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.
Certified General Contractor
Certified Building Consultant®