It might not surprise you to hear that I have many friends in real estate; it’s the crowd that I travel with these days. Whether personally or professionally I meet new agents every week. Most are working extremely hard for their clients whether they’re listing a house for sale or trying to find their buyer’s dream home. Meeting and speaking with these agents is a great opportunity for me to learn that aspect of the home transfer business that includes agents, lenders, appraisers, and of course home inspectors. A hot topic currently is pre-listing home inspections, or more precisely, free pre-listing home inspections.
The plan that the International Association of Certified Home Inspectors (InterNACHI) is proposing involves home inspectors conducting pre-listing home inspections, also called seller’s inspections, at no cost to the home owner. The inspector is paid by InterNACHI and InterNACHI would then own the inspection report and would sell it to any perspective buyer who wanted to know the true condition of the house. The report could conceivably also be sold to contractor services like Porch or Thumbtack to generate leads for their members. It’s an interesting idea and time will tell if it catches on.
The traditional home inspection system always costs sellers more money
Regardless of how you may feel about the InterNACHI plan, what the conversation has done is raised the awareness of seller’s inspections. The current standard is that the buyers hire the home inspector after a contract has been agreed. This leads to a situation where buyers and sellers often must negotiate twice, once during the contract stage and again after the home inspection. It’s during this second negotiation that the seller has lost significant leverage. The house is now off the market and often the seller has a strict timeline to navigate as they also attempt to buy their next home. They often can’t afford to have the deal fall through so they agree to pay more than they should for repairs. Meanwhile, the agents are jumping through hoops trying to line up contractors for repairs with little time to spare before settlement. This system always costs the seller money and creates headaches for their agents.
Avoid the headaches of last minute surprises with a seller’s inspection
The clear majority of the agents that we work with agree that traditional pre-listing home inspections, paid for by the seller, are a great way to find out about the true condition of the home and to avoid these headaches. We have a few very successful agents that we partner with who require it of their sellers. Why? Because they want to avoid the last minute surprises that so often can kill the deal, because they want to know the true value of the home before they list it, and because they want to shift some of the disclosure liability to the inspection company. It makes perfect sense and these advantages of a seller’s inspection are significant.
Decrease your liability
By having the home inspected and making the inspector’s report available to potential buyers the seller is putting all their cards on the table; the seller’s inspection is the ultimate form of disclosure. It shows an honest intent on the part of the seller and their agent to disclose the true condition of the home. And it reduces the liability of the seller and of the listing agent when undisclosed deficiencies are later discovered.
The pre-listing inspection gives the seller time to fix deficiencies before there’s a buyer involved. It also allows the seller to make the repairs themselves if they’re competent to do so. At the very least the seller will have time to shop around for the best price prior to having repairs completed. After the contract and the buyer’s inspection all repairs must be completed by a licensed professional. This can increase the cost of the repairs considerably. But if the seller has done repairs ahead of time, prior to the listing, they have the opportunity to build the cost of the repairs into the asking price, potentially recouping the money spent.
Sell your home faster and for more money
Houses that have a pre-listing home inspection are more marketable. Buyers feel nervous with the entire buying process. There is so much money involved and so many unknowns. The biggest of these is always the condition of the house. Typically the buyers have no idea about this until after their home inspection. This is an anxious time for everyone: buyers, sellers, and both agents. Who wouldn’t want to avoid that? If the house already had a seller’s inspection the buyers would know what they were getting before they offered a contract. And that makes the rest of the transaction so much smoother for everyone. Knowing this, the listing agent can use the inspection report to entice potential buyers. This means more showings, less time on the market and a higher sales price.
A pre-listing home inspection reduces the sellers and their agent’s liability. It makes the home more marketable. It helps the home sell faster and for a higher price. It decreases the likelihood of the deal collapsing and the buyers walking away at the last moment. And it provides peace of mind to the buyer before they offer a contract. So why aren’t more sellers interested in having one? It may come down to their lack of knowledge and that’s where the experienced agents come in. It really is up to them to educate their clients about all the advantages of a seller’s inspection and to warn them of the pitfalls associated with the current standard routine. Still there are some who feel differently.
A common argument against the pre-listing home inspection is that the buyer is still going to have the home inspected by their own home inspector. Okay, so what? Maybe the buyer will pay for another inspection by a different inspector and maybe that inspector will report something that the original inspector missed; it happens. But in all likelihood the type of issue that the second inspector finds will not be significant enough to derail the deal. And the seller has still had the opportunity to take advantage of all the benefits of the pre-listing inspection leading up to this point.
Another argument that I’ve heard, albeit from other home inspectors, is that sellers and their agents don’t want to know the true condition of the home because then they will have to disclose it. I’ve never actually had an agent tell me this and I don’t believe that any of the agents that we work with would have this head-in-the-sand opinion. Look, the condition of the home will be known before closing, better to have the information early when you can control it and determine what to do about it than to get it late from the buyer’s agent after their inspection when your options will be limited.
The way that houses are bought and sold is changing. This trend has been building for many years. Part of that change is the switch to pre-listing home inspections. Giving more control to the seller and the listing agent and more knowledge to the buyer and their agent. Whether it’s the free plan pushed by InterNACHI, a more traditional system or something else altogether the advantages are too great to ignore.