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?
Hello Nicole
Thank you for sharing the procedure used in Canada for home inspections. The signing of a preliminary contract (option) is something we also may want to consider before a final formal sales contract is accepted. Possibly a seller could sign multiple pre-contracts and then be able to accept the best final contract after all inspections are made. That would help prevent the seller from losing valuable time off the market.
Home inspections are necessary for buyers that may have concerns over home defects. Most realtors also appreciate and recommend home inspections to protect their buyer and protect their liability. The biggest issue I see with home inspections is using them for a re-negotiation tool after the real estate contract has been executed.
I agree with ICC. The analogies used do not work. One could argue there would be much less divorce if a potential companion was deemed closer to perfect! And a car can come with a warranty, but is also a different type of sale. Every situation when you “aquire” something involves risk. Which is why we have created safeguards to protect consumers.
Eleanor is correct. There are many people doing pre listing inspections. Some realtors insist on it. In my mind this makes them better realtors than the rest. There are also post purchase inspections. Just to understand what condition the house is in.
To that point. Unfortunately some people use the inspection to renegotiate. I’m not a fan of that. A properly worded inspection report clearly states what is a good idea, versus requiring attention right away.
The following is not a realtor bashing comment. Let’s face it, not having an inspection after a P&S is signed makes for a smoother sale. Having one can create arguments or worse, cause a lost sale. Which delays or stops the commission from being paid. And I’m not a fan of that process either. While a topic for another time, how is it fair to work with someone for a year or two and possibly not get paid!
People use professionals for multiple services. We do this because as individuals we cannot know everything. We don’t usually walk into a court room on our own. We take advice from doctors, lawyers, clergy, dentists and parents.
I agree a buyer should not be allowed to back out for minor wear and tear. I have seen contracts where only an issue costing a certain amount (such as $5,000), would be considered for addressing.
The agents that have game, know how to pull these things off.
To Jackie’s point. Yes, unfortunately with every profession there are individuals that are not good at their jobs. I’m sure Jackie knows people in their profession that she wishes would stop doing the job she does!
I believe that real estate transactions are extremely unique. That you should not make the comparison of not being able to renegotiate in other situations, apply here.
At the risk of upsetting Cindy, I’m hearing a frustrated realtor trying to make the process uninterruptible to get to the closing. To be clear Cindy, I appreciate that desire.
Imagine a world where the realtor gets paid whether the transaction closes or not. How would you feel about the inspection process then?
With all due respect.
It may just be too much time for you, because you want your money done and quick. For the buyer, this is their life savings going into it, and a lifetime to live in that house. Get the inspection, and if you need to, Get a NEW real estate agent.
Was disappointed in your article and the examples you used. Would be very difficult to get out of a contract for a scratched bath tub! You are all over the place with your facts! Disclosure forms completed by sellers can lead to misinformation or deception because they can read “seller is unaware.” As a retired Realtor, you could have shared information about home pre-inspections or clarified how a seller accepts one offer. This was a very confusing and misleading article. Sorry, I don’t usually comment but this was too much in one article.
Was disappointed in your article and the examples you used. Would be very difficult to get out of a contract for a scratched bath tub! You are all over the place with your facts! Disclosure forms completed by sellers can lead to misinformation or deception because they can read “seller is unaware.” As a retired Realtor, you could have shared information about home pre-inspections or clarified how a seller accepts one offer. This was a very confusing and misleading article. Sorry, I don’t usually comment but found this inappropriate for readers of this site.