1. Cost and Control Over Repairs
Ultimately, potential repair items are negotiated between the buyer and seller through the contract. Because you have the list ahead of time, you can control some of the cost by fixing certain items yourself or using a contractor of your choice, your own materials, and doing the work in the manner you choose.
Some items are worth doing, and some might be better suited for providing an estimate or offering a credit. We will go over everything together once we have the list.
2. Avoiding Unnecessary Repairs
The goal is not to fix every item in the report. In fact, it is to fix as little as possible with the least amount of money possible. We typically focus on health and safety concerns, significant defects, and anything that could create a financing problem or remain an issue if we had to sell to another buyer. A typical item would be mold growth in the crawl space that would worry a family with small children. We want to make sure the buyer is not worried about their family’s safety when deciding to buy the house.
An older house may have things that were up to code when it was built but are not today. We are not required to bring the house up to code just because it is flagged on a home inspection. We need to understand what the inspector found and separate the important work from smaller items that may or may not matter to the eventual buyer.
Decking is a typical example. Decking codes have changed significantly over the past 20 years and are often flagged during a home inspection. To be clear, we are not required to bring anything up to code just to sell the house, but we should consider how a buyer would perceive the situation and address things that would cause major concern. Another example is GFCI outlets near water sources. Buyers might worry they will be electrocuted or that the house could burn down—and replacing a non-GFCI outlet costs only about $20.
“The goal is not to fix every item in the report. The goal is to fix as little as possible with the least amount of money possible.”
3. Calculating Your Proceeds
Better information helps you make better decisions. Repair costs also belong in our financial planning. The sales price is only part of what determines how much money you will walk away with.
If we know about a major expense before listing, we can account for it when we plan the preparation and evaluate offers. You may be able to accept a particular price or contribute toward a buyer’s closing costs, but I want that decision based on the money you are likely to keep after the known expenses—not a number that assumes there is nothing wrong with the house.
4. A Pre-Inspection Increases Perceived Value
A buyer who does not know what they might have to repair will often try to protect themselves by offering less to account for potential repairs, especially on older homes. They will likely hold back more than a repair would actually cost because they do not know how big the problem could be. Reducing that uncertainty will make the house worth more in their mind and make them more comfortable offering more.
According to Consumer Reports, a certified pre-owned Toyota sells for 2–5% more than non-certified models. How would that translate to your bottom line?
5. You Control the Cards
This is my favorite part and where this process really shines. Because we know 95% of what will come up on a home inspection, we can, in most cases, provide it to the buyer at the time of the offer and ask them to identify any repairs they wish the seller to resolve as part of the offer. We then agree that none of the remaining items can be requested on a future inspection. This prevents the buyer from threatening to walk away or vastly inflating the cost of repairs and asking for a ridiculous credit.
This idea is worth breaking down further so it can be properly appreciated. Once we are under contract, the buyer typically has a window of time to complete all inspections, which might include home, well, septic, termite, radon, and chimney. It is important to understand that the contract states the buyer has the right to walk away during this window citing dissatisfaction with the inspections. This gives them significant control to ask for repairs or money.
During this window, the buyer receives all the reports. The buyer’s agent will typically ask them to identify any and all items they want the seller to fix or select a dollar amount that will satisfy their concerns. Keep in mind that a typical home inspection is over 50 pages and often identifies hundreds of items, both small and large. There is no precedent around what they should or should not ask for, and no incentive for them to avoid asking for everything. The worst thing that can happen is the seller declines the request, at which point they have the right to cancel and get their deposit back.
As you can see, this is a precarious position to be in. As your advisor, I do everything I can to put you in the best position to realize the highest profit from this process. Making the buyer agree to forego the lion’s share of the inspection items up front is a major win. The best part is that over 50% of the time, the buyer never orders an additional inspection—and we are done before we are started.