Note: This is my next post in the ABCs of Buying, Selling and Investing in Real Estate where I select a letter of the alphabet and focus on a fake situation with a fake character with very real advice and information. This week, I work the seller’s side of things through the letter J.
Jesse was the son of a client, who had bought a couple of properties through me. Jesse now lived and owned one of the properties. His father had given the property to him to live in while attending a local college. It was a way for Jesse to save money on rent and a good long-term investment. Jesse was now ready to sell the home and upgrade to a nicer place. He called me one Saturday morning, ready to vent about his father. Apparently, his father was nagging him about getting a home inspection before putting the house on the market. Jesse thought it was a waste of time and money. His father disagreed. Jesse wanted me to back him on the argument.
This is what I told him.
I have to side with his father on this one. Although it is not common for home sellers to get a home inspection, I believe it is a great idea. I told Jesse that normally a home inspection takes place during the option period, when a buyer can do due diligence on the property to make sure it is a good fit. The home inspector will look over the entire home for anything that might be faulty or in disrepair. They will put their findings in an inspection report provided to the buyers. Some things will be minor items that can be addressed by the buyer after moving in while other items will be major and require some negotiation between the buyer and seller on how the repair is handled. They buyer generally pays for the home inspection, which is between $300 and $500 depending on the inspector and services rendered. All inspectors are licensed in Texas, but you still have good ones and bad ones so buyers should spend some time selecting the right one. Jesse asked me why he needed to do one if a buyer was going to do it during option period. Here are the three justifications I told Jesse for getting a home inspection as a seller.
1. Assists in pricing the property – As I have said many times, the number one item that will get your house sold is getting it priced correctly. If you price it too high, then it might sit on the market for awhile, which is never good. Sellers can get help on pricing their home from their agent. However, an inspection report will shed light on the true condition of the property including any hidden defects like foundation issues or plumbing issues. How does this help with pricing? If the seller wants to get full retail price for their home, then it needs to be in a condition to justify the high price. A home that is not move in ready will always be priced less than a move in ready home. Buyers are not stupid. If you price a home needing work like it is brand new, no one will buy it at the list price. The inspection report will allow the agent to more fully understand the true condition of the property so the property can priced accordingly. Of course, if the seller decides to make repairs based on the inspection report, then pricing can be adjusted. Be forewarned! Whatever it is you do leave in disrepair, you will have to disclose it on the seller’s disclosure notice because you were aware of the issue before putting it on the market. It is never a good idea to stay silent on known repairs as it might cause legal issues for you down the road.
2. Eliminates nasty surprises on Repair Amendment – Can you guess the one item in the home buying/selling process that always seems to stress everyone out? If you guessed the repair amendment (pretty easy considering what I named this section), then you would be a 100% correct. Repair amendments are used in Texas for a buyer to request repairs on a property. These repairs are discovered during the option period, most likely discovered during a home inspection. I have witnessed perfectly sane people go crazy on repair amendments. Buyers don’t want to discover issues with their potential new home and seller’s don’t want to be told the home was not perfect. I have also been told by sellers that the repairs are a hassle because you have to use a bonded or experience tradesman to make the repairs. They just don’t want to deal with repairs. Sellers should then consider getting the home inspection done before going on market. In this way, the repairs can be out in front of the negotiation process because the seller has either fixed the repairs beforehand or listed them in the seller’s disclosure report. Either way, when , and if, a repair amendment is submitted by the buyer to the seller, both parties know what is what before going into the negotiation, so no crazy reactions from either side (I hope!).
3. Makes it is easier to stage the home (and sell it) – Pricing a home plays a huge role in selling a home. Another huge factor in selling a home is making a good presentation. Staging a home is important whether you hire a professional or DIY. Some studies have shown that staged homes can sell much faster. How does an inspection report help with staging? An inspection report will outline all the issues with the home from big to small so knowing your home’s faults will help to know what you need to do to present the home in its best light possible. If the report mentions leaky faucets, you can fix them. If it mentions a fault in the drywall, you can fix it with a DIY kit. How many repairs you actually do depends on your budget and how well you want to present your home (and where you want to price it). By knowing what is wrong with your home, you can patch it up for a more stellar presentation and ultimately help sell it.
Inspections are not for buyers only. Sellers can also take advantage of a good inspector by using their report to help price the home. It can help prepare the seller for the repair amendment by making the seller aware of the issues with the home that a buyer might include in the amendment. It also makes it much easier to stage as you can focus your prep work based on what the inspection report found.