Fritz Pfister

When buying a home it is typically a good idea to hire a licensed home inspector to inspect the home so you can know the home’s condition before you close. The idea behind home inspections is sound. You don’t want to risk buying a home that could potentially have defects that could be costly after you buy. Fair enough.

What has evolved over the past decade is that we now realize not all home inspections are equal. Some inspections miss significant defects. Some inspections report defects when there are none. Some inspections scare the potential buyer out of proceeding with the purchase when there is no legitimate cause to do so.

During the first 8.5 months of 2007 in the Capital Area Association of Realtors there have been 348 more purchase contracts fail to close than compared to 2006. There are many causes for a contract to fail to close. Buyers financial situation has changed and the loan is denied. The home under appraises and the seller is unwilling to negotiate, however the primary cause, in my opinion is the home inspection.

There are several factors in play here. First there are unethical buyers, and unrealistic buyers that expect a home to be something that it’s not; new. This is typically the fault of the buyer agent for not properly advising the buyer on what is contractually legitimate to request to be repaired and what is not legitimate.

The problem more times than not, is the buyers see the home inspection addendum to their contract as a tool to leverage money from the seller. The threat of voiding a contract if the seller does not comply with the buyers demands, especially in a buyer’s market, is a frightening situation for the home seller that must sell. Far too many times the seller caves to the buyer’s demands.

Another huge problem is the home inspector himself. The side commentary to the prospective buyer during or immediately following an inspection can cause buyers to lose interest in the home. Home buyers view their inspector as the final authority regarding the condition of the home being inspected. That simply is not true. Home inspectors are generalists, and often times report on items that they are not qualified to report on. Some inspectors may have other licenses required to make legitimate claims as to a specific component of the home, however most inspectors typically are not licensed contractors such as roofers, heating/cooling, electrician, plumbing, structural engineer or environmental engineers. Most are trained to identify if there MAY be a defect or problem, and then call for further review by the specialist. Far too many times the inspector is making an unqualified assessment of a component they are not qualified to do, resulting in the buyer making illegitimate requests of the seller, or attempting to void the purchase contract.

The way a report is written, and the words used by the inspector also have an impact upon the buyer’s perception of the condition of the home. On many occasions we have seen buyers lose interest in a home over very insignificant maintenance items, because the the inspector reports in such a manner as to elevate the seriousness of a condition. One contract failed recently where the home inspector convinced the buyer that the (new construction) home was amateur construction. Although the home had passed all the county building inspections by county inspectors, because there were a few typical ‘punch list’ items to be completed prior to closing, and the inspector made an unqualified enviornmental assessment; the buyers lost interest in the home. Once the buyers believed the home was amateur construction there was nothing that could be said to change their perception. The home went back on the market, and sold four weeks later for $5000 less. That was the cost to the builder resulting from the home inspectors commentary and unqualified enviornmental assessment.

There are countless situations that have resulted in failed contracts following a home inspection. There simply isn’t enough space on the Internet to post them all!

On Saturday(s) September 22 and 29, on the “Let’s Talk Real Estate” radio program we will have a round table discussion on home inspections. The program airs at 10:00 am central time, on AM970 WMAY, and can be heard streaming live at www.WMAY.com. The program is also available for podcast downloading the following week at WMAY.com. To participate in the discussion call 217-629-7970 for the in studio phone connection.

Members of the round table will include real estate attorney Mike Durr of Sgro, Hanrahan, and Durr LLP. Dr. David Carpenter the former chief microbiologist for the state of Illinois Department of Public Health. Professional engineer Gina Fuhrman of Fuhrman Engineering. Dana Strumpher licensed home inspector, owner of the local Amerispec franchise, home inspector licensing instructor, and member of the state home inspector oversight board. Fritz Pfister licensed real estate broker with RE/MAX Professionals Springfield, over 20 years experience in residential sales.

This is an opportunity to view the home inspection process through the eyes of the attorney, inspector, broker, environmental and structural specialists.

If you are selling a home, or will be selling a home, and you want to avoid the harm caused by a faulty inspection/inspector that could cost you thousands of dollars and months of additional marketing time, here is my advice;

The problem is systemic. The home inspection follows contract negotiations in the form of an addendum to the contract. Why does the inspection have to happen after you have negotiated a sale contract? You think you have your home sold, you think you know the sale price, you think you know the moving and closing dates, but you don’t as long as the contract is subject to the inspection FOLLOWING all those negotiated items.

Why not hire a licensed home inspector yourself BEFORE you place the home on the market? It is certainly legitimate for home buyers to expect the home to be free from defects, and that there are no safety issues. By having the home inspected before going on the market you can cure any defects, or safety issues and market the home as being sold ‘as is’. You make it clear that a copy of the inspection is available for preapproved buyers ‘prior’ to the offer, and that home inspections by the buyer are welcome ‘prior’ to offer negotiations. If a buyer isn’t going to be satisfied with the condition of the home following offer negotiations, then they won’t be satisfied with the condition of the home prior to the offer. Why give buyers the opportunity to use the inspection to leverage more money from you, cause you the harm and the stigmatization of having to go back on the market? This usually results in taking months to sell again, and at a lower price.

Change the system, the way things have always been done, the inspection following offer negotiations to; inspect before negotiate. Home buyer, feel free to review our inspection or have your own inspection PRIOR to offer negotiations. If the buyer is satisfied with the condition of the home, then negotiate an offer. This system will help you as a home seller avoid the plague of the failed contract, multiple negotiations, illegitimate financial/repair requests which are commonplace in today’s real estate market.

If you are a home buyer this system of inspecting the home prior to offer negotiations protects you from buying a lemon, takes the guesswork out of the condition of the home, and saves you from the angst caused by faulty inspections that could follow a negotiated offer. You believe you’ve purchased a home, that you’re done negotiating, you’re excited about your new home, when in fact that is not the case under the current system. All of a sudden buying a home isn’t so exciting anymore. Why wouldn’t you want to know the condition of the home BEFORE you negotiate the purchase?

Visit SpringfieldHome.com and view my home listings. You can see many have been inspected and are being sold ‘as is’. Buyer inspections are welcome prior to offer negotiations. Does this new system work? Of 56 closed residential listings this year, dozens have sold this way, and dozens more are currently being marketed this way. The words ‘as is’ may cause red flags for some people, however in this situation it should not. ‘As is’ in the past meant nothing had been inspected or was available for inspection, you risked buying a pig in a poke. Under this new system, inspect before negotiate, it means only AFTER you are satisfied with the condition of the home do you agree to ‘as is’. It will take some time, and education, mostly among the Realtor population, for this new system for selling a home to take hold. All you have to do is ask any of the dozens of home sellers using my service this year, how smooth the transaction moved to closing with the inspection issues handled ‘prior’ to signing the sales contract.

If other Realtors don’t embrace this type of system that is fine. It will provide a significant point of difference in my service compared to theirs, and help me grow my business, by my helping home buyers/sellers/solve problems that other Realtors are not willing to tackle. Change is difficult for many Realtors.

Regardless which system you choose to embrace, tune in on September 22, and 29 at 10am central time, AM970 WMAY for a round table discussion on home inspections. Or catch the program streaming live on WMAY.com, or download a podcast the following week from WMAY.com.

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