Most home shoppers know they should have a qualified inspector check out a house before they purchase it.
But now, home inspectors are trying to sell sellers on the same idea-to have their houses inspected before they even put them on the market.
Called pre-listing inspections or seller inspections, they have evolved for the most part from the real estate industry`s new emphasis on the concept of ”disclosure.”
Disclosure, a growing trend in several states, refers to a seller`s obligation to disclose the known defects of his property to his real estate agent and prospective buyers.
The key word is ”known,” because even in states with mandatory disclosure laws, a seller cannot be faulted for not disclosing defects of which he or she was unaware.
Right now, only California and Maine require mandatory seller disclosure of all known defects. In those states, if you know your roof leaks but fail to mention it to either your broker or buyer, the buyer can demand you make reparations when, in fact, the roof leaks.
Where environmental hazards are the issue, seven states require mandatory seller disclosure: Connecticut, Florida, Indiana, Massachusetts, Montana, New Hampshire and New Jersey.
More than a dozen other states-Illinois not among them-encourage sellers to voluntarily disclose known defects.
In Illinois, only real estate agents, not sellers, are required to disclose known defects about a property. Agents can be, and often are, sued by buyers for failing to disclose defects. In fact, most lawsuits against real estate professionals are brought by disgruntled buyers who feel they were misled, says Wayne Falcone, president of Accurate Home and Building Inspection Service, based in Wayne, Pa., and president-elect of the American Society of Home Inspectors.
The big push
Some in the real estate industry would like to see mandatory seller disclosure laws in all states, to take the onus off the real estate agent. The National Association of Realtors, a powerful lobbying force in Washington, D.C., has committed its resources to encouraging state legislation that would require mandatory seller disclosure in writing.
Marketing inspections as a protective device for sellers is a new concept that has grown out of this increased emphasis on seller disclosure. Previously, seller inspections were conducted primarily for a specialized market-the many corporations and third-party relocation companies that own houses, Falcone says.
But now, several Chicago area home inspection companies have begun to do pre-listing inspections in the past year and several local real estate firms have begun to encourage sellers to have them done. One inspection company has also begun conducting pre-listing inspection seminars for real estate brokers upon request.
Is this just another way for inspectors to increase business? Stuart Packer, owner of Lincoln Park Associates, a home inspection company, says no, and insists that sellers are the ultimate beneficiaries of a pre-listing inspection.
”This is our ninth year in business. For the first eight years, I wouldn`t do pre-listing inspections, because I believed that the seller might ask for the inspection in January, wait until June to list his house, then use my report to candy-coat something that might have gone wrong in the interim,” Packer says, explaining why he initially felt that pre-listing inspections increased his firm`s liability.
Packer has since changed his mind, though. ”I held that line for eight years, but I`ve found that today`s seller is just trying to be honest and earnest, either out of fear or true concern. But my inspections carry a special disclaimer because we can`t control what goes on in the house after we leave.”
Unforeseen problems
That`s for sure. In one case, a divorce situation, Packer gave a property a clean bill of health. Sometime during the following weeks, the couple had a knock-down, drag-out fight. ”She threw a hammer through a wall and busted a pipe,” he recalls.
Packer says seller inspections account for about 10 percent of his annual business. The cost of a seller inspection, which is the same as one done for a buyer, starts at around $200 and goes up from there. Packer says the average seller inspection runs about $250.
Tom Corbett, owner of TOMACOR, a Chicago house inspection company, says he has done about three dozen seller inspections in the past two years.
”I find that sellers have no idea what they own, even with new construction. With the complicated nature of new technology, sellers don`t know what they own and what they`re buying,” he says.
Corbett tends to find different problems during seller inspections, he says. The most common ailments he cites: termites, bad electrical work and plumbing problems.
”I can tell you about a house in Old Town, where we found termite damage and sewer problems in a 100-year-old building that had been held together by spit and bubblegum,” Corbett says. There was layer upon layer of amateur repairs to the plumbing, including a leaky boiler. Because the seller was able to disclose this information upfront, he made it clear that the price of the building reflected the major problems.
”Because of the disclosure, the property became more attractive to purchasers because buyers didn`t have high levels of anxiety (wondering) what the seller was trying to cover up,” he says. ”I think the house sold in less than a year.”
Know thy house
Corbett feels that pre-listing inspections offer several defined benefits to sellers.
”The most important reason to have one is that it lets the seller know exactly what he or she is selling, so they can disclose defects upfront,” he says.
By disclosing these known defects upfront, Corbett reasons, a buyer would be unable to renegotiate the contractual price after his or her own inspector pays a visit to a house. ”Buyers will be unable to leverage additional moneys out of properties,” he says.
In one recent example, a buyer`s inspector toured a house and found that four windows could not be raised. The buyer went back and renegotiated the $650 it would cost to fix the windows.
That renegotiation, Corbett and Packer say, wouldn`t have happened if the seller had had a pre-listing inspection.
Why? According to Corbett and Packer, the window problem would have been discovered before the buyer ever stepped foot on the property. The defect could have been disclosed upfront, and the seller`s broker could have made it clear that the listing price reflected the defect.
Betty Bauer, broker/owner of Lake View Realty, says that although seller inspections are a new concept, ”we do encourage them because the problems can be addressed prior to (the listing of the property). Many sellers are not aware of problems that exist and, if addressed, the property could be that much more desirable.”
Not for everyone
But not every brokerage house believes pre-listing is a necessary step.
”I`ve had no sellers do this. They feel pretty in tune with their house. The roof is 2 to 5 years old. The back porch needs boards. They`re aware of ongoing maintenance,” says Jim Kinney, managing broker of Rubloff Inc. in Chicago. ”After all, it`s like knowing your own body.”
But Marble Owen, a sales associate at Rubloff, says sometimes a buyer`s inspection can force a seller to have his own.
”I had clients who brought in an inspector I didn`t respect. This guy tore apart the apartment with so-called problems. So the sellers hired their own inspector, who discovered the (claims) weren`t founded,” Owen says.
But Sam Palormo Jr., managing broker for Palormo Realty in Chicago, knows that pre-listing inspections aren`t for everyone.
”They`re just for those who want to make sure everything goes smoothly with their sale,” Palormo says.
Palormo Realty started recommending seller inspections after Corbett did a presentation for the firm.
”I think when a real estate agent takes a listing on a unique property or older building, then we want to do what we can to eliminate objections down the road,” he says.
Palormo acknowledges that pre-listing inspections also offer another layer of protection to brokers, but he says that everyone involved with the sale and purchase of property benefits.
”It gets to the truth right away, and you know there will be an inspection right down the line. It`s just a matter of getting it done upfront. It makes the transaction go more smoothly,” he says.
Joyce Fidell, director of relocation for Kahn Realty, says in the past year and a half, corporations and third-party relocation companies have been requiring a pre-listing inspection on all property.
”It really helps the corporation become aware of problems that need to be fixed,” she says.
It never hurts to have an inspection before the fact, but for everyone`s protection, there should be at least one inspection during the transaction, Fidell says. ”I don`t think it`s necessary in every case,” she says. ”But if there is a question in anyone`s mind, then a pre-listing inspection is a good idea. It helps the seller to sell, and leaves the buyer free to buy.”
If you have kept up your home, sometimes the best proof is a paper trail. Corbett and Packer recommend that you keep all receipts for home repairs completed within the past five years. That way, if you`ve repaired your roof but haven`t repainted the water leak, you can prove the work has been done without the added cost of an inspection.
In addition to noting any mechanical or structural problems, Packer`s pre-listing inspection includes a checklist for sellers that details suggested maintenance improvements, safety precautions and even ideas for increasing curb appeal.
”(Seller inspections) are a new concept and anything new takes time to catch on,” Palormo says. ”People are afraid of change.”
If you do decide to have a seller inspection, here are some tips for making sure you`ve picked a top-notch home inspector:
– Make sure your inspector is a member of the American Society of Home Inspectors (ASHI) or another reputable professional home inspectors`
organization. ”(ASHI) polices its members well. You can`t have a conflicting business and must make your living from inspecting homes,” Packer says.
– Be certain your inspector is fully insured.
– Check references thoroughly and make sure the inspector has been around for awhile.
