defects that really aren’t. The Buyer has used their report to try to negotiate a price drop, but the Vendor, whose has had a pre-sale inspection completed by a Certified Inspector has shown that the issues are over exaggerated. Generally the deal goes through with no price reduction, especially if the Vendor can show, following their report, any material defects were properly fixed.
Changing the price in the middle of a transaction can be a red flag to the lender, particularly if it’s a significant price reduction. The lender could require the work be done by closing, which could delay the closing by months. If the buyer’s loan commitment expires, the transaction could collapse.
Another benefit is that by providing as much information about the property as possible upfront, you decrease the risk of a transaction falling apart when buyers discover information about the property they weren’t aware of when they made their offer.
The purpose of getting presale inspections is not to preclude the buyers from having inspections — it is to educate the sellers and buyers about the property condition before they enter into a contract.
A pre-sale inspection helps in the following ways:
- Unlike the purchaser’s inspection, you can assist the inspector during the inspection to make sure all areas are accessible and the report is as comprehensive as it should be.
- It can help facilitate a faster sale for a more accurate price.
- It helps to eliminate 11th hour re-negotiations or a complete deal collapse.
- It makes you aware of existing issues, giving you the chance to address them with competitive pricing.
- It helps protect you from over-inflated buyer repair estimates.
- It will reduce your liability with full disclosure
- It provides purchasers the comfort of an unbiased 3rd party opinion.
And finally, we work with you on producing a final report, at a highly discounted rate, if there are items you have repaired after the initial report.
We provide digital copies of the summary page of the final report, to your Selling agent, for your open house handouts.