Home Inspections: Is It Time for a Change?
Home inspections quite certainly have become the most dreaded two-word request that a home seller doesn’t want to hear these days. Let’s take a close look at the reality of home inspections.
Frankly, I think it is time for a change! After 45 years in the real estate profession, I must say that the
inclusion of home inspections starting in the late 1990s has created the highest degree of animosity and turmoil between a buyer and a seller that I have ever witnessed.
Home Inspection Then vs. Now
Real estate home inspections first came into play in the 1970s when building contractors were first used to inspect homes for potential homebuyers. It wasn’t until the mid-1980s until home inspectors started to become regulated and licensed. Since that time, their popularity has increased greatly with real estate agents encouraging their use to protect not only the agent, but the buyers also.
The right to a typical real estate inspection is included in just about every real estate contract these days and gives buyers a time period to enlist a home inspector and a time period to report defects that a home inspector may find.
It also lists yet another time period for the buyer and seller to determine if the defects need repair,
replacement, cash in lieu of repair/replacement or no repair/replacement at all. Ironically, these three time periods take place “after” the sales contract price has been negotiated and sales contract signed by both parties. It is the “after” that I have a big problem with.
Before or After
My question to you, the reader, is how many times in our lives do we negotiate a purchase price and then take weeks and sometime months, to determine if we are satisfied or want that product?
I tend to think back to the “early days” of real estate when buyers actually examined a home, often bringing parents or builder friends and then negotiated a price to buy based on the home at the time of signing the sales contract.
Remember those days! Was that really such a bad idea?
Do we negotiate to purchase an automobile, then take weeks or months before completing the purchase? No, we typically test drive the automobile or possibly even take it to an auto repair shop “prior” to agreeing to a purchase price. Notice that the key word here is “prior” to agreeing on a purchase price.
How About an Example
A comical example I often use to explain my frustration with the timing of home inspections is this. When you chose a partner for marriage, do you get engaged and then ask for a two to three week inspection period of your partner, only to come back with a list of defects asking them to be remedied or the engagement terminated? Just imagine the ramifications that we would have!
The inspection reports could come back with all of their many defects listed such as bad knee, crooked nose, thinning hair, etc. How many engagements would be destroyed or terminated after such an inspection? We are all astutely aware that homes, cars and people are not perfect, they will have defects of some kind. But when is the proper time to look for defects? After negotiation or before?
What Home Inspections Look Like
Back to my burning question. I understand that home inspections are necessary and wanted in many cases, however my quest here is to determine if the timing of a home inspection could and should be improved upon.
Presently, home buyers and sellers take days to negotiate a purchase price, execute (sign) a contract contingent on a satisfactory home inspection and start the lengthy process of waiting. Unfortunately,
what I have witnessed in the past and present are home inspections being used as a testy re-negotiation tool to get home sellers to reduce their previously negotiated price even further.
In order words, you may agree to sell your home for $250,000 to a buyer. The buyer gets a home inspection completed in a couple of weeks and comes back asking you to reduce the price of
your home upon presenting to you or your agent a lengthy list of your home’s imperfections. Sound familiar?
Due to the purchase being contingent upon a “satisfactory home inspection,” the buyer also has the right
to terminate the real estate contract for any reason that they deem the home inspection is unsatisfactory. I have actually seen buyers terminate contracts because of a small scratch on a bathtub.
A Possible Solution
My mantra in life is if I don’t like something, I try to fix it. So, here is my suggestion to fix this problem:
If a buyer wants to purchase a home and is unsure of the home’s condition prior to purchase, why not have the buyer conduct a home inspection or even a modified home inspection (now being offered by some inspectors) “prior” to agreeing on a purchase price and executing a sales contract?
The argument I will get from some is that time is of the essence and most home sellers do not wish to wait for a buyer to get a home inspection or modified inspection prior to signing a contract. Also, what keeps the seller from selling the property to other willing buyers while the first buyer is getting the home inspected?
My answer to those questions would be to give the seller the right to negotiate with each buyer based on the merit of their offer.
For example, I have my home up for sale and I have two interested buyers. Buyer #1 asks for no home inspection and will purchase at $10,000 less than asking price. Buyer #2 wants to get a home inspection and asks for a seven-day period to conduct the inspection in order to negotiate a price and sign a contract.
I, as the seller, now have the right to accept whatever offer I feel best suits me. My choices are a $10,000
lower price for an instant sell with no strings attached or sign an agreement with Buyer #2 to wait seven days and possibly get a higher price (or could be a lower price).
It is somewhat of a gamble to wait for Buyer #2, but isn’t that what we all do when we negotiate or wait for the highest and best price we can get? The end result with either Buyer #1 or #2 is that once the real estate sales contract is signed, there is no re-negotiation of sales price, and buyer and seller can rest assured that the buyer is satisfied with their upcoming purchase.
In conclusion, if one wants a home inspection, conduct that home inspection prior to negotiating a price for the home you want to purchase. There are many other options out there of how we can conduct home inspections quickly and fairly “prior” to the negotiation stage. Share your ideas to help get this problem resolved for a better and fairer buying and selling experience.
Have you been puzzled by the timing of a home inspection in your real estate contract? Was your home closing delayed or terminated due to a contingent home inspection? What are your suggestions to prevent untimely home inspection re-negotiations after a real estate contract has been negotiated/signed?
Important points made, ICC. Yes, a bathtub scratch is silly, I totally agree…..but it terminated the sale of the home and the seller had to relist the home after having it off the market for over two weeks. Foundation issues, electrical and plumbing issues are very important and should be disclosed by the seller if known or inspected by a buyer or buyer inspector if of concern. The main issue I see creating problems today is the timing of home inspections and why can’t we get the inspections done prior to negotiating a contract offer instead of after. Having an inspection prior to making an offer on a home, gives the buyer the necessary tools to place a fair offer based on condition. It also gives the seller a fair playing field without having to take their home off the market for weeks and fearing of renegotiating a price that was previously agreed upon. Hopefully we can come up with solutions fair to both buyers and sellers.
Yes, Eleanor, a seller can get an inspection prior to listing their home for sale and sometimes do. The buyer has the option to accept the seller’s inspection or they can get one of their own. I find that buyers typically want to hire their own inspector.
Thank you for your question!
Linda,
Great points that you made. I agree that home inspections are limited in that they only reflect the condition of the home at the time on inspection and predictions of future problems and problems that are concealed are not always known.
The biggest problem I am seeing is the inspection after the price is negotiated on the contract. If we could come up with a fair way to have a buyer inspect a home prior to placing an offer on the home, it would prevent sellers taking homes off the market for weeks at a time losing potential other buyers.
I have received information from home inspectors in the past few months indicating they are not offering a abbreviated home inspection that buyers can obtain prior to making an offer on a home to guide them in the price they feel if fair to offer based on condition. This new abbreviated prior to placing an offer inspection may be part of a solution that is needed.
Thank you so much for your comments and keep up the good work representing buyers and sellers and keeping good communications going between both.
Cindyci
To avoid this, sellers definitely could get a certified inspector’s report prior to listing. Buyers are undertaking the largest transactions of their lives when they purchase homes. It is not like buying a used car. Of course they want to ensure that windows, basement, roof, furnace and other large items are in good order. In the country, its also prudent to have water quality/well testing as well as septic tank/bed inspections, all of which can become expensive nightmares for buyers if there are issues.
I never buy a house without an inspection because we have encountered sellers that intentionally hide problems or lie about the conditions! My recommendation is to have your house inspected before you sell it so you can come up with a fair and equitable price and know what underlying problems you may have.