THE PRE-SALE INSPECTION? BAD IDEA or GOOD IDEA?

Most Agents have a strong view on whether a Seller should conduct a pre-sale home inspection.  Most would advise a Seller against conducting a pre-sale home inspection.  My opinion is that the pre-sale inspection is a prudent course of action.  It does have two costs for the Seller.  The actual cost of the Inspection itself and the cost in that the Seller now has to disclose what they know to any potential Buyer.  In Massachusetts, Sellers are only required to disclose any knowledge of Lead Paint (if the home was built prior to 1978).

Most home sales have a few milestones – Offer, Inspection, Purchase & Sale, Mortgage Commitment, and Closing.  A deal can fall apart at any juncture.  Most negotiations take place at the Offer and Inspection phases.  The Inspection phase is an easy place for the deal to fall apart.  Getting a pre-sale inspection helps to eliminate any, if not all, issues around the Inspection.  A poor Inspection result leaves the Buyer wondering how much more is wrong that they can’t see.  A good Inspection result has the opposite effect.  Either way, Inspection issues will have to be dealt with regardless, it is best to get ahead of it.

Benefits of a Pre-Sale Inspection

A pre-sale inspection allows the Seller to understand the condition of their home from an Inspectors point of view (and the Buyers). The inspection allows the Seller to use the results when setting the list price.  The more issues the Seller can eliminate beforehand, the better the eventual “real” Inspection outcome will

Now that we have covered the main benefit of conducting the pre-sale inspection, lets move on to the “why.”

Eliminates Unknowns      

The Home Inspection is always the huge unknown in the sales process.  The Home Inspection can uncover issues the Seller is not aware of.  Many deals fall apart at the Inspection.  Numerous issues can leave the Buyer feeling that the house is not well maintained.  And, some Inspectors have poor “bed-side manner” and can create unnecessary alarm.  This can create an overly negative impact on 1st time Buyers who are not familiar with home ownership.  The delivery of the message can be worse than the issue itself.  Having few issues to report offsets a bad messenger.  Houses that come “Back on Market” after Inspection are perceived as having something wrong with the house.  Often, Offers the second time around are lower and the issues from Inspection will still need to be addressed or accounted for in the list price.

Fix Issues Before Listing

Conducting a pre-sale inspection allows the Seller to fix any issues before the house goes on market and make repairs in a cost effective manner.  Repair issues almost always cost more if they need to be addressed during the contract process.  Or, the Buyer may want a Sellers credit to address the issue(s) and will likely ask for extra money to eliminate any potential scope creep.

Price to Account for any Issues or Lack Thereof

If the house is well maintained, it can command a higher price – especially if the Inspection Report is provided.  If the Seller elects not to complete repairs, they can disclose the items and have that reflect in the price.  Knowing the exact condition of the house allows your Real Estate Agent to price the house as accurately as possible.\

No Renegotiation

Just getting that Offer in and then agreeing to a price and other terms takes effort and patience.  Having to renegotiate over Inspection items can aggravate both the Seller and the Buyer, each who often feel they gave up too much getting that offer agreed to.  Having nothing to negotiate over after the Inspection makes the transaction progress smoothly towards the Purchase and Sale.  Many deals fall apart at inspection over items – from a dollar standpoint – don’t make sense in relation to the purchase price.  Letting a deal fall apart over $5,000 on a $1,000,000 purchase happens more often than it should.

Even though you have conducted a pre-sale inspection, the Buyer will (and should) conduct their own Inspection.  All Inspectors will identify the same major issues/concerns, but each Inspector will hone in on different items.  So while there should be no surprises, the results might be slightly different.  Thus, while a Buyer request is unlikely, it may happen.  I always attend Inspections.  I want to hear what the Inspector says (in their own words) versus what ends up on the report.

What are the Disadvantages of the Pre-Sale Inspection?

What you know, you have to disclose (in Massachusetts and most states).  What you don’t know, you can’t disclose, because you don’t know it.  Most states have language around issues that “a reasonable buyer would find material when making an offer” need to be disclosed.  Your Agent has to adhere to more strict disclosure requirements.  If you can’t afford to fix a lot of issues, then having the pre-sale inspection means you likely will not be able to fix any issues, but at least you can price for them

In Summary

A pre-sale inspection is not required, and most Sellers do not conduct a pre-sale inspection.  They should.  For most Sellers, a home sale involves selling the largest financial asset they own.  Not knowing the condition of that asset and then allowing an Inspector and/or Buyer to dictate or have the upper hand in the negotiation process seems almost crazy, but that is the norm.  Allowing a Buyer to make a fully informed decision benefits all parties, I would argue it benefits the Seller the most.

Doug McNeilly is a REALTOR® with Coldwell Banker Realty in Wayland, Massachusetts.  He specializes in Wayland, Sudbury, Natick, Framingham and the Greater Boston Metro West Area.  He can be reached at doug.mcneilly@nemoves.com or www.dougmcneillyhomes.com