Do you know what the buyer can and cannot do at inspection? If not, this phase of the sale process can be intimidating.
According to the American Society of Home Inspectors (ASHI), 77% of buyers purchasing a home get a home inspection. For most sellers, this is the most stressful part of the home sale process once a contract is accepted. Some of that stress comes from a lack of knowledge about how the inspection process currently works, and it has changed over the past few years. Below I have outlined my top 5 Truths that you should know about the inspection process and what we should do given the information provided.
I’ve been in the real estate industry since 2008. I specialize in representing sellers in Central Maryland and pride myself on my ability to guide sellers through what is perceived as the most stressful part of the real estate transaction - the home inspection. Did you know that when Realtors get their real estate license in Maryland there is no component of the education that focuses on understanding the systems of a home? Coupled with the fact that there is a lot of fine print surrounding the inspection process, this often becomes the most intimidating part of the sale for not only the seller, but also the Realtor. On the contrary, I am very detail oriented and not only read all the fine print but have a strong understanding of the inspection process and how to successfully navigate in. And having formerly spent nine years in property management overseeing a maintenance and turnover department that managed 700 single-family homes in the Greater Baltimore Area, having completed 72 hours of home inspection education, having managed my three rental properties, an Air B&B, and my own home, I can confidently say I am well versed in home repairs and this phase of the sale process if where I truly shine. In this article I'm including my top five facts about the inspection process that sellers often misunderstand. My goal is to provide you with information and make sure you succeed!
Fact # 1 - A buyer getting a home inspection has the opportunity to terminate the contract for inspection reasons
In 2018, the inspection process changed. Prior to that point, a buyer could elect to either do an inspection and not ask for repairs, but maintain the right to walk away for inspection purposes, or do a home inspection and have the opportunity to negotiate for repairs, but not walk away without potentially losing their deposit. In 2018, that changed. Now a buyer that elects to do a home inspection can negotiate for repairs, negotiate for a credit, or walk away for inspection reasons within the home inspection contingency period.
As a seller, what should you do given this information? From a seller’s perspective, it is always better to go through the negotiation process to do repairs or issue a credit rather than have the buyer walk away and put the property back on the market to start all over again with a new buyer while having to explain the reason for a prior fall through. To prevent a fall through, communication is imperative. As your agent, I will communicate with the buyer’s agent prior to entering the inspections phase. I will find out information such as: Is the buyer a first time homebuyer? Does the buyer have knowledge about home repairs or have someone they trust who is either knowledgeable about home repairs or is a contractor? Are there certain components of the home that the buyer is particularly worried about? Gathering this information can be helpful in diffusing the stress level of the buyer prior to entering the inspection phase. For example, if the buyer is particularly nervous about termites, and you know when you purchased the house several years ago that you had a termite inspection that came up clear and, then, proactively did preventative termite treatments, this could put a buyer at ease.
Equally as important as understanding the buyer prior to the inspection, is to understand the buyer’s mentality immediately after the inspection. As your agent, I will contact the buyer’s agent after the inspection to get some insight as to how it went, and how the buyer is feeling. If there is something of particular concern to the buyer, for example, I will have that conversation with you to find out, what you might be willing to do to make the buyer comfortable. Sometimes a buyer will assume a seller is going to be unwilling to take on a repair and maybe then start considering terminating the contract without giving you the opportunity to address their concerns.
Fact # 2 - A buyer cannot ask for upgrades of a properly working system
The home inspection is not meant to be utilized for a buyer to have components of your home upgraded if those components are working today. Time and time again, I have had sellers inform me that their furnace, for example, is 10 years old. The seller is nervous that they are going to have to replace the furnace. However, a furnace typically lasts 20 to 25 years. If the furnace was installed properly and is working as it should today, the buyer cannot require you to replace it. Now, if you have a gas furnace, and there is not proper ventilation to ensure that carbon monoxide is properly removed from your utility area, yes a buyer can request that you address that, but that is a less expensive repair that having to replace your furnace.
What should we do as a seller given this information? The main components that most buyers focus on during a home inspection are your heating and cooling systems, your plumbing, your electrical, and your roof. Make sure these systems are working properly, you don’t have leaks, you don’t have any areas of your electrical system that spark or lights that flicker, and that your roof is not leaking. If your systems are not working properly, or there are leaks, engage a contractor to make repairs prior to listing your property so that you diffuse potential concerns of a perspective buyer.
Fact # 3 - A buyer can’t ask for cosmetic repairs
The purpose of the home inspection is not for the seller to make cosmetic repairs. Things like a missing cabinet knob, a loose floor tile, a cracked piece of baseboard trim, should not be requested to be repaired.
What should you do as a seller given this information? While it’s important to put your best foot forward when you list your property and have a home that is well maintained, it is in your best interest to focus on any repairs pertaining to the mechanical systems or roof and not stress about small cosmetic deficiencies.
Fact # 4 - A home warranty can make the difference between a contract moving forward or falling through
If during the inspection, the buyer finds that your furnace is 20 years old and is expected to last 25 years, or that your roof is more than 15 years old, these facts can cause some buyers pause, especially if they are new homebuyers, looking at the top of their price range, or don’t have extensive reserves to repair or replace the systems should they fail soon after they purchase your home. Now you are not required to upgrade systems that are functioning properly today. It is in everyone’s best interest that you preserve your pocket as well as the buyer’s. A home warranty can be fantastic solution to make both parties comfortable. Depending on the provider and coverage, a home warranty that lasts for one year can cost anywhere between $500-$800. As a seller, you could offer to purchase a one-year home warranty for the buyer so that in the event one of the systems fails soon after their purchase, it will be mostly covered by the warranty provider.
What should you do as a seller given this information? As your agent, I will find out what particular systems are causing the buyer pause and find a home warranty that covers those systems. For example, not all warranties cover major kitchen appliances, or roofs, but some do. While you would be electing to pay the $500-$800 to purchase the warranty, it is less expensive than putting the property back on the market and looking for the next buyer while still paying your mortgage, utilities, property, taxes, etc. I do not recommend offering a home warranty when you list the property. Every buyer is different and what matters is different. Keep the idea of a home warranty in your back pocket as a negotiation tool at the inspection phase.
Fact # 5 - Being ultra proactive on getting repairs done once you are in agreement with the buyer can be detrimental to you
The majority of buyers cannot purchase a property with cash. Therefore, they will need to obtain a loan. Typically agreements regarding repairs after the home inspection are reached within about two weeks of going under contract. Separately, the buyer is working on getting a loan commitment from the lender. This can take up to four weeks. While the lender issued a preapproval indicating that the buyer should be able to purchase the property, that is different from a loan commitment, where the property has already been appraised and the lender confirms that the sale will go through. Things do happen. If the buyer loses their job for example, the buyer will not be able to get the loan or purchase the house.
What should you do as a seller given this information? If you immediately start working on repairs, you could end up spending money and still have to put the house back on the market. I will work with you as your agent to keep you informed about outstanding contingencies like financing that have not been met so we can make the strategic decisions about when to start doing repairs and incurring expenses.
You’re not required to give the buyer everything they ask for, every seller has their limits
The home inspection process should not be feared. As your agent, I will make sure to bust any myths about the home inspection process for you and also educate you on what can and cannot happen and what your options are. Remember, even if the buyer asks for repairs or credits, you are not required to say yes. You can always say no and we can work to come to an agreement with the buyer. If the buyer is unreasonable, you can say no and then it’s up to the buyer if they still want to proceed with the sale or not. You’re never required to do everything the buyer asks or spend more money on repairs or credits than you’re comfortable with. I'll be in your corner every step of the way!
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