Prelisting Inspections for Real Estate Professionals

1. Prelisting Inspections for Real Estate Professionals

2. Course Objective To better understand: • The difference between a prepurchaseand a prelisting inspection • How each impacts the sale • How prelisting inspections put more control in the hands of the real estate professional

3. Quick Overview • Most homes are inspected • Most offers are made contingent on a home inspection • Most home inspections are requested by the buyer • The buyer has most of the control

4. The Inspection’s Role in the Sales Process Who’s in control? • The buyer chooses the inspector • The buyer owns the inspection report • The buyer may exaggerate what the inspector actually said • The seller and agent have to wait days before knowing if the house “passes”

5. Inspections and the Sales Process • Real estate professionals can be proactive and order a prelisting inspection • The inspection provides shared information, allowing the sale to go forward • An offer made contingent on an inspection is still not a sale, it’s merely a possible sale

6. Goals of a Prelisting Inspection • To share unbiased information about major components and safety issues • To discuss repair, maintenance or safety issues beforehand • To repair certain items in advance • To move the sale forward

7. Prelisting Inspections Advantages to the real estate professional: • Reduce the number of offers contingent on an inspection • Fewer buyers will walk away from multiple offers • Sell a house faster • Sell closer to the asking price • Market a property as preinspected

8. Prelisting Inspections Additional advantages to the real estate professional: • Most sellers believe their homes are worth more than they are • Preinspections help agents and sellers set realistic sales prices • Preinspections help overcome “pride of ownership”

9. Prelisting Inspections Additional advantages to real estate professionals : • May show a copy of the inspection report or a summary at an open house • May list in MLS as preinspected • May put “Preinspected” on yard sign • May persuade seller to make repairs or adjust asking price

10. Prelisting Inspections Advantages to the seller: • Openly disclosing maintenance/repair items boosts buyer confidence • Can choose the inspector • Only one inspector coming to the home • Can emphasize positive aspects of the house • Can discuss findings in earnest

11. Prelisting Inspections Advantages to the seller: • Can reduce the number of days the house is on the market • Everyone has the same information • Can choose what items to repair • Can sell for more if repairs are made • Can repair items, then reissue report

12. Prelisting Inspections Advantages to the buyer: • Instills confidence • Saves time • Removes anxiety: “What if something’s wrong” • Saves the cost of a buyer’s inspection

13. Prelisting Inspections Advantages to the buyer: • Still has opportunity to ask inspector questions • No unpleasant surprises • Can concentrate on mortgage and closing • May still order their own inspector if they choose

14. Who Pays for the Preinspection? Who pays for the preinspection report? • The buyer? No • The seller? Usually • The agent? Sometimes If the agent does pay, it may help secure more listings.

15. Who Pays for the Preinspection? Can the inspector wait to be paid? • He/she should not • If the inspector is paid contingent on the successful sale, it could create or appear to create a conflict of interest

16. Who Pays for the Preinspection? If the seller or agent pays for the inspection, can they influence the inspector? • Neither should try to influence the inspector • The report should be accurate, factual and unbiased • The buyer needs confidence in the report

17. Who Owns the Preinspection Report? Who owns the report? • The buyer, ifthe seller chooses to make it available • The seller, as he/she paid for the inspection • Even if the agent pays for the report, it should belong to the seller • The seller paying for the report reduces any potential liability to the agent

18. Informed Home Buyers • Most buyers know little about construction • Answering questions puts their minds at ease • Informed buyers are more satisfied and can better anticipate and plan for repairs and maintenance • Real estate professionals can focus on the next sale

19. Home Inspection Report Formats Home inspection report formats vary: • Checklist or narrative • Combination checklist and narrative • Computer-generated • Handwritten • May or may not include summary • May or may not include photos • Should be delivered to buyer at first meeting

20. Home Inspection Report Basics Home inspection reports should: • Be factual and unbiased — you can’t hide from the facts; put them out there • Adhere to the industry standards of practice as per major trade groups (ASHI, NAHI, InterNACHI) • Cover all major components • Define terms used therein: (e.g., “acceptable,” “marginal,” “defective”

21. Professional Home Inspector Characteristics of a good inspector: • Trained, thorough and unbiased • Courteous and professional, and has the necessary tools and equipment • Adheres to industry standards • Has good written and oral communication skills • Is insured and, if applicable, licensed

22. What an Inspector SHOULD Do • Adhere to industry standards of practice and code of ethics (ASHI, NAHI, InterNACHI) • Inspect readily accessible systems and components • Report: • Systems or components that aren’t working properly • Explanations of the deficiencies • Recommendations to correct • Reasons with fact if certain systems or components were not inspected

23. What an Inspector Should NOT Do • Predict remaining life of systems or components • Offer advice on methods, materials, costs to fix components unless qualified to do so • Offer to make repairs, refer specific contractors or receive referral fees • Comment on market value • Perform code inspections

24. Educate the Home Buyer

25. Ordering a Prelisting Inspection • Immediately after listing • Provide the seller with a list of inspectors or refer them to a trade group such as the American Society of Home Inspectors (ASHI)

26. Explain the Scope of the Inspection A good inspector: • Explains the scope and limitations of an inspection: It is a visual review of readily accessible areas, random sampling of like items, etc. • Invites the seller along for the inspection • Explains how long the inspection might take, what the fee will be, and when the home seller can expect delivery of the inspection report • Touches upon their training, experience and affiliations

27. Set Realistic Expectations • The buyer should understand that no house is perfect: Expect ongoing maintenance • The seller should anticipate that the inspector could find things he/she is unaware of • The seller should understand this is an opportunity to repair those items or to adjust the asking price

28. Preparing the Seller

29. Inspector Needs Access • Secure pets • Turn off alarms • Remove obstructions to: • Furnace and water heater • Electrical panel • Attic • Garage • Crawl space, etc.

30. After the Inspection A good inspector will: • Leave things the way he/she found them • Verify that the furnace/AC is running and return thermostat to original setting • Turn off lights or running water • Make sure doors are locked, etc.

31. The Inspection Process: Grounds

32. Grading and Drainage • Inspectors always look for grading issues • Negative grading can lead to water intrusion • Most drainage issues are quick and easy to fix

33. Driveway, Walkway and Steps Loose or missing handrails (inside or out) are a safety issue: • Inspector will always look for these items • These items are generally easy and inexpensive to repair in advance

34. Porches, Stoops, Decks, Balconies and Patios • Support posts and stair stringers should have no earth-to-wood contact • Easy to spot and repair in advance

35. The Inspection Process: Exterior

36. Roofing System Inspection of roof: • The roof is a major part of an inspection • The information known is best shared with the buyer: age, number of layers, type of materials, leaking, etc. • It boosts buyer confidence

37. Siding and Trim • There are many exterior coverings, such as wood, vinyl, stucco, brick, stone and synthetics • All can be affected by vegetation, shrubbery and trees making contact with the siding

38. Windows and Doors Inspect for: • Operation • Alignment • Weather-stripping • Evidence of leaks

39. Garages • Garage doors receive a lot of use • Examining the operation, tracks, springs, openers and fit is important • For child safety, auto reverse is a must

40. Pools, Hot Tubs and Spas • Swimming pools and hot tubs are high-maintenance • Having the pool cleaned and filters changed in advance boosts confidence

41. In-ground Sprinklers Irrigation systems can lead to: • Underground leaks/erosion, which can greatly affect driveways, sidewalks, etc. • Poorly placed heads, which can lead to water intrusion in the basement, etc. • In the best case, sprinklers are high-maintenance

42. The Inspection Process: Electrical System

43. Electrical System The buyer wants to know: • Whether the electrical service is large enough to meet their needs • That it is safe

44. GFCI Regardless of the age of the home, an inspector will always look for and recommend GFCI protection: • Bathrooms • Kitchen countertops • Unfinished basements • Garages • Crawl spaces • All outdoor electrical outlets

45. Smoke Detectors • National safety standards require smoke detectors • The inspector will always look for them • They should be in place and functional

46. The Inspection Process: Plumbing System

47. Plumbing and Fixtures Four consistent concerns with plumbing are: • Is there adequate flow? • Is there adequate pressure? • Are there any leaks? • Are the drains plugged or sluggish ?

48. The Inspection Process: HVAC System

49. HVAC System: Heating Check for adequate heating (gas furnace): • Overall size, age and condition of unit • Proper location of unit • Adequate combustion air • Adequate temperature rise • Heat source in each room • Condition, size and location of ducts • Condition of blower/humidifier • Heat exchanger (mostly hidden) • Check for flue gases and other leaks around exhaust and in supply air • Dirty filters obstruct flow and affect temperature rise • Thermostat unit responds to controls

50. HVAC System: Cooling Check for adequate cooling: • Overall size, age and condition of unit • Outside unit, clean, level and up off the ground, suction line insulated • No obstructions interfering with unit • Discharging heat-ambient test • Adequate temperature drop (14 to 22 degrees F) • Blower clean and variable speed • Dirty filters obstruct flow and affect temperature drop • Thermostat unit responds to normal controls