Prior to my current management position, I was an active principal broker. One of the many documents I signed as the broker in my office was the earnest money/escrow money release form. Many times, the reason stated on the form for terminating the contract was “property inspection issues.”
When that happened, I always wondered if the transaction could have been saved one way or another: Did the buyers know what to expect going into the inspection? Why didn’t they remain open to remedies? What role did their agent play in the decision-making process?
I have personally bought and sold 15 homes since the 1980s. The agent who helped my wife and I buy our fourth home provided us with some excellent advice on home inspections, which I’ll never forget. The inspection process evaluates the current performance of the home’s systems and their features, not the cosmetic defects or design issues.
So I learned early on the importance of understanding home inspections. It’s critical that you review the following with your sellers, so your clients know what to expect.
1. Traditional home inspections have limitations
Even though many inspectors are good at their jobs, they are usually not properly trained or have the experience or expertise to provide a true professional opinion on the systems and structure of a property. A typical home inspection is just one person’s review of the home’s systems and their function.
Home inspectors usually aren’t heating and cooling experts or professional structural engineers. A buyer should seek out licensed, specialized professionals who can properly inspect and evaluate a system or structural defect.
2. The inspector will always find something wrong with the house
I have never had a home inspector not find some issue in a home. All inspectors find something. However, what they find may or may not be a problem. The buyer will need to decide whether or not to investigate further to see if a real issue exists.
3. The actual inspection report can be overwhelming
Most inspectors use a pre-written template from an inspection computer software program to generate an inspection report. Usually containing several pages of information, most reports include the inspector’s findings plus tips on interior and exterior home maintenance and other topics related to homeownership.
Prepare the client for what they will receive in their email, so they won’t be alarmed by all that is written in the inspector’s report.
4. More years equal more issues
Before the home inspection, remind the buyers that they are not purchasing new construction. Existing homes will have some wear and tear on them, like high mileage on an automobile. I have learned over the years that most problems and defects in older properties can be repaired or replaced.
Water in the crawl space, mold, fungus, broken window seals, and even radon gas can all be remediated. Don’t walk away from a house if the issues found can be easily corrected either before or after the buyer closes on the property.
5. Seek out an expert to provide a professional opinion on issues that need additional investigation
Having an expert investigate further into an issue the home inspector discovered can alleviate the buyer’s concerns, so they feel comfortable in moving forward in the transaction. An additional inspection can confirm a system or structural element of the home is in good working order or a serious issue needs to be addressed before closing the deal.
6. Consider not using a ‘home inspector’
Hire a licensed electrician, plumber, roofer and contractor to inspect the respective components of the property to see if they are sound and in good working order. It might cost a little more, but you have the licensed professionals who know what to look for when inspecting. This was how it was done years ago, and some buyers still have experts do individual systems inspections on the home they are purchasing.
7. Don’t ask the seller to address everything in the report
Be realistic on the requested items to be repaired or replaced by the seller. Sending an exhaustive list of repairs to the seller may cause them to become angry and it might change the entire tone of the deal.
Adversarial relationships are difficult to manage. I have seen inspection repair requests asking for cracked light switch plates to be replaced or a loose doorknob be tightened. These types of items can be addressed when the buyer moves into the home. Keep the list realistic, only noting the significant issues the seller should take care of before closing.
8. Be careful with your words
Agents should keep their opinions on inspection reports and repairs to themselves. Most clients rely on the professional counsel of their agent. However, we are not experts in knowing how particular systems in a home should function or the structural integrity of the property.
Our role is to shepherd them through the inspection process. What comes out of our mouths might not be what the buyer is thinking. Our comments can cause a buyer to become concerned and possibly walk away from the transaction.
9. Maintain and promote a sense of ‘calm’ during the inspection and resolution period
At this point in the transaction, the emotions of the seller and the buyer, as well as their agents, can run high. It is always good to grab the client by the hand and reassure them everything is going to be OK. Tell them to take a deep breath and to remember the “bigger picture” in their homebuying process. Give yourself this same advice. Always try to find a resolution so the transaction can move on to the next step.
The home inspection can make or break a real estate transaction. I have seen inspectors and their inspections kill a deal. If the buyer knows what to expect and understands how to navigate the inspection process, they’ll be no nasty surprises. As a result, they’ll be more calm, rational and objective in responding to whatever comes up and whether or not to move forward in the transaction.
John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Tennessee. He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”