Spring Has Sprung! Let’s Make It Great!
Signs of early spring are everywhere: robins building nests, crocuses poking through the earth, outfielders shagging fly balls, and A-Pro’s favorite part of the season, families pounding the pavement to explore what’s available in the housing market. Buckle up. It looks like we’re in for another interesting ride ahead.
As we enter the second quarter of 2022, forecasters warn that eager home-shoppers are once again likely to face stiff competition from like-minded buyers as the demand for homes still exceeds inventory in cities across the country. It’s the same scenario that played out a year ago, when more than 70% of home listings in April were embroiled in a bidding war.
An unfortunate byproduct of low inventory levels combined with multiple families vying for the same properties is a problem we’ve addressed in past newsletters: too many shoppers are waiving the home inspection contingency in order to gain an advantage in the bidding process.
As our conscientious friends in the real estate industry well understand, there are numerous reasons why this is a gamble not worth taking, both for homebuyers who skip the inspections and agents who don’t strongly encourage their clients to have the home thoroughly checked out from foundation to roof before signing on the bottom line.
With the traditionally busy spring season here, we’ve devoted this issue of From the Rafters to the importance of making sure clients know the value of a home inspection and the dangers of waiving the home inspection contingency, plus advice on handling objections from buyers who insist on foregoing the inspection in hopes of securing a sought-after property.
And please remember, no matter what the season or condition of the market, whenever your buyers and sellers need a world-class inspection or any of our other services (mold, radon, carbon dioxide, main sewer line inspections, et. al.), you can always count on A-Pro to get the job done promptly and professionally.
Greg Mangiaracina, Founder 1994
A-Pro Home Inspection
Avoiding Lawsuits: A Brief History of the Home Inspector/Real Estate Agent Relationship
Before we examine the current situation regarding clients waiving the home inspection contingency, we thought it appropriate to look at some of the factors that contributed to the growth of the home inspection industry. These included new FHA loan regulations in the 1970s that required inspection of a home’s plumbing, heating, electrical, and roofing systems, plus termite certification. The need for agents to hire multiple professionals to perform these inspections gave rise to the concept of entrusting a single person to handle all of these checks at once—a huge savings of time and money. Another significant step in the growth of home inspections was the 1984 landmark ruling by the California Court of Appeals in the case of Easton vs. Strassberger. At the time, homebuyers were solely responsible for having the condition of the house verified prior to sale. The court cited the seller and the seller’s agent for “fraudulent concealment and intentional and negligent misrepresentation” of soil problems and damage caused by a slide just prior to the sale of the home. The judgment put listing agents on notice regarding their liabilities and responsibilities to disclose facts materially affecting the value of their properties. It became a major impetus for real estate agents to make home inspections an integral part of the homebuying/selling process. The nearly 40-year-old case is still relevant, serving as a reminder of the importance of making sure your clients understand that saying no to an inspection is a decision they will regret later.
What if your client refuses to act on your recommendation to get a home inspection? Tips on ways to handle objections.
A-Pro Home Inspection is blessed to work with some of the most outstanding real estate agents from coast to coast—professionals dedicated to dotting every “I” and crossing every “T” to ensure that transactions are accomplished with best practices in mind, both in terms of protecting themselves and making sure their clients’ get the homes they desire at a fair price.
Despite their efforts to convince clients not to skip the inspection, it has become alarmingly commonplace for homebuyers to forego this critical step in the process. In fact, one recent report found that nearly one-third of recent successful property transactions did not include the home inspection contingency.
From an agent’s perspective, strongly encouraging clients to have an inspection performed demonstrates that you have their best interests in mind. It fortifies your stance as a professional who understands that a home inspection can save them time, money, and headaches, while perhaps preventing them from making a long-term mistake by purchasing a money pit. Insisting on an inspection—or having them sign a waiver stating you have recommended an inspection but they have refused—also helps add a layer of protection from being a party named in a frivolous lawsuit that could drag on for months. Ideally, you’ll be able to convince them that having a professional home inspection benefits everyone involved.
Of course, there will be stubborn clients who won’t budge on this point no matter what you say. But for those on the fence about whether or not to waive the home inspection contingency, here are 8 key points to impart that could make a different in the decision:
- Skipping the inspection could be a huge financial mistake: It seems obvious to us, but maybe not to a homebuyer in the heat of a bidding war. Purchasing a home without having an unbiased professional observe its nooks, crannies, crawlspaces, and cracks would be like kicking the tires on a used car and plopping down cash without taking it for a test drive or having a mechanic look under its hood. A home inspector may find significant and costly defects that could translate into many thousands of dollars in repair and replacement costs—everything from a faulty electrical system to foundational shifting, a leaky roof to a failing heating and cooling system.
- Skipping the inspection could affect your finances down the road: Even if the roof looks okay now and the furnace heats the house the first winter or two, you may be blindsided all at once with a flurry of system replacements not long after moving in. A home inspection report will detail items that are reaching the end of their useful life, allowing you to make household budgetary plans for these expenses rather than having them come crashing down at you without the means to take care of them. Skip the inspection and you’ll have no idea what financial outlays await you and when they’re likely to crop up.
- Relying on your own inspection skills isn’t a good idea: There may be obvious defects that a non-inspector may find, but a trained and skilled professional with years of experience will be able to report on issues that the layman will pass over. Further, having a report filled out by a third-party inspector will carry much greater weight when negotiating sales price based on recommended replacements and repairs. Essentially, by waiving the home inspection contingency, you are also waiving your power to negotiate a more favorable price.
- Skipping the inspection could be dangerous: In addition to inspecting a property for defects, the inspector will also point out unsafe conditions that demand correction, such as exposed and outdated wiring, staircases that pose a tripping hazard, unstable railings, detached decks, and lack of ground fault circuit interrupters. Additional home inspection services (checks for high levels of radon, lead paint, carbon monoxide, and mold) are also invaluable to the health of the home’s inhabitants.
- Consider this: Would you want to purchase a property from a seller who bases their decision on your willingness not to have the structure examined from top to bottom?
- By skipping the inspection, you lose out on many additional benefits: Among these are A-Pro’s free Foundation Level Survey ($175.00 value) that comes with a traditional inspection and A-Pro’s 120-day “If We Don’t Report It, We Repair It®” guarantee.
- Skipping the inspection won’t help with your peace of mind: A home is likely the most expensive investment you will ever make. That’s why it makes good sense to know as much as possible about what you’re getting into before you buy. At best, the home inspector will discover no significant problems or only a few areas in need of minor work. At worst, there may be multiple systems that need immediate replacement, hazardous conditions, and hidden problems that only an inspector would detect. Either way, you receive the information you need to make a decision that’s right your family and finances. Yes, these are competitive times in the housing market, but panicking could lead to lapses in good judgment. And in many cases, losing a house because you demanded a professional home inspection may actually be a win if it would have meant endless grief once you moved in.
- There are ways to make your offer stand out without waiving the inspection: For some sellers, other aspects of your bid may have even greater influence on their decision, such as having a mortgage pre-approval from a lender; making a higher down payment; or including an escalation clause (an automatic bid over any highest bid up to a certain amount), eliminating the need for back-and-forth negotiations. Some contracts include a clause saying sellers are not responsible for repairs, say, below a certain value. Other offers shorten the period of time in which the inspection needs to be done and make the inspection “as is,” meaning the buyer still receives an inspection so they know what to expect but that they won’t ask for repairs after the inspection.
Finally, skipping an inspection could mean no repeat business from your clients: Most successful real estate agents understand that when they take care of a client the right way, the reward isn’t merely a one-time commission. Instead, world-class service and carefully planned networking can translate into a stream of steady business spread out over many years.
Lifetime Value of a Customer indicates how much revenue a single customer will generate for you—from repeat business and referrals—over the course of a lifetime. For example, what begins as a commission of $3,000 from the home sale can balloon into tens of thousands of dollars over the following decades.
By skipping the home inspection, you risk the chance that your client will find hidden problems after moving in and never use your services again. Is it worth the risk of losing tens of thousands of dollars from missing out on the repeat business?
For Hesitant Buying Clients, You Can Suggest a Walk-Through Inspection
As mentioned above, it won’t be easy to convince all your clients about the necessity of having a complete, 500-point home inspection. For those holdouts, you may want to recommend a Walk-Through Inspection. While not a substitute for a traditional home inspection, it can provide your clients with some peace of mind about the property in question. An A-Pro Walk-Through Inspection…
It gives the client a better understanding of the house, including problem areas that could cost them money once they move in
Identifies any red flags and verifies the age of mechanical systems if possible (HVAC, water heater, etc.)
Helps them make a more informed buying decision
The cost of these one-hour verbal consultations during the initial walk-through of the property can be used to pay for the cost of a full inspection if the client wishes to have one performed afterward. The Walk-Through inspection does not include walking on the roof, running water, and other checks normally done during a 500-point A-Pro home inspection. There is no warranty and guarantee, and the inspector assumes no liability.
For Smart Sellers, You Can Suggest a Certified Pre-Owned Listing Inspection
More and more sellers are being proactive by hiring a home inspector to perform a Certified Pre-Owned Home Inspection prior to listing the property. This is the same visual/operational 500-point roof-to-foundation inspection available for potential buyers, covering every major system in the home. Benefits include:
Speeding up the sale of the home
The ability for the seller to make repairs and replacements before listing
Building trust with homebuyers through total transparency
Finding problems with the home that you may not have been aware of before listing
Some buyers may choose to forego a home inspection because one has already been performed for the seller. These buyers can give their best offers upfront without lowering the price they are willing to pay based on their decision to waive the home inspection.
A Certified Pre-Owned Home Inspection, along with the seller’s disclosure document, equal valuable protection against lawsuits, in addition to helping homes sell faster and at a higher price. Plus, the home inspection report is transferable to the buyer upon sale.