Saturday, November 15, 2008

Pre-listing Real Estate Inspections -- Will they reduce the drama?

Yesterday, a broker in my office starts singing a song he made up: "My least favorite part of this job is dealing with inspections." It was a catchy tune, and he sang it with emotion. After all, he just received an inspection report with no less than 30 items that needed to be addressed. He had just completed the Inspection Notice, asking that every item be repaired or replaced for his Buyer client. On a deal that he closed a couple months ago, his Seller client had to pay over $10,000 in credits for inspection items that were revealed for the first time when the Buyer's inspector found them.

Can inspection drama be avoided? Well, maybe not avoided, but I'm convinced it can be reduced. A number of home inspectors I know suggest conducting a pre-listing home inspection. The Seller hires the inspector and then gets a report of items needing attention - the same report a Buyer would get if he/she hired the inspector. The Seller can then repair the items on the report before a Buyer even comes along.

What if you are the Buyer looking at a home and you know a pre-listing inspection was done and all the items were repaired. What would you think? "I want to see that report," is the first thought. The second might be, "this Seller really cared about having this property ready for sale." A more cynical thought might be, "I wonder if the Seller knew the home inspector and certain items were not included in the report." "I better get my own inspection."

The Buyer is certainly entitled to an inspection of his/her own, and as a listing agent, I would encourage they get their own inspection. It is up to the Seller whether to show the Buyer the pre-listing inspection report. I would suggest to my Seller clients that being open and honest is a good policy and share the report. I will venture to say that the Buyer's inspection report will have far less items than the Seller's original inspection report.

The challenge in getting a pre-listing inspection report will be convincing your Seller to pay for it. I have had a number of clients who refuse to pay $200-$500 to know the items that are wrong with their home. One of my clients even told me that he didn't want to know if there was something dramatically wrong with his property because then he would have to disclose it! I said, "Wouldn't you rather know now than when you have a pending contract and the Buyer's inspector finds it??!!"

It is my policy that my firm and I will not hire home inspectors. It is the responsibility of the Buyer or the Seller to engage the inspector. After the inspection, the report belongs to them. If you can't get your Seller to agree to a pre-listing inspection, you are going to have to wait until the Buyer's inspector comes along.

I believe the more information the better when it comes to real estate transactions. Sellers should find out as soon as possible whether their properties need any repairs. If they do, please fix them! It will make your client's property much more attractive to potential Buyers. When the perfect Buyer comes along, you can rest assured that on the day the inspection objections are due, you and your client will be drama-free.

Authored by Amy Nakos, JD, CLHMS, Owner/Managing Broker, Landmark Real Estate Group, LLC, 111 Main Street, Frisco, CO 80443, 970-668-1430 office, 970-389-8388 cell, anakos@landmarkregroup.com.
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