How I Saved $1,250 in 60 Minutes When Selling My Home

When you sell your home, one of the standard operating procedures is that your buyer will hire a licensed home inspector to inspect your home. And believe me, they will find a long list of things that are wrong.

calculatorIt does not matter how perfect your home, they will find a litany of problems. Why is that? Because that is what they are paid to do. The more problems they find, they better and more competent they appear to be to the buyer. Not only that, not listing a problem opens them up to a potential law suit. When it comes to inspecting a home, inspectors err on the side of caution: they list everything—even the minor items.

Of course, as the seller, this has no impact on you until the buyer comes back to you with a list of requested repairs. That is when you, as they seller, need to get to work.

First of all, no matter what the buyer request that you repair, you never offer to fix anything. If you do, you open yourself up to the possibility that the buyer will not be satisfied with “your” repair, and a whole slew of problems could ensue. Instead, what intelligent home sellers do, is offer cash to the buyer that they can use to make their own repairs. But how much to offer?

When I went to sell my home, the buyer requested $2,500 repair credit, and included the list of items he intended to fix with that amount of money. Seems reasonable enough, but was the dollar amount fair?

The first thing I did was go through the list and combined the repair items into three categories: electrical, plumbing and roof. Then I identified the major expenses in each list. And finally, I called an electrical contractor, a plumber and a roofer.

I told each service supplier that I was in escrow and needed a verbal estimate for some work to be done. They did not know that I had no intention of using them, so each one was happy to give me the estimate right over the phone. But as you will soon see, even though I was not going to use them to do repairs, I did give them a referral (which may or may not lead to their getting the business).

It turned out that the estimated total for the work was $1170. So, just to be safe, I rounded up to $1250 (half of the amount requested). I then crafted a written response to the buyer showing his list of requested repairs, the estimated cost for each AND the name, company and phone number of the person who supplied the verbal quote. What could the buyer do? He had to accept it.

Bottom line: The buyer received the money he needed to repair the things he cared about and three service providers got a business referral for the price of a phone call. Oh, and I saved $1,250 for about 60 minutes of work. I think they call that win-win.

 

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Why You Should Never do a Home Inspection Before You Sell Your Home

Ask one hundred home inspectors if you should get a home inspection before selling your home and one hundred will say yes. Of course their answer does not come without a conflict of interest: they make money if you do one, otherwise they don’t.

Ask one hundred real estate agents if you should get a home inspection before selling your home and fifty (a total guess) will say yes. Their motivation is that if you do the pre-listing home inspection and you fix the items that are potential deal killers, it will make their prospects for selling your home better. What real estate agent doesn’t want to list a flawless home?

tape measure

We are not talking about visually obvious problems with a home. That is not why someone hires a home inspector. If you have a hole in the middle of your living room floor, you do not need an inspector to tell you to fix it. You hire an inspector to find problems that lay people, like most buyers and sellers, could not find just by walking through a home.

Now you see how the inspector benefits from a pre-listing home inspection and you see how the agent benefits. But what’s in it for the seller? Turns out, not much. Actually there are three exceptionally good reasons for a home seller to not do a pre-listing home inspection, all three of which can, unintentionally, cost the home seller thousands of dollars.

It can only scare home buyers away. I recently paid for an inspection of a home I was getting ready to buy. (I strongly recommend buyers get a home inspection.) Other than one or two minor things, the inspector told me it was one of the “cleanest” homes he had ever seen. There was almost nothing wrong with it. So, you can imagine my surprise when I actually went through the home inspection report in fine detail and found fourteen items reported as Deficient. Fourteen! In a problem-free home.

What I have come to learn is that even with a home in really good condition, there are a lot of inspection deficiencies. Many of them are no big deal, just areas where the home does not meet the code. The problem comes when the seller shows this inspection report to a potential buyer. The buyer is not going to look at the report to see what is right with the home, they are going to look for deficiencies. And no matter how perfect the home, there are going to be deficiencies. And each deficiency is just one more reason for the buyer to lower their offer (or not make one  at all).

It is much better to wait until an offer has been made, and the buyer is emotionally attached to the home, before they see it “warts and all.” Plus the buyer has to pay the (approximately) $400 for the inspection.

You must disclose deficiencies to buyers. Real estate law stipulates that you have to disclose, to any potential buyer, problems you know about your home. If the neighbors have an annoying, barking dog, technically you have to disclose that. What you do not have to disclose are problems you know nothing about. By performing a pre-listing home inspection, not only do you now know all the problems in your home, but you are required to tell potential buyers about them. In other words, if you conduct an inspection, you have to turn it over to them for review.

There is nothing wrong with buyers finding out the problems with your home. As I have already mentioned, I strongly suggest home buyers get a home inspection. I just do not see any reason why the home seller should pay for it, especially when they are most vulnerable: before they have an offer in hand.

It can never cost you less, only more. The most important reason of all to never do a pre-listing home inspection is that it can never save you money. It can only cost you money.

Imagine you perform a pre-listing home inspection and find a $10,000 problem with your home. To make your home more sellable you decide to go ahead and spend the money to fix the problem. You are now out $10,400 (don’t forget the inspection fee). How do you get this money back?

Now imagine you do not perform the inspection, what are the possible outcomes?

a)      One possibility is that the buyer waives the inspection contingency. This is not typical, but in a seller’s market like we have today, it does happen. In this case you saved $10,400 by not doing the pre-listing inspection and fixing it.

b)      Another possibility is that the buyer does the inspection, but wants the home so bad, they choose to not make it part of the negotiation, for fear of getting rebuffed. Once again you saved $10,400.

c)      A final possibility is that the buyer does the inspection and insists that you fix it. As the seller, you can choose to say yes, no or let’s split the difference. Even in the worst case scenario, where you agree to pay the full cost of the repair, you will save $400 (the inspection fee).

Could the buyer walk away after they see the $10,000 problem? They could, but if they are willing to walk away when they are already under contract, there is not much chance they would have even made an offer before hand had they known about the problem.

I cannot see any scenario where the home seller benefits from a pre-listing home inspection. If a Realtor or home inspector knows of one, I am all ears. In the meantime, save yourself the trouble and let the buyer pay for the inspection.

To see how ReaListing helps home sellers make more informed decisions, click here.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.