Why Sellers Should Always Get a Pre-Listing Home Inspection

Repairs can be a major source of dispute between sellers and buyers.  What a seller may consider to be a minor issue can be a major concern to a buyer.  Often, Sellers fail to recognize certain conditions may affect the Buyer’s ability to obtain affordable insurance; a Seller who has current insurance may not be aware of the need to update an aged electrical panel or roof (they simply have not come up for renewal yet). Generally, the Seller feels the sales price is a bargain for the home, as-is, and they do not believe they should make repairs or updates. Listing agents are pressured to present the home, as-is, and hope for the best (most know these issues will have to be dealt with later).  Avoiding upfront issues with the hope they will may be dealt with by an increased repair allowance or closing assistance or even an outright price reduction later may not work if the Buyer is unable to obtain insurance or get a loan commitment.  Certain repairs will almost always kill a loan commitment – WDO/termites, visible mold, structural cracks, broken windows and inoperable AC systems to name a few. A more recent deterrent to loan approval is the discovery of open/expired or missing building permits.  Almost all local building departments are on-line now and title companies are searching for permits.  Open/expired or missing permits may halt the title approval which means… no loan!  Generally, this situation is discovered well after the buyer has conducted home inspections and final negotiations.  Many home inspectors do not research building permits and almost no realtor does. Most Sellers simply do not think of it or think it is not necessary – they got away with building the deck or replacing the roof without a permit so why should it matter?  The home inspector said the roof has ten years of useful life!  Many times, we find there was a permit pulled for the roof but it was never finaled because the roofer failed to call in the final inspection and sometimes we find the roof failed an initial inspection and the roofer did not notify the homeowner! Open/expired building permits mean the work was not accepted or finaled and therefore it is improper.  This could relate to significant financial exposure to the Buyer if the work has to be removed/replaced. Common issues we find are open/expired permits for roof replacement, fences, plumbing, siding and remodel permits.  Common missing permits include decks, garage conversions and room additions.  Typically, if I find an unpermitted room addition, I will also find undersized AC systems, inferior electrical and plumbing. Listing agents are actually required to conduct a physical inspection of the home to include questioning what are generally obvious additions.  It is important to note the size/layout of the home on the local property appraiser website may include room additions as the appraiser conducts a physical inspection every year or two and will generally add structural additions to the tax role – however, this does not correlate to a building permit and, therefore, does not mean a proper building permit was obtained.  As data sharing becomes easier, progressive jurisdictions are beginning to notify all affected departments of disparities one department may note such as the appraiser notifying the building department or code enforcement when they discover additions without permits; so in time, the ability to “get away” with not obtaining permits will become much harder. For many Sellers, failing to recognize factors which may delay or kill the sale upfront will generally cost them much more in the end.  Having a pre-listing inspection by a competent home inspector does not mean the Seller must completely remodel the home.  A pre-listing inspection should include researching permits on file, inspection of the major components to identify possible issues a Buyer may face with the appraisal or obtaining insurance, possible life safety concerns, WDO/termite, pool/spa and general maintenance recommendations. A pre-listing inspection is meant to assist the Seller and it should not be used as a marketing tool for a prospective buyer.  There are very real legal issues involving privity and a home inspector who sells a pre-listing inspection for the purpose of “assisting” the Seller/Listing Agent is actually quite foolish.  If you use a home inspector who offers this, make sure they have at least $1 million in E&O insurance and further, that you obtain a Named Additional Insured certificate from their carrier. A Pre-Listing inspection does not provide proper due diligence protection to both the Seller and the Buyer.  It helps the Seller meet what most would consider to be acceptable standards of functionality whereas a Buyer may need more than this. Unlike real estate agents, home inspectors can’t be “dual agents” although some may try.  A smart Listing Agent or Buyer’s Agent should always recommend against this practice by some home inspectors.

              William Chandler Certified General Contractor Certified Building Consultant® www.TheBuildingInspector.net

You don't have to choose the most qualified inspector, but it does help!