Providing inspection reports as a seller

15 Replies

Hey everyone!

My family inherited a house through probate. The home was owned by a hoarder and the house is in pretty rough shape but in a good neighborhood (Rockridge in Oakland, CA). The home itself is VERY charming with architecture typical to the area.

The house will very likely need significant work on plumbing, foundation, electrical, etc., but per several agents is unlikely to be torn down. Very rough estimate is that $100-200k will need to be put into the house per our realtor. We cleaned out the house and are now working with our realtor to determine how much work we should put into the house before selling. We do not live in the area so will not be flipping it ourselves, would like our involvement to be minimal. ARV is probably approximately $1-1.2 for a flipper.

At this time we are planning to do only superficial improvements - paint, gut cabinets, refinish floors, etc. Current estimate from one contractor for this work is approximately $20k.

One question that we have is regarding inspections - getting both a general inspection but also detailed ones for plumbing, electrical, etc. This information would need to be disclosed to any potential buyer, correct?

Does anybody have strong opinions whether we should preemptively get inspections done on this fixer-upper, or let the buyer/flipper do it? What are the pros and cons?

Thank you!

If it’s going to be a total rehab, I wouldn’t do any repairs, painting etc.....that will all get changed, just clean it out. I wouldn’t do any inspections, that will be up to the buyer.

@Natalie C. if you are going to do work, then go all the way and fix it as a flipper.  If you are just going to sell it somebody that will flip it or renovate the property to live in then, as @Wayne Brooks , has suggest clean it and leave it.  I would suggest that you DO NOT pull any reports.  In an old house like that you will probably run into a TON of issues that a buyer could use against you.  Put it on the market as what it is: a flippers dream/as is sale.  You may not get near the $1.2 number, but you will have very few headaches and the sale should happen quickly.  I am sure that if you wanted to you could EASILY go "off market" sale with somebody on BP in the Oakland market.  You would save yourself the agent commissions and you would be dealing with somebody that knows the area and product.  I am in the Oakland market, but I don't do any flipping.  But I am sure I could point you to some locals guys, pm me if you are interested. I am not an agent, so no fees or anything.

A quick search indicates that an estate in California is exempt from the required disclosure form .  Personally, I would not want to open a can of worms that doesn't need to be opened 

As others have said, I would sell the property as-is. Partial or superficial renovations rarely make sense

I'm a California real estate attorney and broker.  As others have stated, part of the decision is up to you and whether you want to quickly sell a total fixer for less or take longer and sell a turnkey home for more.  However, the decision on disclosure is not up to you.  

Among other disclosures, by California law, you are required to disclose known material facts about the property.  If you do an inspection, you will learn many material facts about the property, and you will be required to disclose those material facts to a buyer.  On the other hand, if the buyer obtains a report and if you are never apprised of the results of that report, it is arguable that you do not have to disclose those items to a future buyer, if the first buyer falls through.  You will also have other disclosure requirements mandated by statute and contract.

Given the market, if it was my home, I would do minimal cleaning, touch-up, and paint and then put it on the market as a great fixer with lots of potential.

Originally posted by @Bryan Zuetel :

I'm a California real estate attorney and broker.  As others have stated, part of the decision is up to you and whether you want to quickly sell a total fixer for less or take longer and sell a turnkey home for more.  However, the decision on disclosure is not up to you.  

Among other disclosures, by California law, you are required to disclose known material facts about the property.  If you do an inspection, you will learn many material facts about the property, and you will be required to disclose those material facts to a buyer.  On the other hand, if the buyer obtains a report and if you are never apprised of the results of that report, it is arguable that you do not have to disclose those items to a future buyer, if the first buyer falls through.  You will also have other disclosure requirements mandated by statute and contract.

Given the market, if it was my home, I would do minimal cleaning, touch-up, and paint and then put it on the market as a great fixer with lots of potential.

 Am I correct as a google search indicated that an estate is exempt from the required sellers disclosure(different name in Cal) ?

The inspection might get you closer to the asking price to sell "as is" but so does an agent who will do CMA for you.

If the seller has pre-inspection, usually it's available at the property, so the potential buyers could estimate their expenses and ARV. Besides, it shows that all the repairs nesessary from the inspection report, are already factored in the price: it will seize the unnecessary negotiations on that basis

However, I agree that it's more beneficial just to sell it to a flipper rather than DIY especially partially 

@Greg H. The answer is yes and no.  A seller who inherited a property through probate or trust may be exempt from the California Real Estate Transfer Disclosure and CAR-required Seller Property Questionnaire.  However, such seller may still be required to complete the CAR Exempt Property Disclosure and regardless, will still be required to disclose known material issue.  There are other seller disclosures that are still required irrespective of the probate or trust.

A buyer will probably do their own estimates and inspections even if you've already done them, so I wouldn't waste the money. As well, a flipper confident enough to take on a $100k+ project is definitely not going to place any value on painting you've done. For one, they'll need to have an overall vision for the project and won't want to try to be matching the paint colour you chose once they've torn out all the kitchen cabinets.

In some circumstances, putting on a fresh coat of paint and upgrading the floors garners a maximum return on investment. This is not one of those times.

I agree, that paint, flooring and cabinets will all be redone on a $100-200k renovation, so there is no need to touch any of it. I would get a good idea of ARV, figure on what the rehab will cost and try and determine the real value of the house you have. Stick it out there at the right price as is and sell it off.

Hi @Natalie C. ,

I may disagree with some of my counterparts here about how to sell it. If you do nothing and sell it "as is" rock bottom, flipper special, then you will get a certain number. Now if you get it up to FHA mortgage-able standards you can sell it to a retail buyer. That opens your list of buyers up quite a bit and competition on your property is always a good thing. Obviously I do not know the area/house or market but if 20K gets it to where it is habitable and can qualify my gut says you would make much more than that over what you would make from a flipper.

Just my 2 cents and good luck!

EDIT: And I suppose I should answer your actual question. I would not recommend an inspection, let the buyer do it and address the issues that arise

Hey everyone!

Thank you so much for the thoughts, they are super valuable, I feel like I have more discussion points to bring up to my realtor.

My realtor is experienced (30+ yr in the East Bay), has a good reputation, and has over a dozen rental properties so I do generally trust his opinions. I'll see what his opinions are on some of these points.

Thanks again everyone for taking the time to read my post and give their opinions!

Natalie

Originally posted by @Natalie C. :

Hey everyone!

My family inherited a house through probate. The home was owned by a hoarder and the house is in pretty rough shape but in a good neighborhood (Rockridge in Oakland, CA). The home itself is VERY charming with architecture typical to the area.

The house will very likely need significant work on plumbing, foundation, electrical, etc., but per several agents is unlikely to be torn down. Very rough estimate is that $100-200k will need to be put into the house per our realtor. We cleaned out the house and are now working with our realtor to determine how much work we should put into the house before selling. We do not live in the area so will not be flipping it ourselves, would like our involvement to be minimal. ARV is probably approximately $1-1.2 for a flipper.

At this time we are planning to do only superficial improvements - paint, gut cabinets, refinish floors, etc. Current estimate from one contractor for this work is approximately $20k.

One question that we have is regarding inspections - getting both a general inspection but also detailed ones for plumbing, electrical, etc. This information would need to be disclosed to any potential buyer, correct?

Does anybody have strong opinions whether we should preemptively get inspections done on this fixer-upper, or let the buyer/flipper do it? What are the pros and cons?

Thank you!

 I would leave it up to the buyer to do their own / pay for their own inspections.