Often I hear real
estate agents complain that they have worked weeks, months, even years with a
client only to have “their” deal killed by the home inspection or the home
inspector. Statistics show that 15-25% of sales do not go through after a home
inspection. So are home inspectors at fault, or, are there are other issues
that led to the terminated contract? I want to look into all these issues more
closely and offer possible solutions.
As a licensed home inspector who has worked with countless real estate agents in the past 27 years, I know there are several things that can lead to a canceled sale. Some home inspectors can be overzealous, especially new inspectors who may have expertise in one aspect of home construction, but lacks experience in others. For example, a former HVAC technician who became a home inspector, would be more critical of HVAC installations, or a former roofing contractor more critical of roof details, etc. Sometimes, an overzealous inspection can be related to an inspector's experiences, or lack of experience in the home inspection business. If the inspector has poor communication skills he can be misunderstood; and then, other times, the buyer is looking for a way out of the deal prior to the home inspection, and uses the home inspection contingency clause as the way out.
While it is acknowledged that overzealous inspections can happen, in the vast majority of times, it is the unique characteristics of the property, buyer expectations and unprepared buyers that result in a cancellation due to the home inspection.
So what can a real estate agent do to improve his or her odds that the sale is not canceled?
As a licensed home inspector who has worked with countless real estate agents in the past 27 years, I know there are several things that can lead to a canceled sale. Some home inspectors can be overzealous, especially new inspectors who may have expertise in one aspect of home construction, but lacks experience in others. For example, a former HVAC technician who became a home inspector, would be more critical of HVAC installations, or a former roofing contractor more critical of roof details, etc. Sometimes, an overzealous inspection can be related to an inspector's experiences, or lack of experience in the home inspection business. If the inspector has poor communication skills he can be misunderstood; and then, other times, the buyer is looking for a way out of the deal prior to the home inspection, and uses the home inspection contingency clause as the way out.
While it is acknowledged that overzealous inspections can happen, in the vast majority of times, it is the unique characteristics of the property, buyer expectations and unprepared buyers that result in a cancellation due to the home inspection.
So what can a real estate agent do to improve his or her odds that the sale is not canceled?
1. Prepare the
Buyers for Bad News: An agent may not have any construction experience, but
they should be able to identify some issues that impact value on a property. The
true cost of buying a home is the sales price plus the cost of repairs to bring
the property to an "average sales condition". Home Inspectors are the
"bad news bears" because we are being hired to find the problems with
the property that the buyers are enamored with.
We like to tell clients that no house is perfect because houses are
built by people who are not perfect, and built with materials made by imperfect
people. Buyers need to understand that no house they purchase will be perfect,
although some are more perfect than others, and that the agent is there to help
with the negotiation where and when warranted.
When an agent tells his or her client to expect the home inspector to
find things wrong with the property, and maps a game plan with the buyers to
deal with findings ahead of time, it makes their job of following up after the
inspection much easier. In the past, I have seen agents use percentage of sales
contract contingency clauses, or a lower contract price on the front end, to
hopefully deal with home inspection results on the back end.
2. Prepare the Buyers with Realistic Expectations: So do you prepare a buyer for an offer in a strong sellers market different than a buyers market? Of course you do!
In a buyers market the buyer has the upper hand (home prices are falling) and the results of the home inspection should be expected to be discounted from the sales price. A buyers agent has to work harder at negotiation in this kind of market. On the other hand, in a strong sellers market (home prices are rising), the seller has the upper hand. The home inspection results should not necessarily be expected to be negotiated, unless there are big ticket items that need resolution. It is the job of the buyers agent to educate the buyer on market conditions prior to the home inspection.
2. Prepare the Buyers with Realistic Expectations: So do you prepare a buyer for an offer in a strong sellers market different than a buyers market? Of course you do!
In a buyers market the buyer has the upper hand (home prices are falling) and the results of the home inspection should be expected to be discounted from the sales price. A buyers agent has to work harder at negotiation in this kind of market. On the other hand, in a strong sellers market (home prices are rising), the seller has the upper hand. The home inspection results should not necessarily be expected to be negotiated, unless there are big ticket items that need resolution. It is the job of the buyers agent to educate the buyer on market conditions prior to the home inspection.
3. Prepare the
Buyers for Unique Characteristics: No two people are the same and you can say
the same thing about houses. In markets with subdivisions, homes that are of
similar age are easier to see differences in maintenance and other issues. However,
an older home, with deferred maintenance that has not been updated in several
years; might be a clue that you’re in for a rough home inspection. Even newer
homes with cosmetic issues can be problematic to deal with. Big surprise ticket
items like roofs and structure issues can easily result in a canceled sale and
that is due to no fault of anyone, except possibly the seller. Hopefully, if a
sale becomes cancelled due to unique negative characteristics, the real estate
agent has built a trusting relationship with the buyer that will enable them to
keep showing the client other properties.
Sometimes buyers get confused because they have not been prepared by the agent, they don't trust their agent and/or they are not familiar with the local market. In those cases I often get asked at the end of the home inspection “would you buy this property?” My response is the same every time: “I’m not in a position to advise you whether to buy a house or not. My job is to show you the problems and report those problems to you. What you do with that information is between you and your agent.” I can't possibly answer that question for anyone because I am not privy to all the contract information. I also recognize some people are less comfortable in dealing with issues contained in a home inspection than others. What one person might shrug off as no problem to correct, someone else may see as difficult to correct. We try to let buyers know the magnitude of the defects, so they are less confused about what the major defects are when they go back to their agents.
So, is the answer to a real estate agents dilemma of keeping the deal alive to hire the least experienced inspector, or, to put the least experienced inspectors on the official referral list? Isn’t a short list of issues better than a long list? Not if you want happy clients. In addition to the obvious “fall out” from missed defects, the inexperienced inspector may not be as educated as your buyer on what constitutes a defect. Buyers are more educated today than ever due to access to online resources. Remember, who you refer is a reflection of who you are. If you refer only inspectors who you think will not "kill the deal", you can lose the client's (the buyers) trust and respect. You may get the short term result you want, but long term, this can have negative and sometimes disastrous consequences. The answer is to refer home inspectors who have a minimum of five years experience (more is better) and follow a code of ethics and industry standards (like ASHI).
Sometimes buyers get confused because they have not been prepared by the agent, they don't trust their agent and/or they are not familiar with the local market. In those cases I often get asked at the end of the home inspection “would you buy this property?” My response is the same every time: “I’m not in a position to advise you whether to buy a house or not. My job is to show you the problems and report those problems to you. What you do with that information is between you and your agent.” I can't possibly answer that question for anyone because I am not privy to all the contract information. I also recognize some people are less comfortable in dealing with issues contained in a home inspection than others. What one person might shrug off as no problem to correct, someone else may see as difficult to correct. We try to let buyers know the magnitude of the defects, so they are less confused about what the major defects are when they go back to their agents.
So, is the answer to a real estate agents dilemma of keeping the deal alive to hire the least experienced inspector, or, to put the least experienced inspectors on the official referral list? Isn’t a short list of issues better than a long list? Not if you want happy clients. In addition to the obvious “fall out” from missed defects, the inexperienced inspector may not be as educated as your buyer on what constitutes a defect. Buyers are more educated today than ever due to access to online resources. Remember, who you refer is a reflection of who you are. If you refer only inspectors who you think will not "kill the deal", you can lose the client's (the buyers) trust and respect. You may get the short term result you want, but long term, this can have negative and sometimes disastrous consequences. The answer is to refer home inspectors who have a minimum of five years experience (more is better) and follow a code of ethics and industry standards (like ASHI).
In summary, an
agent would do well to try to empathize with their buyer. In other words, “do
unto others as you would have them do unto you”. A more transparent approach
will lead to happier clients, better referrals and more long term success.
For more information about me and our company, please click on the link below:
865-453-9965
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