The Value of Presale Home Inspections for Real Estate Investors

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Presale home inspections have been around since the early 1990’s, but have always been somewhat under-utilized in retail transactions. Having been previously in the home inspection business for many years, I can tell you that they were always a hard sell especially in the early days.

Even as the years passed, the vast majority of sellers wouldn’t invest two or three hundred dollars in an inspection to discover defects in the house that would typically be found during a home inspection. They would always say that they were just going to “take their chances”. This little voice deep inside really believed that the inspector wouldn’t find the rotted wood, homeowner installed wiring — you fill in the blanks.

Real estate investors as a whole, rarely use this tool that will almost always assure them more profit at closing.

How do you get more profit at closing?

The days are gone when a home inspection was the exception rather than the rule. If you are a rehabber, you probably already know that most buyers get a home inspection prior to closing. At this point when they have the inspection and find something that they want repaired, the price of the property has almost always been negotiated down. Then the investor is stuck spending more money after they have accepted a lower offer.

Having a presale inspection can save you big dollars if you fix these unknown things and roll them into the price of the home right from the beginning.

What are some guidelines?

A lot depends on your level of experience as a rehabber and what type of rehab you are doing.

For instance, if you are doing a rehab that is mostly cosmetic in nature, did you actually crawl under the house and look at the crawl space? There’s a good chance that a lot of you didn’t. There are a whole host of problems to be found in crawl spaces.

How about the furnace?

When you saw that inspection sticker on the side of the unit with a date telling you it was 8-10 years old, did you just call it “good enough” or did you have it looked over by a heating and air professional? Is there a chance the home inspector will find a cracked heat exchanger or something else that would be unsafe for the buyer during the home inspection?

What about the electrical system in the house?

Are you knowledgeable enough to find reversed polarity, improper wiring in the panel box, or breakers that are damaged or not the right size? Did you check all of the GFCI’s to be sure they are properly grounded and working properly? These will all be things the home inspector will be looking for plus many more.

Giving the plumbing a once over

He will also run the water in the house for 20-30 minutes continuously at all of the faucets to look for any signs of leaking.

During this time he will discover things like a leaky shower pan, any leaks under the sinks, and pipes leaking in a basement or crawl space. A competent home inspector will go into the crawl space under the house after the water has been running for a
time. If there is a slow leak it will take it a while to show up. The water will also be run at hose faucets on the exterior. These are big problem areas that are often over looked.

Home inspection facts

During a home inspection, the inspector systematically goes through the house and will typically look hundreds of different components in a home. He will do the same exact inspection in a presale home inspection.

Having this knowledge prior to putting the house on the market puts YOU in the drivers’ seat – not the buyer. While cosmetics are never part of a home inspection, the inspector may actually point out some things in a presale inspection that he knows will become an issue for any buyer such as missing grout on the bathroom floor or torn screens. Anytime a house has a lot of little repairs that need to be done, it’s a red flag to a potential buyer that the house may have bigger things that have been neglected.  Let’s face it, when you’ve been working in a house for a couple of months, you get to a point where you just don’t see
a lot of these minor details.

Proven benefits

NAR put out a statistic a few years ago that stated that, “Homeowners that had a presale home inspection, almost always sold their house more quickly and for more money than those folks that didn’t”. It’s something to think about the next time you get ready to list your rehab.

Juhan Sonin

About Author

Sharon Vornholt

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

14 Comments

  1. I think it would greatly benefit sellers to utilize presale home inspections, especially with the current buyers market. Having a home inspection before putting the home on the market could help them to know what to expect, instead of having to come up with $500-$1,500 right before closing to either repair or make up for the defects. Great post.

    • Pete-

      You could get one, but wholesalers typically won’t get a home inspection because of the sheer number of offers they make. Also, speed is important when you are a wholesaler. So if you wait to get an inspection, you might lose the house. Most wholesalers quickly get pretty good at estimating repairs. You need this skill to make offers. You don’t need to be perfect, just close enough.

      Rehabbers on the other hand, could benefit greatly from having a home inspector go through the house before putting it on the market. Licensed home inspectors are trained to look at things that an investor wouldn’t necessarily look for. They are in fact required to report on certain items.

  2. Sharon, great post. Your mention of the tie between pre-sale inspections and the speed of sale is an important one to note. A seller will be armed to negotiate fully once they know about potential repairs needed–or can decide to take them on much earlier in the process.

    • Jill-

      That is exactly the point of getting one. Information in this case directly translates into dollars.

      A seller can also decline to make a big repair if they so choose by telling the potential buyer that the price of the house reflects the need for … a new roof for instance.

  3. Getting a pre-sale home inspection is a great idea. The seller is then aware of and can address any issues identified by a state licensed inspector. As a potential buyer, I would be very impressed to see a recent inspection resport for review before making an offer on a property.

  4. Very Good article Sharon, refreshed my memory on all the things that go bad before closing. More than once I have talked bad about a darned Home inspector who held. Up my closing and cost me money or the whole sale. Thanks

  5. When I was active it was common to encourage all sellers to get an inspection up front. Even an experienced investor can get tripped up, especially when delegating out responsibilities to others. The “as-is” approach is getting more difficult to sell, even when there is private money involved and no bank. Great article Sharon. Thank you

    • Mike –

      Getting a presale home inspection is smart marketing. It makes the buyer feel like all the cards are on the table. In my 17 years in the home inspection business, less than 10% of the buyers spent their money to get another home inspection when a presale inspection was done. This makes it vital as the seller, that you use a qualifed professional to do the presale inspection.

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