Pre-Listing Inspections have never really taken hold in our industry. There are a lot of reasons why but the most commonly reported is that Sellers do not want to have to disclose the results of their Pre-Listing Inspection. This argument may have some merit but unless there are material defects, the findings should not cause a disclosure issues. Material defects that are known by the seller can often be worked into the price and disclosed upfront so they do not derail the negotiations later. In my experience the Seller’s Disclosure is so frequently inaccurate that I wonder if these types of claims are even actionable. (I refer to the Seller’s Disclosure as “The Book of Lies.”)
Recently there has been a huge (and largely unsuccessful) push from the home inspection industry to make Pre-Listing Inspections the norm. I don’t think this is news to anyone but the reasons why it is happening now should really raise an eyebrow. Real Estate agents have been spending tons of money for online leads and it has drawn the attention of some people who see it as an opportunity. There are several groups in the inspection industry that have come up with different strategies to capture buyer leads and sell them to the highest bidder.
Here is the basic premise: A home inspector can offer a free or discounted home inspection to a seller in exchange for ownership of the report. The seller and their agent will advertise the availability of the report online and direct interested parties to a website where they can download the pre-listing inspection for a small fee. Anyone who is willing to pay $5-$10 dollars for a home inspection report on a listed property is probably a qualified buyer. The home inspector has now captured their information and will be able to sell the lead to real estate professionals, mortgage brokers, insurance agents and anyone else who has an interest in a qualified buyer. Some programs even have the agents pay a subscription fee to be eligible to receive the leads. The buyer may have spent $10 on a report but they are typically encouraged to have their own pre-purchase inspection.
Another type of Pre-Listing Inspection we are seeing is one that advertises the home as “Move-In Certified.” This inspection will also post the report online and available for download but the seller pays full price for the inspection and the inspector may even edit or update the report after the homeowner has made certain types of repairs. This tactic is typically promoted by new inspectors who have difficulty obtaining business from buyers so they want to short circuit the process and do the inspection for the seller. Since it is the inspector that is actually promoting the home as “Move-In Certified” the seller is off the hook for everything the inspector misses and the buyer has no claim against the inspector because they didn’t hire them in the first place. This tactic is sometimes successful in tricking the Buyer into believing they have completed their due-diligence when they have not.
There is third option that I think is much more suitable for all parties in the transaction. I call it the Pre-Listing Walk and Talk. This is not an inspection at all but a consultation. Ideally the Seller has the consultation before they even put the home on the market. They will hire a qualified Home Inspector (an ASHI Certified Inspector if one is available) to review the home in the same way they would for a buyer during a home inspection. The seller will learn what deficiencies or deferred maintenance will be highlighted during a typical home inspection and they can decide how to handle them. The inspector may also advise them on what issues are frequently misunderstood by other inspectors in the area and what issues are real safety concerns. There is no written report, but the seller can take their own notes and decided what will be updated, repaired or disclosed before settling on a list price with their Realtor. In this way they can allocate their resources appropriately, they will be able to anticipate any concessions the buyer may request and they can price the home accordingly.
At The BrickKicker of Athens, we offer the Pre-Listing Walk and Talk for 50% of whatever we would charge for a Pre-Listing Inspection that included a written report. Other The BrickKicker operations have similar programs. This is a win for every party involved. (Also, there is no need for a seller to disclose that they had a consultation with a home inspector.) If there are material defects that they were not aware of, the Seller can address them before setting a purchase price, whether by repair or disclosure. They can also plan concessions before agreeing on a list price or accepting an offer. (Sure, it has been a “Sellers’ Market” but that often means frequent terminations.) The Agents win because the due diligence period will have no surprises. There is no increase in liability because material defects are disclosed or repaired before the house goes to market. The contract is less likely to be terminated because of issues that come up during the home inspection. (That doesn’t mean another home inspector isn’t going to blow some deferred maintenance out of proportion.) The buyer wins because material defects are disclosed before they make their offer and they can complete their due diligence without any surprises.
My advice to Sellers and their Agents is to find a qualified Home Inspector before you list the house. Let them tell you what issues are going to come up and address them before you set the list price. This may be your most powerful negotiation tool. By disclosing material defects you have removed them from the equation. Don’t be tricked into schemes like “Move-In Ready” that are designed to discourage buyers from completing their due-diligence. A discerning buyer may interpret this as a sign that the seller is hiding something and may avoid making an offer at all.