Inspections help seller, buyer prioritize repairs

#290 in a series of true experiences in real estate
July 1999, Hills Newspapers

A man approached us at an open house this week to ask a question. He’s thinking of putting his house on the market and wants to know if he should remove the wall to wall carpeting in his living and dining rooms to expose the hardwood floors.

We told him that wood floors are very popular these days, and it can be a good idea to show them off. But, before deciding about the floors — or any other preparation for sale — we’d suggest that he get one or two inspections on the house. The results should help him figure out what needs most to be done.

Although not required by law, a “termite” report is usually obtained by the seller, and there are advantages to getting one sooner rather than later. This inspection, which costs around $150, covers termites and other bugs that eat wood, as well as fungus and dry rot – damage caused by water to the wood in a house. The inspector notes the damage he finds and makes a bid for correcting the problems in a report that is typically 8 to 10 pages long.

Recommended work commonly involves damaged wooden windows, stairs, porches and decks, wooden door thresholds, shower wall structures, and foundation sills. Buyers, of course, are interested in what amount of money will be needed to make things right, and they will take the termite report bid into account when writing an offer.

Sometimes buyers will ask the seller to credit the money for the work, but more often these days, especially in this brisk market, houses are purchased “as is” with regard to the termite work.

It is commonly believed that lenders will require that termite work be completed before the sale closes, but we have never had a sale where this was true. Some buyers have termite work done during their ownership, often while they are doing remodeling. But other buyers never do anything about the work. Some years later, they sell to new buyers with the work still untouched. (Of course, the damage is often more extensive by then.)

For the seller, getting a report when he is first thinking of selling allows him the opportunity to make repairs. For example, a seller may be thinking of updating his bathroom before selling. He gets a termite report which recommends only one repair: replacing the bathroom floor which has dry rot. This seller may choose to have the sub-floor and the vinyl covering replaced, allowing the house to be advertised as having a “termite clearance.”

On the other hand, the termite report might recommend that extensive decking be replaced due to the presence of fungus and dry rot. The bid could be very high – $10,000, depending on the size of the decking, or even $30,000. Knowing what the bid is, the seller could opt to replace the decks, but more likely, he will get bids from other contractors who may charge less for the work. These bids would be passed along to would-be buyers.

Another inspection that sellers frequently obtain these days before marketing is a general physical inspection. This inspection, which costs around $400, is just what it sounds like: a look at the entire house and all of its systems. The inspector climbs up on the roof and crawls underneath the house. He looks at drainage around and under the house, the furnace, hot water heater and electrical system, also the fireplace, plumbing, appliances – every part of the house that it is possible for him to examine.

The physical inspector is like a “GP” who assesses the overall health of the house. He may recommend further assessment by specialists such as a fireplace mason or furnace expert.

The physical inspection report will be passed along to interested buyers to read. A buyer should always have ample opportunity to thoroughly investigate the condition of a property with his own experts, but a seller-supplied report will reveal to a buyer the strengths and inadequacies of the building before he arrives at his offering price. While some people are not going to want to buy old, original-condition houses with eighty-year-old electricity and plumbing, for others such things are not a problem.

In our experience, the more the buyer knows before he makes his offer, the better. Well-informed buyers tend to be strongly committed. They have their own inspectors go over the house, but they already know pretty much what to expect. Unless something new comes up, chances are good that there will be no renegotiation of price after the buyer’s inspections.

For the seller, knowing about problems before his house is on the market, gives him the opportunity to fix them. Recently a client of ours learned that his roof was worn in spots. The roof was only a few years old and still under warranty, so the owner called the roofer who had done the installation and explained the problem. The roofer re-coated the roof at no charge to the owner.

Another client learned during a physical inspection that a wall furnace in his house was putting out dangerous carbon monoxide. The owner called a heating contractor who discussed remedies and costs. The owner chose to have the wall heater disconnected and to extend heating ducts from another furnace into the area, thus eliminating any buyer concern about adequate and safe heating in the house.

An inspection before a sale can also help the seller with his disclosures. A house is made up of so many parts that it is next to impossible to know everything about its condition. By providing a professional inspection report to buyers, in addition to writing down his own knowledge of the house on disclosure forms, the seller shows his interest in having the buyer know the truth about the house.

Before deciding such things as taking up wall-to-wall carpeting, it is wise for a seller to know the negatives about his house. Once the extent and cost of problems is known, then plans can be made about how best to present the property to buyers. Sometimes, because of what is revealed during inspections, plans change dramatically.

The owners of a house we have on the market now originally intended to paint the entire interior before marketing. They also were going to refinish the worn hardwood floors, replace kitchen vinyl, and have some professional staging done. The idea was to sell the house in move-in condition. But before doing anything, they had inspections. The owners (and we) were shocked to find that the whole foundation must be replaced. We talked and thought and decided on a different tact.

We hired people who made the house immaculately clean, but did no painting. We removed the old carpeting but did not refinish or replace any floors. We went ahead with the staging. The house looks good, but it does need work — beginning with a new foundation. We are marketing the house, not to a move-in buyer, but to someone who wants a fixer.

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