Why doing inspections upfront is not enough.

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Education & Training with Real Estate Expert Witness Support

The purpose of a listing agent is to get the most money for their client at closing.  Not the highest sales price but the highest net price.

Too often,  listing agents have the seller order inspections upfront without doing the repairs.  I contend that in most cases,  this is costing the seller money.  Here are some reasons:

  • Remember,  the seller is strongest during negotiations,  when the buyer is in love with the property.  If problems show up during the transaction,  the power shifts to the buyer.
  • If a seller waits until the contract,  they are obligated to replace what is there,  with existing materials.  If a seller does the work before the contract,  they can creatively downgrade, thus saving the seller money.  If a seller has a questionable roof,  the buyer might demand it be replaced if they want to sell.  If it is shake,  that is what the buyer will expect.  If instead,  the seller had replaced the shake roof with an ashpalt roof,  they would have saved 1/2 and now had a marketing advantage ......NEW 30 yr ROOF! Or instead of a several thousand dollar mastic tile showere,  put in a new Plastic insert at 1/2 the costs.
  • If you shop the Seller repairs before the buyer offer,  you can save lots of money.  If you wait until 15-20 days into the deal,  there is little time to effectively shop.  Also,  if you wait,  the Buyer might insist that you use their contractor.
  • Sometimes there are alternate solutions to fix a problem.  If you do it upfront,  the seller can be creative,  inlcuding removing the item  (non-code patio cover, etc). 
  • Everyone agrees that properties that show best,  sell quicker and sell for more. So,  if that is the case, why would an agent let their seller wait to make repairs,  where there is a glaring problem?  How often have you toured a house,  only to see a disgusting shower or a stain on the ceiling from a prior roof problem?  So,  instead of a buyer opening the shower door and wondering ..."How do people live like this?",  they open the door and say .....Honey,  come look at the new shower.



I think the best approach is to ask youself,  if I were FLIPPING this house,  what would I do.  Then,  ask,  what will it cost to fix and how much return will I get back.

WHAT DO YOU THINK????

 

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Guy Berry

Email - guy@guyberry.com

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Comments (5)

David M. Childress
Howard Hanna Real Estate Services - Akron, OH
I would love to be your Realtor® in Akron Ohio!

Hey Guy, you make very good points. I always look at the return on investment when I advise my clients what to fix and how much to spend. If the return is there, I tell them to fix it! If not, it is reflected in the listing price and stated.

Jun 05, 2008 09:02 AM
Anonymous
Celia Bella, Coldwell Banker, Palo Alto

Guy, you are so right!  I recently was able to get my Buyers $1,600 in Seller-paid repairs/replacements, because the Seller didn't repair some things ahead of time.

Jun 05, 2008 09:19 AM
#2
Anatol Polillo
ALP Inspections LLC - Baltimore, MD

A pre sale inspection is a great marketing tool if there are no issues.  If there are defects that need repair, the seller has the option to get them fixed prior to the stress of being in a contract.  This can save them money, by giving them time to shop around for the best prices.  That said, most agents I work with, do not recommend pre sale inspections for their clients; not sure why, perhaps a liability concern if repairs are not made.  A wise buyer will hire his or her own inspector and not rely on the sellers inspection report.

Jun 05, 2008 09:30 AM
Anonymous
Beth Oehlert, Alain Pinel, San Mateo

Hi Guy,

I agree with your assessment that the best time to get inspections is up front and that it is critical for negotiating purposes to get the work done before putting it on the market.  This gives the seller the most advantage and saves him/her from the expense and headache of a contractor and 'like' materials. 

I look forward to reading more of your blogs.

 

Jun 10, 2008 11:24 AM
#4
Jamie Flournoy
got agent? - New Market, MD
The Realtor on Your Side

Guy:

Again, you're right on.  I always guide my sellers through all of the inspections (property, termite, roof, chimney, pool, etc.) by pointing out to them that waiting for the buyer to do the inspections is like putting the buyer in the driver seat.  Now getting the seller to do the repairs is another thing, but your points are definitely worth noting and passing along to my sellers.

Perhaps, you could negotiate a bit with the sellers when it comes to the repair work that's called out on the inspection reports.  Any items that would be considered deferred maintenance the seller should pay for since, he/she got to live in the home and enjoy it but didn't pay to maintain it.  And any items that the buyer is asking to be repaired but wouldn't completely fall under the category of deferred maintenance should be shared between the buyer and seller.  For example, if there's a 30 year wood shake roof on the home that has another 10 years of life in it.  Buyer wants it replaced and seller thinks it should just be patched.  The agents could help the buyer and seller negotiate on the replacement where the Seller pays a 1/3 of it and the buyer pays 2/3 of the cost.

What do you think about that approach Guy?

Jamie Flournoy, Broker, Assist-2-Sell, San Jose, CA

Jun 12, 2008 04:12 AM