Four Reasons Why Home Inspections Kill Deals:
A buyer may cancel a transaction after a home inspection! Sellers and agents may be tempted to blame an overzealous home inspector when a transaction falls apart after the inspection of some houses.
But there’s more to that situation than meets the eye.
Estate professionals know there are many ways that deals can fall apart, from credit, financing, appraisals to plain cold feet. But certainly, one of the more common deal killers is the home inspection.
But it doesn’t have to be!
Houses and Home Inspectors Do Not Kill Deals
Four home inspection situations lead to a cancelled transaction. Two things which are not on this list are the house and the home inspector. Some estate agents blame the home or the home inspector. However, let’s consider what happens in these situations.
Problems are caused when the home inspection report significantly alters the buyer’s expectations about what they thought they were buying. The client may say, “Gee, I thought I was buying a well-maintained home, but now that we have looked closely, I see the house requires a lot more maintenance than we expected”.
Therefore, the cancellation has everything to do with the client’s expectations coming into the inspection! Agents may wish that the home inspector had been less forthcoming about the condition of the house but this is not the solution! The solution to this problem is buyers having more realistic expectations before they sign the contract. My website and blog attempt to teach people skills that will help them look at houses and evaluate risk so they are more prepared to make an offer on the right house.
Here are the top four reasons buyers cancel a deal after the inspection.
1) Unprepared buyers
There are no classes in university or high school to teach people how houses work or where the risk lies in a residential building. Even professional estate agents have little or no training to help them understand how to look at houses and identify issues. A new generation of homebuyers, many of whom who did not grow up working on their houses with their parents, compounds this problem.
2) Unrealistic expectations
Adding another layer of complexity to modern homebuying is the degree of sophistication and the change residential housing has undergone. Most buyers now expect a level of luxury and comfort in a house that their grandparents could scarcely have imagined fifty years ago. Today, buyers are buying more expensive and more complex homes, yet do not fully understand how they are built or how they work. Furthermore, with an explosion in internet marketing, buyers have less and less time for decision-making. A huge increase in the number of buyers requires quick action with offers, increasing the chance for buyer remorse.
3) Improved reporting
Moreover, the consequence of the growth in technology has resulted in the sophistication of home inspections as well. Over the past 15 years, computer-generated reports, digital cameras, and other new tools have led to rapid innovation in inspection methods and reporting. Today, upon hiring a quality home inspector, a buyer can expect to receive a 30- to 60-page report with dozens of colour photos, detailed diagrams, and links to additional information. The result is those homebuyers who have home inspections, have access to more information about the home they are purchasing than ever before.
4) Unprepared sellers
Home sellers should prepare for the likelihood of a home inspection in advance. Don’t underestimate the importance of making a good impression. Don’t make the mistake of thinking all inspectors see past stuff. Furthermore, if the seller’s house is ready for a home inspection, this helps to prevent delays and can prevent surprises.
Obvious omissions in the seller’s disclosure can cause a deal to fall through. The question arises ”what else is not listed” when the seller is not completely truthful.
Often buyers will accompany the home inspectors during the inspection. Buyers feel uncomfortable asking questions if the seller is present. Therefore, the seller should not accompany the inspector and buyer! It leaves the impression that the seller has something to hide!
If the swimming pool is dirty or when the water, electricity and gas are not connected, that part of the inspection may be deferred. When doors are locked and remotes are missing and there are no keys in the doors, this can result in components not being checked.
Deferred portions of the inspection noted in inspection reports create suspicion.
The right house at the right price
The main reason that deals fall apart after a home inspection is that the findings significantly change what the homebuyers thought they were buying. Many make the mistake of blaming the home inspector or the house. However, all houses have problems, but every house is the right house for the right person at the right price.
I’ve inspected houses that would be costlier to fix than they were worth. I have inspected houses on properties worth less than the property itself. However, the buyers wanted to renovate them anyway, because they were in love with the place. If an inspection on a teardown can go well, then really any inspection should be able to be successful. Bad houses are extremely rare, even though unrealistic expectations on the part of buyers or sellers can make them seem like they are common.
Surprisingly, buyers sometimes read my inspection reports and comment something like, “Oh, you think that house is a bad house”. I do not judge houses. All I do is document the condition of the properties! This enables clients to buy them at what they believe is the right price. It is unrealistic expectations that I don’t like.
Home Inspectors don’t kill deals!
The charge that home inspectors are killing deals is not true! I believe that the real estate industry could do more to prepare agents to teach buyers and sellers an informed way to look at the “bones” of houses. There are not any requirements for new real estate agents to learn anything about houses to get a real estate license.
I believe that should change.
All houses pose some level of risk! There are skills that both buyers and agents can learn to evaluate that risk and make appropriate offers. A more transparent approach could help buyers and sellers have more realistic expectations. This could save everyone a lot of time and money, resulting in happier clients and better referrals. Also a lot less talk about home inspections killing deals.
I hope this sets the record straight!
Inspected Once, Inspected Right!®