Consider a Selective Inspection Before You List

Imagine this scenario:

You just got your house under contract.  You’re excited, doubly so since you’re already under contract on a new home and it is contingent on the sale of your current property.

A few days later you find out that the home inspection done by the buyer has turned up concerns about the life expectancy of the furnace and the sewer line is compromised.  Estimates on a new furnace along with the sewer line repair are coming in at $22,000.

You are panicked that the buyers are going to back out, and that the purchase of your next home is in jeopardy.  The buyers are asking for more than the repair/replacement items are likely going to cost, but you feel like you have to cave into their demands to keep moving forward on your dream home.

YIKES.

Scenarios like this make you wonder if home sellers should have their homes inspected before putting them on the market?  It’s an important question with significant pros and cons.  Before considering the options, let’s first review a seller’s disclosure obligations.

A Seller’s Disclosure Obligations

Home sellers in Colorado are required to disclose latent defects of which they have actual knowledge in the ‘Seller’s Property Disclosure’ immediately after an offer on their house is accepted.  A latent defect is one that is not obvious on casual inspection – something like a skylight that only leaks when there is an extremely heavy rainstorm.  Sellers must disclose what they know, but are under no obligation to investigate their properties to discover defects that they aren’t aware of.  It’s this lack of duty to investigate that make the pre-market inspection/no inspection question a bit complicated. Any good home inspection is going to turn up dozens of previously unknown issues – and you will then have to disclose all those issues regardless of how significant, or insignificant, they are.

With a clear understanding of the seller’s disclosure obligations, the pros and cons of doing a pre-market home inspection are simple - 

Pros:

• Eliminate surprises. If you complete a pre-market inspection, you should have a sense for what will show up on a buyer’s home inspection (assuming they do one once you are under contract).  You can be selective on what you choose to do and not do, and complete any repairs or replacements on a timeline that works for you.

• Informed pricing. When expensive items need repair or replacement, you can include those costs when you set your home price.  Now, you may not get a dollar for dollar return on full replacement costs for items such as a furnace or a brand new roof. However, as you analyze the market and see comparable homes with old furnaces or roofs you should be able to pass along some of the cost to the buyer. Big ticket items like roofs, mechanical (furnace, water heater, AC unit) that are new or newer will definitely help with the ‘salability’ of your home as buyers don’t want to take on those costs after having come out of pocket for a down payment and closing costs. This becomes particularly important in a buyer’s market

• Attract buyers at a better price. Having a completed inspection report for potential buyers may deliver a high level of confidence in your property.  This could increase demand for your property over others that do not provide an inspection report, and may ultimately pull in a higher quality buyer. 

Cons (there’s really just one con, but it’s a biggie):

• You could create a significant number of disclosure items.  Many will be items of “deferred maintenance” , which are elements that aren’t actually broken but might not have been maintained as well as they should have been.  You’ll have to disclose all items (big and small) to the buyer since you now have actual knowledge of them. 

So what do you do?

If you have an issue with any big ticket items during a home inspection it is fair to assume the buyer will ask for remediation in either the form of repair/replacement or a credit. As a value-add service for my clients, I offer a pre-listing inspection by a Licensed Home Inspector. These home inspectors know what to look for to give us the right information to hit the market prepared. We’ll be able to fix potential inspection objections on the front end, eliminate surprises in the middle of your transaction, and get you top dollar for your home.

- Chris Hawksley | Realtor, Broker Associate -