The Value of Pre-Sale Inspections

From YourSITE.com

Industry Residential
The Value of Pre-Sale Inspections
By John R. Schneider
Jan 31, 2004, 00:22

Although it is still a good market for sellers, unless your house is in top condition, and priced right, it may end up sitting on the market. Buyers are being more cautious about purchasing a home and are quick to leave a sale if significant hidden or undisclosed items are discovered during the inspection process.

The best protection sellers can give themselves when selling their homes is to have an inspection prior to listing the property. Pre-sale inspections can assist sellers in complying with disclosure requirements and limit their exposure to future liabilities. In California, a seller is responsible for disclosing “known” material facts that may affect the desirability of the house. This includes potential “red flags”, and conditions which may indicate a problem such as, noisy neighbors, poor drainage, an un-permitted addition, or unstable soil.

The problem is that most sellers know very little about the house that they own, and are often unaware of hidden concerns. In most transactions, a seller does not provide disclosure information to the buyer until after the buyer signs a contract. Sellers fill out a form called the Transfer Disclosure Statement, and give this document to the buyer, usually within three days of signing the contract. This form then becomes the basis for the “disclosed” condition of the property.

Any pertinent information that is not disclosed or is discovered after receiving the disclosure statement can potentially create a situation of vulnerability for the seller. Buyers are often not willing to accept undisclosed structural or safety concerns, or drainage issues. Because of the high costs of buying a home, buyers are asking sellers to either fix the undisclosed items, or reduce the price of the house. No longer can sellers be assured of getting their asking price, or of avoiding making any repairs to the house. To have an advantage in this market, it is important for sellers to know everything they can about the condition of their houses before they decide to sell.

Having your house inspected before you sell will limit your exposure to liabilities during and after the sales transaction. A pre-sale inspection can often provide you with valuable information on the current condition of the house and property site that you are probably not aware of. The most important pre-sale inspections for a seller are the general house inspection, and the termite inspection. However, prudent sellers may also get roof, chimney, and sometimes appliance inspections.

The general house inspection will include important information about the property site, drainage around the building, the exterior of the building, the roof, chimney and the utility disconnects. It will also include the interior of the house, the electrical wiring, plumbing lines, the furnace and the water heater, and finally, information about the structural framing in the attic and the garage and the presence of any health and safety concerns.

Once you have this information, you will have the opportunity to decide whether or not you want to fix or correct an item before you enter into a contract with a buyer. If you decide not to fix certain items, you disclose the fact as part of your contract. By disclosing this information up front to a buyer, a seller can prevent the buyer from trying to negotiate repairs on those items after they enter into the contract.

If you are working with a Realtor, discuss the inspection reports with your agent before you make any decisions. Agents can often advise you whether or not it would be in your best interest to have certain items repaired. Correcting health and safety conditions, drainage or structural concerns is far more important than fixing something that poses little exposure to liability, or a minimal cost to fix. Your agent can also help you establish the terms of the sale based on what is being disclosed.

All About Homes has developed a three page check list called the “Seller’s Property Review”, that home owners can use to help evaluate the condition of their homes. By answering the questions in the checklist, a home owner will be guided through an inspection of their home, as well as the property site, ending up with valuable disclosure information. If you would like to receive a copy of this checklist, visit our website at www.allabouthomes.com and click on the download link, or contact us at the address or fax below.

John R. Schneider is a licensed general building contractor and a certified residential code specialist. He is president of All About Homes, a residential inspection company, and has been performing code and construction consultations since 1985. Readers may address their comments to John Schneider, 24326 Mission Blvd. Suite 7, Hayward, Ca 94544. Fax number: 510 537-8666. Please include your phone number. Schneider will answer questions of general interest in the paper. He reserves the right to edit the letter for brevity and clarity. Readers are encouraged to contact a competent contractor or code consultant for specific information regarding questions they may have about their homes.