Top presale real estate inspection to-do's

REThink Real Estate

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Aug. 25, 2011

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REThink Real Estate

Tara-Nicholle Nelson
Inman News™

Q: As a seller in this tough market, I asked our agent about doing our own inspection that we could present to the buyer. Our home is 60 years old; we know there are issues; have fixed what we can afford; and adjusted the price to reflect what we can't afford to change. Our agent is completely against it.

Our contract with him is almost up, so should we go ahead and do this before we sign a new contract? We're not trying to hide anything but think it would be a plus to be able to present a buyer with complete information from the beginning. --Kris H.

A: There are certainly widely varying opinions within the agent community on the issue of presale inspections, by the seller, to be disclosed in advance to prospective buyers. I, personally, am a big fan -- here's why:

If your home is old, as yours is, and there are things that are wrong with it, as with yours, buyers are likely to see or suspect these property ailments, so to speak, too. But buyers tend to walk into a property, see things that need fixing and do one of the following: (a) mentally overestimate what it will actually cost to fix the issues, (b) mentally underestimate what the repairs will cost, (c) decide that the place will just be too costly or take too much work to repair and/or (d) see the list price as a starting point for negotiations.

As a result, sellers like you tend to either get (a) lowball offers, (b) no offers or (c) get into contracts that the buyers later want to renegotiate.

When you provide a pest or even a general home inspection that lists out the issues the home has, you add a layer of reality on top of buyers' sometimes irrational beliefs about what actually needs to be done, and, almost more important, what it will cost. You create a sense of order and eliminate any unreasonable overwhelm that buyers are just making up in their heads.

(To be fair, there are certainly buyers who might see the reports and decide based thereon that the work is too expensive and that your home is not for them, but it's best to weed those folks out upfront -- before you get into contract with them.)

Providing this information, coupled with some other items I'm going to recommend you include, also creates a sense of calm at your willingness to fully disclose the home's issues, and can help manage buyer's understanding of your pricing strategy.

If you do decide to provide some advance reports to your home's prospective buyers, I'd suggest you make sure to include all of the following along with them:

1. Bids or estimates from licensed contractors. Inspection reports without repair estimates up the fright factor that repairs can cause. Most pest inspections will include a bid, but general property inspections most often do not. Get a licensed contractor (or several) to provide you with written estimates to do the work indicated in the advance reports you obtain.

This can be an especially useful strategy in cases where one inspector calls out a scary-sounding big fix or puts a big price tag on a repair, and you can find other reputable contractors who can do the work for much less.

Ideally, you'd make sure the contractors are going to be OK explaining the estimate to the buyers, if they decide to call up and inquire.

This strategy also enables your agent to market the list price as already reflecting a discount for the needed repairs, for the buyer who will take the property in as-is condition.

2. Recent, comparable sales data. If your list price truly is discounted, show the buyers this by pointing out all the other sales in the area of homes in superior condition, but otherwise similar to yours, that sold for more. This adds much credibility to your contention that the list price is already discounted.

3. A summary sheet with a receipt for the buyers to sign. You can eliminate some of the overwhelm of looking through a book of reports by providing a packet, covered with a sheet that provides bullet points of the more major items, the repair bids for fixing them, and a note about the list-price discount with a receipt for the buyers to sign and include with their offer.

4. A caveat that the reports are "for their information" and a recommendation that the buyers obtain their own inspections. You don't want the buyers to think that you've rigged these inspections, or paid the vendor off to make them favorable to you. You also do not want to create any sort of warranty that these inspections have found every single item that could be wrong with the home.

Let them know that you are still advising them to obtain their own inspections, and will make your home available for that if the buyers and you enter a contract for the sale of your home.

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