Dear Real Estate Brokers & Agents:
How many of you have either said or heard someone else in your office say that “the home inspector killed this deal”? If you are being honest, I suspect all of you have and even if you haven’t said it out loud, I’m willing to bet you thought it at least once or twice. Is this really true? Can home inspectors “kill” deals? The honest answer to this questions is “no”. Home inspectors do not kill deals and if the real estate industry really understood what a home inspection is and what home inspectors do, the opposite may be true. Yes, you read this correctly. I really believe a good home inspection is just as likely to help a deal close smoothly as it is to kill a deal.
Right now, I can almost hear some of you say “there is no way a home inspection ever helped close any of my deals”, but let’s step back and examine that statement from a different perspective. First, can you clearly explain the home inspection process and applicable standards of practice in your state to someone in just 3 or 4 sentences? If not, how can you hope to explain it to your client and how can you hope to use the inspection report to protect both your client and perhaps more importantly, you. A well written home inspection report can actually protect a real estate broker or agent from liability exposure whether you are on the buy or sell side of the transaction.
If you represent the buyer, you already know that a good home inspection can often save you from letting a client buy a home with potentially costly hidden defects. If you primarily represent sellers, you might now find yourself asking, “How can a home inspection protect me if I am the listing agent”? The simplest answer is to remember all of the times a seller “innocently” failed to disclose what a buyer might view as a material issue. Or just think about how many times you see a freshly painted basement in a house you are listing for sale. Why would a seller paint a basement floor before you even sign the listing agreement? The point is that real estate agents and brokers are not mind readers and do not have x-ray vision. Having a home inspection report helps alleviate your potential exposure to a post-closing claim which is much appreciated by your E&O carrier. You certainly know what it is like to get dragged into a “he said, she said” argument between a seller and buyer months after the sale closed.
In order to better understand a home inspection just think of the home inspector as a physician with a general practice (GP). When you go see your GP and he/she sees something that is not normal, they typically send you for more tests and refer you to a specialist/expert. They do not try to diagnose everything themselves. Rather, they understand their own limitations and defer to an expert in the field. This is almost identical to what a home inspector (the GP) does when they say in their report that the roof shows evidence of unusual wear and tear and they recommend you contact a licensed roofer (the expert) to further evaluate the issue…before the sale closes. The timing of going to the expert for further evaluation is critical. If you wait until after the closing, the expert may reveal a much more serious problem than you believed. This is akin to ignoring the referral to a specialist by your GP because you have a vacation planned and then finding out after the vacation it is too late to treat your condition.
It is also important to remember home inspection is defined as a “visual examination” of the major components and systems in a home. The word “visual” is very important because it means the inspector cannot see behind/through walls or under carpet/tile and cannot cut holes in anything to supplement his/her visual examination. Other issues encountered by a home inspector which limit the effectiveness of his/her report include, by way of example, inaccessible areas (attics and crawl spaces), rooms filled with boxes, furniture blocking walls, and freshly painted walls, floors, or ceilings. In the end, this means even the best home inspector cannot and should not be expected to find every single item which may be of concern.
Similarly, like a medical exam, the inspector is limited to reporting what they saw on the day of the inspection. The day after the inspection takes place something could happen which creates visual clues not present on the day of the inspection. For example, it hasn’t rained in some parts of California for more than 2 years. If a home inspection is conducted today there may be no visual signs the roof is not sound, but tomorrow after it rains hard everything could change. This is why a walk-through immediately prior to closing is an absolute necessity. Things change after the inspection has been done and not even the best home inspector can predict the future. In addition, once a buyer takes possession it is their duty to properly maintain the home. Too many times we have seen a homeowner try to blame a home inspector for an issue caused solely by the homeowner’s failure to do any regular, required maintenance.
So, how can a home inspection make the closing process go more smoothly? First, if a home inspector is engaged by the seller before the property is listed, the seller will have a road map to use to evaluate and possibly resolve any issues a potential buyer might bring up. If the seller already knows about something, the chances the buyer can use it to derail a sale or negotiate for a significant price concession are significantly lower. For example, even if the seller doesn’t want to repair the roof, he/she can get bids for the repair work well ahead of time so when the buyer asks for a $10,000 price reduction the seller can hand over 3 bids that average $5,000 and retain negotiating leverage they might otherwise have lost. A pre-listing home inspection will cost between $300 and $500 so it is easy to see there is a real benefit to knowing about any issues before the buyer shows up waving a red flag and screaming “foul”.
A good home inspection and thorough report will bring transparency into a real estate transaction and that benefits all concerned over the long haul. Now, take the pledge to give home inspectors the respect they are due and stop blaming them for “killing” deals. Even the ancient Greeks stopped killing the messenger centuries ago.
Author: Brian L. Trotier, JD, is the Executive Vice President and Chief Operating Officer of FREA and a former practicing attorney with more than 30 years experience in real estate and risk management.