|
             
| |
|
PRE-SALE INSPECTIONS
|
 |
|
|
|
OK, you’re ready to sell your home. You did
everything by the book: you painted, cleaned, sorted, de-cluttered,
pruned, and scaled down. You cleared the surfaces, washed the windows,
cleaned the curtains. You got a termite inspection. Heeding the wise
columnists’ advice, you interviewed three local agents, asked them all
the right questions, selected one and decided on an asking price. You
are primed and ready to roar. Right?
Well, maybe.
How is this for an idea:
Invite a professional home inspector to come through your home.
The sole purpose of his life during the three hours he spends in your
home is to identify every defect he can find.
He then writes up his nit-picky report and packages it in a neat
little binder, so you can scare hell out of all your potential buyers.
For this privilege, you get to pay him $400-$600. Sound like a pretty
good deal?
That is the smartest thing you can do, according to
the University of California educator and trainer Guy Berry.
In a recent continuing education class for brokers entitled
“How to Avoid the 10 Biggest Deal Killers”, he asserted that
nation-wide studies show that an astonishing one out of three home
purchases collapse before the close of escrow. Red Oak Realty’s count
for failed escrows is 10-15% -- far less than half the national average,
I am happy to report, but still a figure which represents countless
hours, considerable expense, and frustration for everyone involved.
Can anything be done to minimize failed escrows?
Berry spent all but the last 10 minutes of the 4-hour course discussing
the number one deal killer of all time:
Lack of pre-sale inspections.
BENEFITS TO SELLERS
The theory is that pre-sale inspections best serve
the interests of all parties, but particularly those of the seller. How
is this possible? Here is why:
 |
Fewer
surprises: If a buyer knows most or all defects up front, the
defects take on their proper perspective. If the buyer is the one
who discovers the defect during inspections,
that defect takes on ominous proportions and suggests a
plethora of unseen horrors. He wonders, “What else has not been
disclosed that I haven’t discovered?”
|
|
Less
re-negotiations: If a buyer is not aware of a defect prior to
making the offer, quite naturally the tendency is to re-negotiate
the price once the defect becomes known. With prior knowledge, he
should have already taken the defect into consideration. If not, he
has little leverage for renegotiating.
|
|
Helps
fair pricing: Prior knowledge of defects helps the seller to
determine a realistic asking price in the first place. If the asking
price reflects the true condition of the property, buyers are more
likely to complete the sale as originally contracted.
|
|
Less
litigation: Problems disclosed up front defuse future
litigation. If litigation should occur, the seller has a better
defense.
|
|
Higher
sales price: Yes, you read that right. Prior knowledge of
defects leads to a higher, not lower sales price. When the buyer
knows about defects, he feels more comfortable.
He knows what he is buying and does not “hold back” for
unexpected problems.
|
|
Seller
has more leverage: The seller’s strongest point of leverage is
at the time the buyer first presents an offer. This is particularly
true in a hot seller’s market. When there is re-negotiation during
the escrow, the buyer has more leverage. At that point the seller is
already mentally set for a sale. He is more inclined to give
concessions to avoid the risk of having the house come back on the
market.
|
|
Seller
controls options: If a seller has prior knowledge of a defect,
the seller can chose to 1) ignore it -- offer the house “as is”
with the defect intact; 2) repair it, either with his own hand or
with a contractor of his choice; or 3) downgrade -- for example, he
can remove that rickety old deck altogether rather than repair it.
|
|
Screens
disqualified buyers: If
a buyer is the sort who doesn’t want a home near an underground
creek, better to disclose the creek up front and let him pass. |
Obviously, pre-inspections do not circumvent the
need for the buyer to conduct his own investigation. The buyer should
still hire his own professionals and come to his own conclusions. The
existence of a pre-sale inspection, however, should at least touch on
most areas of concern which will be discovered anyway during the
buyer’s inspections. The more advance knowledge the buyer has, the less likely
that buyer will turn and run somewhere down the road.
PEST REPORTS COMMON
Until fairly recently in our area, no pre-sale
reports of any kind were expected by buyers.
Now it is common practice for a seller to obtain a pre-sale
structural pest control inspection report (“termite”). These reports
are provided by the seller, even when the seller has no intention of
paying for any corrective work. And
because they are often the only pre-sale reports available, buyers have
come to rely upon them as a key to the general condition of the
property.
This is a mistake.
Structural pest control inspections are very limited in scope.
Their narrow purpose is to identify wood destroying organisms, including
termites, beetles, and dry rot. Why not provide information about other
areas of the home as well? Doesn’t the prospective buyer care about
the roof, hazardous materials, earthquake resistance, soils stability,
plumbing or electrical? A general inspection, while not necessarily
complete, will give a buyer a better overview of the property as a
whole.
When a home falls out of escrow and comes back on
the market (“BOM” in Realtor-talk), that wonderful excitement and
momentum of the home’s initial entry to the market is lost forever.
A BOM property is stigmatized. Everyone wants to know, “What
happened? Is there anything wrong with the house?”
Ask anyone who has been through this process. They will tell you
that anything which can reduce the chance of a failed escrow is worthy
of very serious consideration. Pre-sale inspections may be the best
preventative medicine a seller can take. |
|
|
|
