Pre-listing Payoff

[hausdok]

By Dan Schuerman

In today’s saturated market, it is not just a lack of buyers causing difficulties but also the resistance of sellers to aggressively position their homes to sell quickly and for the maximum price possible.

Most homes sold throughout the U.S. will have a home inspection completed by the buyer prior to closing. For years the home inspection process has been positioned at the end of the real estate cycle. A home is listed, an offer made, a contract written and then, just before closing, the home inspection is ordered - leaving sellers, buyers and agents feverishly trying to fix, replace or get estimates for problems uncovered in the inspection.

Due to the current market situation, some real estate agents are figuring out how to use the home inspection as a fast-track selling tool. These agents are instructing their sellers to have a pre-listing (or pre-sale) inspection performed. A pre-listing inspection, paid for by the seller or listing agent, provides a written report as to the pre-sale condition of the property and may uncover concerns which might compromise a sale.

By moving the inspection to the beginning of the sales cycle, these agents are able to shorten the process by removing obstacles before they can interfere with a potential sale. Pre-listing inspections are nothing new. They have been a part of the inspection business for a number of years but are rarely performed during strong sales markets.

During strong markets, buyers purchase a home inspection to make sure there aren’t any surprise defects and to substantiate the purchase price. In an up market, sellers often have backup offers to fall back on if negotiations break down with a prospective buyer. Sellers forego a pre-listing inspection knowing buyers are not likely to walk away from a deal. They will have an inspection performed as a part of the contract.

In weaker markets, when there are more properties available and/or fewer buyers, the seller is at a disadvantage. The buyer will sometimes use the home inspection to verify condition and to negotiate a lower price to cover repair and improvement costs. It is when there is a higher-than-normal level of homes for sale that the seller can attract buyers by pre-inspecting their home prior to placing the “for saleâ€

[StevenT]

I think it's a great idea to have a pre listing inspection so a buyer can have the oppertunity to fix any problems ahead of time. But, I can't see it taking the place of an inspection by one's own inspector.

I also think that the amount of law suits would increase.

If I was a seller and I had pre inspected my property, I would allow the buyer to see the report if he liked, but I would still recommend that he have his own inspection.

[randynavarro]

When I inspect a place that's already been pre-inspected, I often find signficant items that weren't on the original pre-inspection report.

Its tricky business. If you do a pre-inspect, it'd better be really good. Seems to me there's a much higher risk of getting in trouble.

[StevenT]

Randy,

I agree with you and that is my whole point.

I find that many of the propertys that I inspect end up with reports that are unique to the situation. For instance, if I inspect a home that is "finished" there are things that I maight focus on that are different than an inspection of a "handyman special".

For instance, I recently inspected a vacant, forclosure home that has been vacant for years, the house is crap, but the property is magnificent. The place was riddled with infestations, structural problems, electric issues, etc.

I didn't spend too much time inspecting the cabinet doors or door bell, etc. This report suited my client's needs and reflected the important issues of the property. I can imagine that report being passed on, expecting me to pay for minutia that wasn't included.

[SIInspect]

Fellow inspectors.

Start thinking outside the box. How many individuals selling the piece of cra.. house are going to pay to have a pre-inspection done? This is to be marketed to the $500,000 and up market. People who will pay for a pre-list inspection to either PROVE their home is "tops" in the market or use it to remove the stigma attached to a home that has been on the market too long for reasons other than condition (price). These high end homes are usually well taken care of and you have low risk when things are functioning and maintained. You charge higher than base pricing due to the size, earn MORE with LESS risk.

The buyer cannot win a suit against you if you did the inspection for the seller. your report should state that the report is for your customer (the seller) only and that any information used to make decisions by anyone other than your client is disclaimed.

The Buyer would need to sue the seller and they would need to file suit against you. If you worry about getting sued in this business, get out of it! I find that most of the inspectors I have met over my many years in the inspection business who are worried about suits, typically are limited in their abilities to perform a thorough, complete and "suit-tight" inspection in the first place. If you really know your stuff, and you care to do a thorough job,you won't get sued.

This is a great marketing tool and a wonderful way to expand our market. Take advantage of it before everyone elsr beats you to the prize.

[Scottpat]

Originally posted by SIInspect

The buyer cannot win a suit against you if you did the inspection for the seller. your report should state that the report is for your customer (the seller) only and that any information used to make decisions by anyone other than your client is disclaimed

The Buyer would need to sue the seller and they would need to file suit against you. If you worry about getting sued in this business, get out of it! I find that most of the inspectors I have met over my many years in the inspection business who are worried about suits, typically are limited in their abilities to perform a thorough, complete and "suit-tight" inspection in the first place. If you really know your stuff, and you care to do a thorough job,you won't get sued.

This is a great marketing tool and a wonderful way to expand our market. Take advantage of it before everyone elsr beats you to the prize.

Sorry to say, but you are mistaken. Third party lawsuits have been upheld and do happen. I have been involved in one personally. You can disclaim all you want, but it does not stop or prevent anyone from naming you in a lawsuit. Yes, you might win or be dropped from the suit but this is only after you have spend a significant amount of time, energy and money defending yourself.

[SonOfSwamp]

Originally posted by Scottpat

Originally posted by SIInspect

The buyer cannot win a suit against you if you did the inspection for the seller. your report should state that the report is for your customer (the seller) only and that any information used to make decisions by anyone other than your client is disclaimed

The Buyer would need to sue the seller and they would need to file suit against you. If you worry about getting sued in this business, get out of it! I find that most of the inspectors I have met over my many years in the inspection business who are worried about suits, typically are limited in their abilities to perform a thorough, complete and "suit-tight" inspection in the first place. If you really know your stuff, and you care to do a thorough job,you won't get sued.

This is a great marketing tool and a wonderful way to expand our market. Take advantage of it before everyone elsr beats you to the prize.

Sorry to say, but you are mistaken. Third party lawsuits have been upheld and do happen. I have been involved in one personally. You can disclaim all you want, but it does not stop or prevent anyone from naming you in a lawsuit. Yes, you might win or be dropped from the suit but this is only after you have spend a significant amount of time, energy and money defending yourself.

I'm with you on that one. The oft-repeated HI notion that the words in a contract or HI report will win the day is, well, wrong. Or at least it could be wrong.

I can't recall doing an inspection for the owner of a house that was for sale. High risk, little reward, the way I see it.

I do know of one brilliant HI who was sued by a third party, but was dismissed from the suit because he had pre-emptively accounted for the dilemma in his contract. His customer had to indemnify him against a third-party suit.

Anyhow, I guess perfect contract language, and the perfect judge, can get the HI off the hook. But it's not something I'd risk just to get a few pre-listing inspection jobs.

I've never approached this biz as a rah-rah salesy kind of thing. I think of it as mostly art, with a small but necessary bit of science. The simple act of not screwing up the job is usually enough to make customers happy, and keep the phone ringing and the checks coming.

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[ozofprev]

Gotta go with Scott and Walter on this one.

Hey, more power to you if it works in your market. Aside from the legal issues - if I'm buying a car, it means nothing to me if the seller says, "My mechanic checked her out and she's purrrfect." In fact, my antennae go up. (Yes, I have big antennae...)

[sepefrio]

A pre-listing inspection is NOT for the buyer. If a buyer were to use a pre-listing inspection as their inspection, then they deserve what they get. A pre-listing inspections purpose is to identify problems before the buyer even sees the house and give the seller an opportunity to correct the problems thus making the sale easier. It has been shown that buyers will often ask for far more in price reductions than the actual cost of the repair (then most don't even fix it, lol). Thus, by getting a pre-listing inspection, a seller can actually make more money on the sale of the house.

[Chad Fabry]

That's the problem, John. No matter what you say or write who can depend on the information in the report, the buyer is going to get a copy. Then, whether you like it or not, you expose yourself to a litigious parasite whose sole, self appointed purpose on Earth is to take your money and convert it into the universal currency known as a BMW.

[SonOfSwamp]

Originally posted by sepefrio

A pre-listing inspection is NOT for the buyer. If a buyer were to use a pre-listing inspection as their inspection, then they deserve what they get.

No argument there. But no matter how bulletproof the HI thinks he is, there's always the chance of him missing something (or not), and getting hauled into court by, well, anybody who touches the deal.

Maybe it's just me, but if I were going to do pre-listing jobs, I'd make 'em walk-and-talks, with no written report. That way, there are no contract issues, and no record that can end up in the hands of somebody who might want to reach into my pocket.

A thought just hit me: Here in assbackwards Tennessee, the HIs have to carry E&O. I haven't talked to my lawyer about the various scenarios, but I wonder: What's to stop an unhappy buyer or seller, or both from kicking up a fuss and dipping into the HI's E&O deductible? In TN, all the unhappy party has to do is ask, and the HI has the choice of handing over some dough or paying for a court fight.

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[hausdok]

Originally posted by SIInspect

The buyer cannot win a suit against you if you did the inspection for the seller. your report should state that the report is for your customer (the seller) only and that any information used to make decisions by anyone other than your client is disclaimed.

Now you're giving incorrect legal advice, Dan.

Here's what I suggest, call your lawyer and ask him/her if it's possible for a 3rd party to sue you through subrogation.

Unless you're state is radically different than most others, you're probably going to be surprised.

ONE TEAM - ONE FIGHT!!!

Mike

[SonOfSwamp]

Originally posted by SIInspect

The buyer cannot win a suit against you if you did the inspection for the seller. your report should state that the report is for your customer (the seller) only and that any information used to make decisions by anyone other than your client is disclaimed.

Text snipped here...

If you really know your stuff, and you care to do a thorough job,you won't get sued.

DingDingDingDingDing! Hot folklore coming through!

Sometimes I think the best topic/title for an HI how-to book would be something like, "Who Thinks This Stuff Up?"

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[sepefrio]

My mother use to be a 4th grade teacher. She reported a case of suspected child abuse to the school and they to the police. My mother and the school were sued for defamation of character. She and the school lost because the abuse case was sealed until a final verdict was made. After the father was found guilty of abuse, the school and my mother won an appeal.

Anyone can be sued for anything at anytime.

An 80-year-old woman was run down and killed by a truck in Missouri. The trucking company went on to sue the family of the woman for her “negligenceâ€

[Chad Fabry]

If an inspector does a full blown...

Wouldn't that get the realtor union all riled up?

[Les]

Would some one on this board tell me what a "full blown" inspection is? I am kinda new at this and need the help.

Some of us make a fair amount of change reading "full blown" inspection reports.

[ozofprev]

Two issues are entangled here - the law, and pre-listing (seller) inspections. I'll leave the law to the lawyers, but...

Since the pre-listing inspection is not for the buyer, the buyer will/should get his own inspector. Hey, it works for attorneys - buyer and seller each have their own.

If pre-listing inspections did take off, it would double the number of inspection jobs [:-thumbu]. Hell, it could even improve the quality of inspectors by encouraging a healthy competition. An unqualified inspector who repeatedly performs a poor pre-listing inspection could be driven out of business as the buyers' inspectors reveal, time and again, all the important stuff that was missed.

Of course, not all of the competition would be friendly.

[Chad Fabry]

Of course, not all of the competition would be friendly.

Ain't that the truth. I'm an ass sometimes.

[SonOfSwamp]

Originally posted by Les

Would some one on this board tell me what a "full blown" inspection is? I am kinda new at this and need the help.

Some of us make a fair amount of change reading "full blown" inspection reports.

Les, I know that you, like I, have read many a blown report. These days, blown reports are the only ones I read.

An example quote (a real one) from a blown report: "Well-built house!"

Turned out that one had $30K in damages. Wall leaks aplenty. House wrap was underlapped.

So many Tilt-A-Whirl Greasers. So little time...

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[kurt]

I hate 'em. Pre-lister's, that is. Heck, I talk sellers out of doing them. I've never had anything other than unsatisfactory experiences.

I tell sellers to do the smart stuff. Clean the house. Haul away the crap. Refinish the floors if they're messed up. Paint. Put flowers in a vase on the DR table. Make the place look like someplace you'd want to buy and live in. If you're selling a used car, you wash, wax, and toss a Febreeze sheet under the seat, right? Why waste money on a pre-listing report? Spend the dinero on fundamental sales practice(s).

I tell sellers the greatest likelihood is that an extremely incompetent inspector is going to look @ their place anyway, and they won't find anything. If they do find something, I tell them to hire me to figure out an appropriate response & fix to hold the deal together. Most deals fall apart due to inappropriate response, not some silly defect. The average realtor (that's a redundancy, if there ever was one) can't figure out where their ass is; how can they figure out how to fix a building? If there's something so serious that the seller can't, or won't, fix it, why waste money learning about it? Put the sucker on the market & let the incompetent home inspector take the heat.

It's my overly simplistic answer to clearing out the incompetence in our profession, and making folks understand what a real inspection costs. Folks aren't going to come to these realizations by us telling them; they're going to come to these realizations by getting slapped upside the head. Face it, all our attempts @ rapprochement are only going to be viewed as meeching; always have, always will. Folks want to trust their realtors, much to my continual amazement.

Yep, I'm laissez-faire.

This stuff isn't complicated. It's just a house.

[SonOfSwamp]

Originally posted by ozofprev

An unqualified inspector who repeatedly performs a poor pre-listing inspection could be driven out of business as the buyers' inspectors reveal, time and again, all the important stuff that was missed.

I don't have any first-hand experience with that scenario yet, but here in assbackwards Tennessee, that (imaginary) HI will continue to get referrals, especially if his reports indicate that the house is better than it really is. The only thing that would slow him down would be claims on his mandatory E&O, which are just another version of the old "pay to play" scam.

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[ozofprev]

Nope, it's not realistic today. I'm imagining a future world with a majority of competent, caring realtors and inspectors. (Yes, I chuckled and wet my pants a bit while I typed it.)

[sepefrio]

Full blown means used to it's greatest capacity. As in a balloon, if it is inflated to it's maximum capacity without popping, then it is full blown. This is a very common term in the military to indicate that every possible step will be followed. I.E. a full blown uniform inspection is dress uniform with medals and all. Where as a normal inspection is the daily working uniform, not as detailed, usually not recorded and on a smaller unit level.

Legalities of this statement I won't even comment on except as I'm not sure really, but maybe it isn't the best idea.

[hausdok]

Hi,

I think they're a great idea and I like the idea that those on both side of the transaction should do it. It would help to weed out some of the folks in this business who are incompetent because it would function kind of like a peer review. Whenever I get a house where they tell me that they've had a seller's inspection, I tell them that I don't want to see the report or know anything about it until I'm done with my inspection. I tell the client that if I don't find everything that's in that guy's inspection report they can put that check back in their wallet. That's never happened, but I bet there were a few inspectors who got a phone call and ended up refunding their fees for some major sh** that they'd missed. Can you imagine revealing to a seller that his home had been in a fire and his seller's inspector - who'd also done the inspection on the home when the seller had bought it - had completely missed the fact years before? Last I heard, that guy had gone back to work at Boeing.

Kurt, I know you don't like to do them, but imagine, just for a minute that you did. You go in, do your usual thorough inspection, write a decent report, and then you turn it over to the seller. The seller then tells any buyers that he's had a pre-sale inspection. Naturally, they don't trust it, so they hire their own guy.

At this point, unintended peer review kicks in; if the guy is completely incompetent and misses half the stuff that you found, the seller can point it out to the buyer - "Gee, it's too bad you wasted all that money on that inspector, 'cuz my guy found a whole lot more stuff. See, here it is on the disclosure form and in this report that you didn't want? By the way, as we told you previously, we don't intend to fix any of these things because our price reflects these issues." Buyer turns around, nukes the other guy and demands the fee back. If that happens enough, that guy will be out of business.

So, what happens if the other guy finds something you miss? That's easy, you go back, confirm the issue and then you either admit you missed it or you show why it's not a good call. Chances are, if you missed mentioning something it's going to be a small issue that you really didn't need to comment on anyway; if it turns out to be something serious, well, refund the fee, apologize, and use it as a lesson - bet you won't miss it next time.

Either way, there's peer review in play. The seller, the listing agent, and you, will all be awaiting the results of that report. If the other guy botches it and misses a bunch of stuff you found, or starts calling out silly crap just for the sake of being able to report something, you're going to look better and folks on both sides of the transaction are going to move the other guy's name to the 'don't call' pile.

ONE TEAM - ONE FIGHT!!!

Mike

[Les]

I see the other side of Mike's scenario.

Does the seller disclose everything on the report from "his" inspector?

Why not just hire a known friendly inspector and tout that as a "pre-list" inspection?

How about when Kurt does pre-list and I do pre-purchase? (6months later) I'm serious!

We all know bad inspectors and try as we will, we will not have a good attitude.

Do you really want to do a pre-list inspection and have to answer a couple hundred questions?

Will you talk to the potential (23 of them) buyers about your report?

Mike, do you really want to subject your self to a peer review from a dummy?

Do you really think the average buyer is going to get their own inspection?

Do you really think the real estate salesperson is not going to market the pre-list inspection?

The only up-side is it may bring you additional business for a short time.

Les - "I did a pre-list inspection on this house back in 2003. But since then Checklist Charlie did an inspection, to verify my inspection, for the buyers/sellers. He also did a pre-list last month for the sellers. Ma'm with all that information, you are going to have to decide ..............."

Why is it that most qualified inspectors are known as non-progressive types and newer inspectors always are looking for additional revenue, while not even knowing how to do the basic job! Just inspect the house and write a good report. Take your money and move on. I'll bet you 39 cents I have pondered nearly every scheme to increase bottom line. Just doing plain white bread inspections is a full time job, which I rarely do anymore. There are people in the office that are much better at it. When they get a wild hair, they kindly refer the "special project" to me.

maybe more later