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Laurie Phill…, Real Estate Pro in Andover, MA

what do you think about advising a seller to have a premarket inspection? What are the negatives?

Asked by Laurie Phillips, Andover, MA Fri Oct 15, 2010

Do the results need to be disclosed if they are corrected? Would you advise sharing it with perspective buyers? Would you mention at a pre-inspection was performed in the listing information? Thank you for your responses.

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I strongly advise a pre-market inspection by the seller. This puts the seller in control as the seller is made aware of deficiencies in the home before a buyer enters the picture. The seller can then repair the safety items by his or her choice of contractor with his or her choice of materials. In California, for example, the expectation is that if an item is replaced during escrow, it must be replaced with a like kind of material. If it is done before a buyer enters the scene, it can be replaced with any proper material the seller chooses. For example, if a bathroom floor is water damaged, the seller can replace it with vinyl flooring instead of the more expensive tile. The seller also has the option of not doing the work but disclosing it to buyers before contract formation. This way the buyer goes into the transaction fully aware of the deficiencies. Although the sales price may be different, this is better than the buyer being surprised halfway into the escrow and deciding to back out. Knowing the deficiency up front, the parties may negotiate a credit instead of doing the work as part of the sales contract.

Bottom line--the buyers will most likely discover the same repair items with their own inspection if you don't already have one. If you know the negatives up front, you can better explain them, negotiate around them, or repair them.

The other side of the coin is that you may have a house in excellent condition with no or few repair items. In that case, you'd want to showcase this report to a potential buyer to encourage them to make an offer.
1 vote Thank Flag Link Fri Oct 15, 2010
Laurie,

It depends. If this is an equity seller and has money to do all repairs identified on the inspection report - then maybe. If it's a short sale - NO, because the seller doesn't have the funds to fix the issues and you must disclose everything you know about.

When you have any inspection completed, the seller will receive a copy - they then have to disclose everything on it, fixed or not. It might be something as simple as a dirty A/C vent or as serious as exposed wiring - it must be disclosed to EVERY buyer along with the Seller's Disclosure Document for your State.

As a listing agent, I always disclose everything I know or learn about. I NEVER have a pre-marketing inspection completed and I never accept a copy of a Buyer's inspection report. Because, once I've been told, I have to disclose to each ongoing buyer if that buyer backs-out.

Best,

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
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1 vote Thank Flag Link Sun Oct 17, 2010
Hi Laurie - In California, sellers have to disclose repairs. And it is prudent for your seller to disclose the report as well. As the sayiing goes, "When in doubt, disclose, disclose, disclose."

I think the answer to your question about whether to do a pre-inspection is "It depends."

For me, as an investor with a strong buyer's perspective, I wouldn't do a pre-inspection as a listing agent because as a buyer's agent, I look at those and appraisals performed by sellers with a grain of salt. I want my own team to look at the property with my buyer's interest in mind. So if you are trying to make a case to potential buyers that the home is in good shape, good buyer's agents just won't be convinced - which is what Don was saying.

However, if you see that your seller is unrealistic about the condition of the house and you expect there might be an issue with needed repairs, the pre-inspection approach can be effective, but can blow up on you in ways like Kevin mentioned. I try to advise sellers i am working with about the process and what to expect (including worst case) so that there are no significant surprises to them if a buyer's inspection comes back claiming the house is in serious disrepair. You can kind of get a feel for what you can expect simply by seeing how the house was maintained. But big items like cracked slabs can surprise you once in a while...

The wild card here of course is that different inspectors have different levels of tolerance and I have seen some reports that make a missing outlet cover seem like a huge issue. So when you end up with 2 inspections, there can certainly be issues of opinion.

The one type of situation I have seen pre-inspection used prudently was when a stem wall was visibly cracked in a garage. The seller had the inspection and an engineers quote to fix the problem so potential buyers could quantify the issue, thereby eliminating it as a point of contention. That would probably be the only time I would go that route.
1 vote Thank Flag Link Fri Oct 15, 2010
Hello Laurie,

I used to do the premarket inspections until this happened: Had a preinspection done, fixed all problems. Disclosed what the problems were and that they were fixed. 2 weeks later we had an offer and the buyer wanted their own inspection anyways, which is perfectly fine. There were several things found wrong that needed updating and/or repair. The big surprise..... it was the same inspector. The deal fell through because the seller was so mad and refused to do more work and/or concede on price. This was enough to cause me to lose faith in the idea.
1 vote Thank Flag Link Fri Oct 15, 2010
There are plusses and minuses. Diane nicely covers the advantages.

Some agents are reluctant to do so because then problems have to be disclosed. Yes, they might well have been discovered during a home inspection paid for by the buyer. Still . . .

And while problems can always be corrected, sometimes the seller isn't in a financial position to correct them all.

No problem sharing it with prospective buyers. But if it's a really good report, the buyers may just assume that the inspector, who was hired and paid by the seller, turned in a report favorable to the seller. So while there's some advantage to it, I don't think in all cases that it'd be hugely persuasive.

Having said all that, I still probably agree with Diane that it's a good idea. But it certainly has both pros and cons.

Hope that helps.
1 vote Thank Flag Link Fri Oct 15, 2010
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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Giving the homeseller a 'heads-up' on what will be a integral part of the buying process is a great idea. This allows the seller to develop contingencies. If you and your seller want to retain control, you can not allow your seller to be ambushed by an inspectation or appraisal. This can even serve as a insurance policy for your buyer that a biased inspector for the buyer isn't gaming the process.

I don't see anything but positives. Of course, stuff happens!
0 votes Thank Flag Link Mon Oct 18, 2010
Hi Laurie,
I think it's a great idea and one that will get the seller the highest possible price for their property if they address any and all issues that come up during inspection.
0 votes Thank Flag Link Sat Oct 16, 2010
I always think its a good idea for a seller to get one. Better to know what issues will crop up before any potential buyer does. Then the seller can resolve any repair issues. Any material defects in the property will also have to be disclosed.
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0 votes Thank Flag Link Fri Oct 15, 2010
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