Pre-Inspections – Who Should Do Them?

May 02 20160 Comment

Pre-Inspections in Seattle - who should do themThe competitive housing market in Seattle is heavily favoring sellers and there are many different strategies being employed in an attempt to maximize a sellers’ final sales price. One of the things that we’re starting to see more often are pre-inspections conducted by the seller instead of the buyer. Which way is better?

First, let us explain the competitive landscape…

What we see on almost every listing in core Seattle neighborhoods is a situation where the seller lists their home on the multiple listing service and has his/her broker publish that they are going to wait a certain number of days (usually 7-10) before the seller will review any offers. What this does is gives their listing plenty of time to sweep to the various brokerage and third party websites like Redfin, Windermere.com, Zillow, Trulia and more. It also gives buyers an equal opportunity to tour the home and if they like it, plenty of time to do their due diligence – like conduct their home inspection BEFORE they submit an offer, review the title report, etc. – in an effort to minimize the number of contingencies included in their offer, which ultimately makes them a much stronger buyer in the eyes of the seller. All of these efforts are made with the hope that they will beat out any competition and move towards closing on their soon to be new house.

However, a lot of buyers are finding themselves in multiple offer situations over and over again, which means they are spending money on inspection after inspection on homes that they don’t get. This can obviously become expensive since each inspection can range between $450 and $500 (and up!), depending on the size of the house. This repeat expense has caused some buyers to burn out on the home buying process or simply avoid homes that are new to the market and likely going to be a competitive offer situation.

Because of this, some listing agents are now encouraging their sellers to front the cost of the home inspection and have one completed prior to ever going on the market, all in an effort to entice more buyers to come through their home by creating a low barrier to entry. The thought is that by providing buyers with the inspection report, each buyer is now on the same, level playing field and hopefully the seller receives more offers than they would have otherwise, which would, in theory, drive up their final sales price.

But this can expose the seller…

While on the surface a seller-conducted pre-inspection seems like an easy way to garner a stack of offers for the seller to choose from, however, we feel that this can leave a seller exposed. One of the issues we see is that the home inspector could uncover an issue that the seller had no knowledge of previously, at which point they are now faced with the decision to either remediate or ignore. Regardless of what they choose to do, they will have to now disclose the problem to potential buyers (and any subsequent repairs made) on the Form 17 – Seller Disclosure.
Another thing to consider is that no two home inspectors will generate the same report – which will be provided to all potential buyers for review. There are hundreds of home inspectors in the area and a wide range of inspection tactics, opinions, recommendations and personalities. We’ve seen some inspectors take a very alarmist approach when reporting their findings and others take a relaxed, “there’s no need to freak out” mentality. On top of that, we’ve seen some inspectors make recommendations for updates or repairs that aren’t necessarily in-line with what a professional contractor who specializes in that trade would suggest making.
Therefore, it is our position that it benefits the seller to have the buyer participate in the inspection process. This allows the buyer to interact with the home inspector, ask questions and determine after a verbal conversation with the inspector if any of the findings are risks that they are or are not willing to take. Simply put, we feel that inspection items are usually presented in a less dramatic fashion than the written summary of the inspector’s report.

There is an exception…

So while we don’t typically suggest that our sellers conduct their own pre-inspection of their home, we will, however, recommend that they conduct an inspection of their sewer line by means of a sewer scope and providing that report to potential buyers. The tactics used by sewer line inspectors are relatively consistent so if one individual finds a hole or other issue in the line, it is far more likely that any subsequent inspectors will also report the same issue. Additionally, multiple inspections and cameras being run through the same pipe over and over can cause unnecessary strain on the line, especially if it is an old pipe.

If you have any questions about pre-inspections and our philosophy about them when it comes to sellers proactively conducting one, don’t hesitate to reach out.