Do You Need a Pre-Listing Inspection?
Selling a home is stressful. A pre-listing inspection can help.
Have you ever had a close friend or relative who’s lost weight, but you don’t notice it happening because you see the person all the time? Sometimes we don’t notice something like that until we hear other people commenting on it. The same idea is true of our homes. We see our homes every day, but we don’t see them the same way a prospective buyer walking in for the first time will see them. The prospective buyer will be comparing your home to all the others they’ve seen, not just in terms of basic information like square footage or how many bathrooms you have. They’re also looking at the condition of the home. They notice things that you haven’t, and they don’t know how serious those things might be. They also know that sellers aren’t under any obligation to make repairs or concessions, which means that buyers are risking their own time, the money they spend on home inspections, and any due diligence termination fee that is negotiated up front. The current real estate market is pretty balanced. Homes are spending longer on the market, and prices are being reduced all the time. A pre-listing home inspection is an excellent tool home sellers can use to gain an advantage.
Consider a Pre-Listing Inspection if Any of These are True
How do Sellers Benefit from a Pre-Listing Inspection?
Having a pre-listing home inspection can…
1. Save money long term
By having a pre-listing inspection performed prior to putting your home on the market, you have the opportunity to shop around for estimates for any work you plan to have done. There simply isn’t enough time for this when negotiating repairs during a buyer’s due diligence period. Much of the time, buyers will request credits or price reductions in lieu of repairs. They tend to overestimate repair costs significantly, and sellers typically have no idea whether or not the credit they’re agreeing to is reasonable. On the other hand, sellers sometimes agree to make repairs and find out later that those repairs are much more complicated and expensive than they imagined.
2. Provide a marketing advantage
Being able to provide prospective buyers with a pre-listing home inspection report really allows homes that are in excellent condition to stand out compared to other homes that are on the market. Buyers will be more comfortable offering on these homes, even when they still plan on having their own inspection done later.
3. Reduce buyer’s negotiating leverage
Unfortunately, some buyers make offers on homes and plan to negotiate the price down later after a home inspection. This is especially true when a listing is brand new on the market, or if there are multiple buyers interested in the same home. These buyers often blow relatively minor things out of proportion and ask for significant price reductions. It works in their favor far too often. I did a pre-listing inspection on a home last year, and the listing agent told me that the buyers requested a $25,000 price reduction. Thankfully, my report had been provided to the buyers up front, and the sellers were able to negotiate that price reduction down to $600 based on the fact that they had been aware of most of the issues at the time they made their offer on the home.
4. Reduce the likelihood of a terminated contract
Contracts are usually terminated because of surprise problems, along with not having adequate time to evaluate the seriousness and cost of those problems. A pre-listing inspection greatly reduces your chances of this happening. If a buyer views your pre-listing inspection report and still decides to write an offer on your home, you know they’re serious about buying and unlikely to terminate the contract. For example, I did a pre-listing inspection on a home last year that ungrounded outlets throughout the home. This could have potentially been a huge problem due to the cost of correcting the issue. However, my report was provided to prospective buyers up front. The seller accepted a full priced offer on the home and specifically wrote into the contract that no repairs or concessions would be made for anything on the pre-listing inspection report.
5. Help you and your agent price the home correctly
Sometimes a home inspection report will reveal items that aren’t necessarily defects — these aren’t items requiring repair, but they still impact what a buyer will be willing to pay for the home. These are usually things like aging roofs and HVAC units, but they can also be things like cast iron pipes or drafty windows. All of these items influence what a buyer will pay because they will be considering the cost of replacing these items in the future. A home’s condition is a major factor in the value, and pricing the home correctly is the only way to overcome these issues. Homes that are priced too high for their condition spend much more time on the market and ultimately sell for less than they would have if they were priced correctly in the first place.
6. Speed up the selling process
When a seller can illustrate that their home is in good condition, and the home is priced correctly, that home will receive a contract more quickly than competing homes because this type of property has the largest potential pool of buyers. Even homes that need repairs go under contract more quickly when the buyers don’t have to worry and wonder what kind of surprises there may be later. The reduced repair negotiations and reduced likelihood of terminated contracts also contribute to faster sales.
Some agents may recommend against having a pre-listing home inspection performed simply because sellers are obligated to disclose known defects. Their reasoning is that you cannot disclose what you don’t know, and it may not be found during a buyer’s due diligence period. The truth is that if there is something significantly wrong with the home, it will be found. This can be devastating for both buyer and seller! Did you know that buyers aren’t obligated to share their inspection reports with sellers? Buyers have the right to terminate their contract for ANY reason at all during their due diligence period, and they don’t have to share their reasons with the seller. As a result, some sellers have multiple terminated contracts before they find out what the problem is. You can’t address what you don’t know about, and this kind of thing can result in a home taking months longer to sell. When it comes to a seller’s disclosure obligations, we see a pre-listing home inspection as a benefit because it allows the seller to add professional documentation to support anything mentioned on the disclosure statement.
