If you plan to sell your house, be prepared for potential buyers to have a home inspection done as part of the due diligence process after the offer is made. Some real estate investors and cash buyers might skip this step, but most buyers don't: 81% of homebuyers have the house inspected, according to Zillow.
If the inspection report shows little wrong with the home, you have nothing to worry about. But if you get a bad inspection report, you might need a Plan B, as Zillow reports that 15% of buyers back out because of a bad inspection report.
Every inspection finds something
A home inspector will always find something to report. In fact, I bought my first investment property from a home inspector. The inspector I hired, while he didn't find much wrong with the house, still found some minor issues.
The point is to not expect a perfect report. When it comes to home inspections, don't sweat the small stuff. But major problems, which would constitute a bad report, usually require some action from you.
What constitutes a bad inspection report?
Minor maintenance issues like a hairline crack on the driveway, tree limbs that touch the roof, or a loose bathroom floor tile probably won't make a difference in the sale. Here are major issues that would need to be addressed in most cases:
- Roofing: This could be leaks, missing shingles, or a failing roof.
- Electrical: This is typically wiring that's not up to code.
- Plumbing: There could be leaky pipes or sewer system problems.
- Foundation: Major cracks can signal settling and water damage.
- Pests: This means an infestation and/or termite damage.
- Mold: This is expensive to get rid of.
- HVAC: Old systems will need to be replaced.
- Building code violations: This could happen if you renovated the house at some point and the renovations don't meet the city's building code.
Should you fix the problem yourself?
The best option if a major problem was discovered is for you to fix it yourself -- if you have the funds to do so. It'll generally cost you less than if you grant seller credits. If you can't or won't fix the problem, you risk the buyer walking away. If that happens, you must disclose the major issue when you relist the home.
What about giving seller credits?
If you can't fix the issue, you can offer the buyer a repair credit. This is a dollar amount you grant to the buyer so they can get the problem fixed -- usually in the form of paying all or part of the buyer's closing costs. Another option would be to lower the selling price of the home.
When it's a good idea to get your own inspection
If you aren't sure what type of condition your home is in, you might want to have your house inspected by a professional home inspector before putting it on the market. That way, you'll know what issues a potential buyer will likely see, and you can fix any problems before you list. Note that if you don't fix the problems revealed in a preinspection, you'll need to reveal them to potential buyers.
While some buyers will buy a home that has issues and for the full asking price, that scenario usually happens only when it's a seller's market, as it is today. Most buyers come back with a counteroffer, depending on what the problems are. Some buyers walk away, but others might ask you to fix the problem or grant seller concessions. Both options boil down to you netting less money from the sale, so sellers often fare best by fixing any problems before listing.
The Millionacres bottom line
You should always list your house when it's in the best condition possible. This becomes extremely important in a buyer's market (when buyers call the shots). It's not as important in a seller's market, like what we're currently experiencing -- high demand for homes and low inventory. But if the house is in truly bad condition, it's unlikely you'll get the market rate.