Pre-sale inspections are the various property inspections (home, pest, roof, pool, etc.) that home sellers pay for and provide to home buyers upfront. In Silicon Valley, this is the norm. It benefits both sellers and buyers by allowing the property’s condition to be known and understood before offers are even considered.
Confident buyers pay more.
A major principle for sellers to understand is that home buyers who feel confident about a property’s condition will pay more. When they are concerned about hidden costs, they pay a lot less or perhaps don’t write an offer at all.
For this reason, being thorough with the disclosures and providing documentation upfront (receipts for major work, permits record, etc.) and providing inspections for prospects to study upfront provides the transparency that removes worry, even if things do need to be repaired or replaced. In nearly every home, some work will need to be done.
The National Association of Realtors did a study and found that buyers often believe that repairs or replacements will be five times what they actually cost! That’s been generally true in my experience, too – sometimes they only think it’s 2 – 3 times as much. But it’s always overblown! Here’s an example from my own experience:
A few years ago I had a listing where a new roof was needed. It was a small house. I got a bid for the roof replacement (bids usually are free) and the cost was about $15,000. I had a buyer looking at similarly sized homes and asked him what he thought a new roof would cost, and he stated “$100,000”.
That’s a perfect example of why sellers need buyers to understand the scope of work upfront.
On a related note, just like with every other profession, inspectors aren’t all the same quality or thoroughness. Some companies or individual professionals may miss things or gloss over them. When that happens, the credibility of the whole inspection is called into question and buyers may lose all confidence. I’ve seen this when properties have significant looking flaws with foundations or walls and they are not even mentioned in the pre-sale inspection reports. The buyers and I have the same thought: what else did that inspector miss? It is a mistake to select an inspector based only on the cost of the inspection. Better is finding a reputable company and person who will find the truth (and it should be the same truth whether a buyer or a seller ordered the report).
Informed buyers don’t get surprises that cause them to want to back out.
What’s the risk if you don’t get pre-sale inspections? Without the upfront documentation, home buyers typically would request a contingency (way to get out of the contract) to pay for their own inspections in escrow. At that point, your home is tied up while the process unfolds.
With the various investigations, buyers may discover expensive surprises that will change their motivation to complete the sale and then will either renegotiate or back out. Most consumers know that if a home sells a second time, it usually sells for less.
On the other hand, the home may have sold for less due to perceived repair / replacement costs, but if the inspections are clean, the sale price will not go up!
The cost of inspections may be around $1,000 – $1,400 for a house, less for a condo or townhome, usually. It is a very small percentage of home prices here.
Some of the typical pre-sale inspections for a house include:
Pest Report (covers “wood destroying organisms” such as termites, fungus, dry rot, boring beetles, etc.)
Home Inspection (checks the foundation, electrical, plumbing, and other systems of the house)
Roof Inspection (a home inspector will comment on the roof’s condition, but cannot price the noted repairs nor do the work)
If there’s a pool, a pool inspection is also advisable
The home inspector may suggest other inspections if problems are discovered. Those could be for foundation, heating, cooling, electrical, plumbing, and so on.
With a condo or townhouse, you can also provide the HOA documentation upfront. There are some HOA doc specialists who can review them (for a fee) and warn of red flags and missing items that could be crucial.
To summarize, pre-sale inspections benefit sellers because by making the home’s condition known, fear is removed for the buyers. Confident buyers pay more and they don’t back out later because there aren’t surprises.
Once you are prepared with the inspection reports you need, we will take some steps to make sure your home looks its best. This is staging. By the time it’s ready to view, your Santa Clara County area home should look simply irresistible to buyers.
Related Reading on Pre-sale Inspections:
Who is present at the home inspections? (article on the Valley of Heart’s Delight blog)
How often should you get a termite inspection? (also on our other blog)