How Real Estate Agents Work with Home Inspectors
A home inspection can make or break a sale. The inspection is where expectations meet reality. The buyers discover their dream house needs thousands of dollars in repairs. The sellers discover they'll have to settle for a lower purchase price. The agents discover that the buyers and sellers can't come together over a deal. It can be a rough wake-up call for everyone involved. As a real estate agent, you'll experience hundreds of home inspections during your career: good, bad, and ugly. Your clients will only experience a few. They need someone to help them navigate the inspection itself and the subsequent negotiations, and that person is you. Below, you'll find the basic realities of a home inspection and your role in the process.
Is a Home Inspection the Same as a Home Appraisal?Home inspections and appraisals are different processes completed by different professionals. Appraisals focus on evaluating the current market value of the home. Flaws are a part of that valuation, but finding problems isn't their primary job. Mortgage lenders typically require appraisals to make sure the property is worth what a buyer is paying. Inspections focus on the condition of the property and its systems exclusively. They look for health and safety issues, as well as more minor repairs. They aren't required (by law or by lenders), though the FHA strongly encourages it.
How Long Does a Home Inspection Take?An average-sized house will take a few hours. The inspector will walk through the house's exterior, interior, and the surrounding area. They'll note down any defects or hazards and their severity. The written report should take three or four days to complete.
When Does a Home Inspection Happen?There are two kinds of inspections in residential sales. The Buyer's Inspection happens after an offer but before closing. Nearly all home sales (80% of resales) will go through the buyer's inspection process. They cost less than $1,000 and act as an important safeguard for the buyer. The Seller's Inspection happens before the home is listed, if it happens at all. They give sellers an opportunity to get ahead of problems, but there are downsides. More on this later.
What Qualifications Should the Home Inspector Have?As an industry professional, your clients will ask for recommendations on an inspector. As a new agent, you can ask your brokerage who they prefer. Pay attention to the work of the inspectors you meet and curate your own list. Here are a few of the things you should consider before recommending an inspector:
- Most states require licensing for home inspectors, but there are 15 states that don't. You should know your state's requirements, and always double-check the status of inspectors.
- Even if your state doesn't have licensing, you can check inspectors' certifications. The American Society of Home Inspectors (ASHI) is the most common and sets standards for the industry. The International Association of Certified Home Inspectors (InterNACHI) is another.
- There is no standard inspection format. But your state may provide requirements on what needs to be evaluated, and ASHI publicly posts its standards of practice.
- Accuracy & Context. Every home is going to have issues on inspection. A good home inspector should be able to say when the problem is minor and when it needs to be looked at by a professional. They should be able to advise clients on the relative seriousness of the problem. Their written report should be consistent with what they communicated in person. Home inspection comes with substantial liability, and 60-70% of inspectors are self-employed. That can make some practitioners skittish and lead them to red flag every issue (especially in writing). You don't want them to downplay major problems, but you don't want them to blow issues out of proportion either.
Should Seller's Agents Encourage a Seller's Inspection?The answer depends on your seller and their house. A pre-listing or seller's inspection can allow your clients to handle issues before a buyer ever sees them. It can also help smooth the way during closing and relieve some of the stress during the final stages of a sale. Your sellers won't have to worry that the buyer's inspection will reveal a major problem they're unaware of (theoretically). For all these reasons, seller's inspections are becoming more common. On the other hand, they'll be legally required to disclose their inspection report to buyers, so it's a bell that they can't un-ring. And different inspectors find different things, so there's no guarantee you'll eliminate surprises. If your sellers are particularly high strung or their house is on the older side, a seller's inspection is probably valuable. If the house is relatively new and they've been diligent with maintenance and repairs, not so much.
Should Agents Attend the Home Inspection?This is a personal call every agent has to make for themselves. In the "pro" column, you'll know what was said, if and when your client gets nervous. You'll also have a chance to evaluate the inspector for future work. In the "con" column, you could make yourself a nuisance or expose yourself to liability. As a new agent, you should probably attend at least a few so you can make an informed decision about whether you find it valuable to your clients. But when you attend, remember that you're not an inspector. You'd hate it if the inspector tried to do your job, right? So return the courtesy. Pointing out problems and contradicting the inspector isn't just bad form. It also opens you up to liability.
What Happens If the Inspection Finds a Problem?The important thing to learn as an agent is the level of response that different problems warrant. There are a few ways the sale can go after an inspection:
- The buyer walks away. They're under their rights to do so under certain circumstances. Your clients should reserve this option for extreme problems: major structural issues, termite infestations, severe water damage, and so on.
- The seller brings in experts. If the inspector's findings seem to exaggerate a problem, sellers can bring in experts to re-evaluate the problem. You should proceed down this road carefully, and with reputable professionals, to avoid alienating the buyer.
- The buyer asks to renegotiate. For medium-sized issues, the seller should expect buyers to ask for either repairs or a lower purchase price to cover the cost.
- The buyer accepts things as-is. If the only problems are minor or cosmetic, the buyers might not bother renegotiating.