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Wednesday, October 25, 2017

What You Need to Know About the Inspection Process When Selling Your Home

Getting your home under contract is just the beginning of the long and complicated process of successfully reaching the closing table. Of the many hurdles that lie between contract and closing, one that typically comes early in the process, and that can require deft negotiation, is that of the home inspection.  

From the buyer’s perspective, the cost of a professional home inspection is definitely money well spent. A good professional inspector will identify hidden defects that the layperson is likely to miss.  With an inspection report in hand, the buyer can then, with sound advice from their agent, determine which issues they believe the seller needs to address (by repair or monetary consideration). The buyer’s agent will then prepare an “Inspection Objection” document and present it to the seller (through his agent), who then decides which issues, if any, he is willing to address. These are expressed in an “Inspection Resolution” document which, once signed by both parties, gets the parties past inspection. If they don’t reach agreement and the buyer doesn’t withdraw the “Inspection Objection,” the contract terminates at midnight on the resolution deadline.

From the seller’s perspective,  he doesn’t have to fix “a damn thing.” It’s all a matter of negotiation, and this is when the seller benefits from having an agent with good negotiating skills on his or her side.

When contracts fall, it’s usually because of inspection issues, so it’s important to get the inspection done as quickly as possible after going under contract, ideally within 7 days. In addition to a general home inspection, buyers should consider a sewer scope and a radon inspection. Each costs about $100, but given that sewer line repairs are typically multi-thousand dollar affairs, a buyer would include a sewer line repair among his inspection demands and reasonably expect the seller to cover the cost of such repairs.  Radon mitigation systems typically cost  $1,000 or so and are called for about 50% of the time, in my experience.

Sellers should always seek a reasonable settlement to a buyer’s demands; first because the objective is to get to the closing table, and, second, because if the contract falls, all defects revealed by the first buyer’s inspection have become known to the seller, who is then obligated to disclose them to the next buyer.  A skilled listing agent can often negotiate downward many of the demands made of his seller.  I’m proud of my own track record on both sides of these negotiations.

A seller can create a stronger position by accepting a back-up contract for the same price, which can often be achieved when multiple bidders are involved. The listing agent can share the buyer’s Inspection Objection, plus the full inspection report, with a back-up buyer, asking for a waiver of inspection in the event the current buyer terminates. If the back-up buyer agrees, the seller is now able to refuse to make any repairs. This creates a no-lose situation for the seller because if the current buyer opts to terminate there’s another one waiting in the wings who has waived inspection.

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