Seller Inspections: Streamlining Real Estate Transactions.
by Nick Gromicko
Former REALTOR and Founder of the National Association of Certified Home Inspectors
Seller inspections (sometimes referred to as pre-listing inspections) are becoming more popular because they virtually eliminate all the pitfalls and hassles associated with waiting to do the inspections until a buyer is found. In many ways, waiting to schedule inspections until after a home goes under agreement, is too late. Seller inspections are arranged and paid for by the seller, usually just before the home goes on the market. The seller is the inspector's client. The inspector works for the seller and generates a report for the seller. The seller then typically makes multiple copies of the report and shares them with potential buyers that tour the home for sale. Seller inspections are a benefit to all parties in a real estate transaction. They are a win-win-win-win. Home inspectors should consider offering seller inspections and marketing this service to local listing agents.
Advantages to the real estate agent:
Agents can recommend certified NACHI inspectors as opposed to being at the mercy of buyer's choices in inspectors.
Sellers can schedule the inspections at seller's convenience with little effort on the part of agents.
Sellers can assist inspectors during the inspections, something normally not done during buyer's inspections.
Sellers can have inspectors correct any misstatements in the reports before they are generated.
Agents are alerted to any immediate safety issues found, before other agents and potential buyers tour the home.
Repairs made ahead of time might make homes show better.
The reports provide third-party, unbiased opinions to offer to potential buyers.
Clean reports can be used as marketing tools to help sell the homes.
Reports might relieve prospective buyer's unfounded suspicions, before they walk away.
Seller inspections eliminate buyer's remorse that sometimes occurs just after an inspection.
Seller inspections reduce the need for negotiations and 11th-hour renegotiations.
Seller inspections relieve the agent of having to hurriedly procure repair estimates or schedule repairs.
The reports might encourage buyers to waive their inspection contingencies.
Deals are less likely to fall apart the way they often do when buyer's inspections unexpectedly reveal problems, last minute.
Reports provide full-disclosure protection from future legal claims.
Advantages to the home inspector:
Seller inspections allow the inspector to catch inspection jobs upstream, ahead of real estate transactions and the competition.
Seller inspections are easier to schedule and are not under the time constraints of sales agreement's inspection contingencies.
Working for sellers is typically less stressful than working for buyers about to make the purchase of their lifetimes.
Sellers can alert the inspector to problems that should be included in the report, answer questions about their homes, and provide seller's disclosure statements.
Repairs of problems found during seller inspections often necessitate the need for re-inspections by the inspector.
Seller inspections put a sample copy of the inspector's product, the report, in the hands of many potential buyers who will need a local inspector soon.
Seller inspections put a sample copy of the inspector's product, the report, in the hands of many local buyer's agents that tour the home.
The inspector is credited, in part, with the smoothness of the real estate transaction by buyer, seller and agents on both sides.
The liability of the inspector is reduced by putting more time between the date of the inspection and the move-in date of the buyers.
The liability of the inspector is reduced because the inspector's clients are not buying the properties inspected, but rather moving out of them.
The buyer might insist on hiring the seller's inspector to produce a fresh report since the seller's inspector is already familiar with the home.
Seller inspections provide inspectors opportunities to showoff their services to listing agents.
Seller inspections provide examples to the listing agent of each home, which might encourage those agents to have other listings pre-inspected by the inspector.
Most sellers are local buyers and so many sellers hire the inspector again to inspect the homes they are moving to.
Advantages to the seller:
The seller can choose a certified NACHI inspector rather than be at the mercy of the buyer's choice of inspector.
The seller can schedule the inspections at the seller's convenience.
It might alert the seller of any items of immediate personal concern, such as radon gas or active termite infestation.
The seller can assist the inspector during the inspection, something normally not done during a buyer's inspection.
The seller can have the inspector correct any misstatements in the inspection report before it is generated.
The report can help the seller realistically price the home if problems exist.
The report can help the seller substantiate a higher asking price if problems don't exist or have been corrected.
A seller inspection reveals problems ahead of time which:
might make the home show better.
gives the seller time to make repairs and shop for competitive contractors.
permits the seller to attach repair estimates or paid invoices to the inspection report.
removes over-inflated buyer procured estimates from the negotiation table.
The report might alert the seller to any immediate safety issues found, before agents and visitors tour the home.
The report provides a third-party, unbiased opinion to offer to potential buyers.
A seller inspection permits a clean home inspection report to be used as a marketing tool.
A seller inspection is the ultimate gesture in forthrightness on the part of the seller.
The report might relieve a prospective buyer's unfounded suspicions, before they walk away.
A seller inspection lightens negotiations and 11th-hour renegotiations.
The report might encourage the buyer to waive the inspection contingency.
The deal is less likely to fall apart the way they often do when a buyer's inspection unexpectedly reveals a problem, last minute. The report provides full-disclosure protection from future legal claims.
Advantages to the home buyer:
The inspection is done already.
The inspection is paid for by the seller.
The report provides a more accurate, third-party view of the condition of the home prior to making an offer.
A seller inspection eliminates surprise defects.
Problems are corrected or at least acknowledged prior to making an offer on the home.
A seller inspection reduces the need for negotiations and 11th-hour renegotiations.
The report might assist in acquiring financing.
A seller inspection allows the buyer to sweeten the offer without increasing the offering price by waiving inspections.
Common myths about seller inspections:
Q. Don't seller inspections kill deals by forcing sellers to disclose defects they otherwise wouldn't have known about?
A. Any defect that is material enough to kill a real estate transaction is likely going to be uncovered eventually anyway. It is best to discover the problem ahead of time, before it can kill the deal.
Q. Isn't a home inspector's liability increased by having his/her reports be seen by potential buyers?
A. No. There is no liability in having your seller permit someone who doesn't buy the property see your report. And there is less liability in having a buyer rely on your old report when the buyer is not your client and has been warned not to rely on your report, than it is to work directly for the buyer and have him be entitled to rely on your report.
Q. Don't seller inspections take too much energy to sell to make them profitable for the inspector?
A. Perhaps. But not when the inspector takes into account the marketing benefit of having a samples of his/her product (the report) being passed out to agents and potential buyers who are looking to buy now in the inspector's own local market, not to mention the seller who is likely moving locally and in need of an inspector, plus the additional chance of re-inspection work being generated for the inspector.
Q. A newer home in good condition doesn't need an inspection anyway. Why should the seller have one done?
A. Unlike real estate agents whose job it is to market properties for their sellers, inspectors produce objective reports. If the property is truly in great shape the inspection report becomes a pseudo marketing piece with the added benefit of having been generated by an impartial party.
Q. Don't seller inspections and re-inspections reduce the number of buyer inspections needed in the marketplace?
A. No. Although every inspection job a NACHI member catches upstream is one his/her competitors might not get, especially if the buyer waives his/her inspection and/or the seller hires the same inspector to inspect the home he/she is buying, the number of inspections performed by the industry as a whole is increased by seller inspections.
Read the latest from the LA Times.
A new selling tactic: the pre-listing inspection
Owners hope to head off trouble and speed sales by hiring their own inspectors.
By Frank Nelson
Lost Angeles Times
August 26, 2007
JUDY MELLO wasn't looking forward to buying a new place to live, imagining a lengthy, complicated and perhaps stressful experience.
"I figured it was going to drag on for months and months," she says. "But it wasn't like that at all."
In fact, it took Mello, a retired registered nurse, a total of only 3 1/2 weeks to buy a $500,000 condominium in Carpinteria, a small coastal town a few miles south of Santa Barbara.
Although a number of factors smoothed the process, Mello says an inspection report commissioned in advance by the sellers played a large part in her decision to buy and helped speed the sale.
As housing sales continue to bog down -- last month Southern California sales were the slowest for any July since 1995, according to DataQuick Information Systems -- property owners are turning to new strategies.
One tactic increasingly bringing buyers and sellers closer together is a property inspection obtained by the seller before the home is even listed. A seller's inspection report is not in lieu of one commissioned by the buyer, but it often accomplishes the goal of signaling openness and good faith while at the same time unearthing any unpleasant surprises.
In some cases, a preemptive seller's inspection means repairs, such as leaks or faulty electrical wiring, will likely be completed in advance on the buyer's behalf; less pressing matters may be flagged and the asking price adjusted down accordingly. "To me, the report meant they were definitely interested in selling and cared about selling to somebody who was going to be satisfied," Mello says. "I felt comfortable that they were thinking of my interests."
Colleen Badagliacco, president of the California Assn. of Realtors, says not so long ago, when sellers were being bombarded with multiple offers, they didn't have to worry that much about the shape of the home.
"Now, the seller has to go the extra mile," she says. For some, the downside means making sure the house is priced right, taking disclosure to the next level -- the more they know, the more they legally have to disclose -- and offering to fix things.
But on the upside, a pre-listing inspection that gives buyers a better idea of where they stand and what, if any, additional work is needed, can also help sellers fend off demands for unrealistic price reductions to cover repairs.
According to Dan Steward, president of Pillar to Post, a nationwide home inspection company, buyers typically expect a $2 to $3 price discount for every $1 worth of defects turned up by their inspector.
With their own report, sellers can choose, for example, to spend a few hundred dollars fixing a plumbing problem that might otherwise mushroom into a claim for more than $1,000 off the price and, in the process, spark further potentially prickly negotiations.
"It definitely makes sense," says Chuck Miller, a 16-year veteran of the real estate business and now associate manager and sales agent with Coldwell Banker in Studio City.
In his own and other real estate companies, he's seen a marked uptick in the number of pre-listing inspections, perhaps a rise of 10% to 15% in the last year, and believes the ploy is helping sales move faster and more smoothly.
"Most people want to turn the key and walk in," he says. "They don't want repairs, and they certainly don't want surprises. If they know they have to do some work, they can at least prepare for that."
The National Assn. of Certified Home Inspectors, based in Boulder, Colo., also has noted a rise in the number of inspections carried out for sellers, though founder Nick Gromicko says they do not have national statistics.
However, on a local level, Gromicko does have some figures: "Our Denver chapter went from doing less than 2% of their inspections for sellers last year to doing 28% for sellers in 2007."
When Jack Lucarelli and his wife, Jeannie Wilson, decided to put their Toluca Lake home on the market for $3.75 million, they followed agent Miller's suggestion and first had an inspection.
The way it turned out, they need hardly have bothered. As Bob Wood, senior inspector with Sunland-based LaRocca Inspection Associates, combed through their 3,700-square-foot, two-story home, he was hard-pressed to find anything wrong.
A little dry rot in one post in the backyard, two faulty sink stoppers, a loose faucet and a cracked tile in the driveway. "It cost us about $18 for repairs," Lucarelli says, adding that the clean bill of health did not surprise him.
He says that he and his wife -- both of whom work in the entertainment industry -- have done a lot to the 1936 Spanish Mediterranean-style home and always kept the place in top shape. "But we thought the inspection and termite inspection were important to alleviate any fears or anxieties about any internal, hidden problems," he says. "It's an added convenience to the purchaser."
Chris Wrightsman, co-owner of LaRocca Inspection, sees these types of inspections becoming more prevalent and estimates that the number of homeowners choosing this option has risen about 5% in the last year.
He says the practice is much more common in Northern California, especially in the Bay Area, and he expects the trend to continue to grow. "When homeowners know the condition of their property, they can avoid a lot of problems and price accordingly."
Lisa Endza, director of communications for the Boulder-based national home inspectors group, says the cost of inspections ranges from $300 to $600, depending on the size and age of the property.
Tom Valinote of Thousand Oaks, who inspected Mello's Carpinteria condo for the sellers, runs Pillar to Post franchise offices in Camarillo and Goleta. Armed with a digital camera, laptop and a 1,600-point checklist, he typically spends two to three hours working through a house for an average cost of $425.
Inspections give sellers options, he says.
"They can say to the buyer: 'We found these problems. But we wanted to make sure we sold the house in the best condition possible. So, we fixed things, here are the receipts and now you don't need to deal with this.' "
That approach certainly appealed to Robert and Judy Parkinson. Longtime Los Angeles residents before moving to Oregon two years ago, they are in the process of selling a Montrose house they've owned as a rental for about five years.
Robert Parkinson says it was because they had never lived in the property, which is almost 90 years old, that they opted for the pre-listing inspection. "We wanted to do the due diligence and know the condition of the house before we put it on the market," he says.
"We didn't want to get into escrow and have someone do their own report and have a bunch of surprises. We mostly wanted to know that the price we're asking, $615,000, is a good, fair, solid price. We wanted to have a real clear idea of the condition of the house and do any work that needed doing. We felt that put us in a stronger position."
The inspection brought to light a number of issues, he says, the main ones being some plumbing, electrical and roof caulking work. They have now fixed most things and feel that having the inspection and spending about $7,500 on repairs were good moves.
The Parkinsons' agent, Gena Pinkerton, with Richard Keilholtz Realtors in La Cañada Flintridge, says the feedback from potential buyers to the roughly 30-page pre-listing inspection report has been very positive.
People assume because the house is old that it must need a lot of work, she says. "But the report shows that it doesn't. It's a huge relief for people to know that."
Sellers wanting to have their home pre-sale inspected should visit: www.moveincertified.com
Read the entire article at LATimes.com http://www.latimes.com/classified/realestate/news/la-re-inspect26aug26,0,413106.story?page=1&track=rss