Episode 11: Inspections from the Seller’s Perspective

Scott Williams: Sweet Home Santa Barbara, where the skies are so blue. Sweet Home Santa Barbara, what’s worked for me can work for you.

Jonathan Robinson: Welcome back, listeners, to Sweet Home Santa Barbara. I’m your co-host, Jonathan Robinson. I’m with my realtor and friend, Scott Williams. Hi there, Scott. I hear today we’re going to be talking about inspections from the seller’s perspective. Later, you’ll be doing one based on the buyer’s perspective. In terms of what sellers need to know about inspections, I’m wondering should sellers always get a presale inspection?

Scott Williams: Well, in general, I want to say yes to that, but there’s some big caveats. We’re going to go into those because the answer isn’t always yes to all inspections. However, there is a difference between whether you own a house or you own a condominium. It’s much more likely that you’re going to want to do inspections if you’re a house owner, and less likely if you’re a condominium owner.

Jonathan: I’m wondering, first of all, how much do presale inspections cost? Another question is do they always even affect the outcome of the sale?

Scott: I think they always affect the outcome because the information that you have about the condition of the home affects you, whether you’re a seller or a buyer. It’s kind of the middle ground where the buyer and the seller meet. What an inspector has to say always affects how the deal is going to go.

Jonathan: Now, why are you getting a presale? Because obviously, when a buyer makes an offer, there’s some kind of inspection. What are the advantages to doing that?

Scott: Well, if you’re in the category where your home is in nice condition and the market conditions are such that you can make money from fixing up a home… That was a conversation in our previous podcast. But if you’re in a market where you can make money, then you’re going to have a punch list or a to-do list that will come out of the physical inspectors view of the home. Since you’re going to have contractors around, you have a handyman, you’ve got a plumber, an electrician, a roofer, a carpenter of one sort, who’s working at the house, you can hand this list to them and say, “While you’re fixing the steps, why don’t you also fix the hot water heater or whatever it might be?” This, then, improve the view of the home in the mind and the eyes of the buyers. We use that to increase the price.

Jonathan: That makes sense. It seems that by doing that, you might be able to pick off some things that, for a small amount of money, can make a big difference in the sale price.

Scott: That’s entirely true. That’s exactly why you would do it. The opposite side of that also is true, and it’s worth noticing and mentioning. If you don’t know about them and the buyer inspects them and finds out the leak under the house, suddenly, you’re going, “Oh my gosh. It’s leaking under my house.” In your own mind, you’re thinking, “I’m going to have to fix that.” The buyer is thinking the same thing. You’ll need to fix that. That will become a cost to the seller.

Jonathan: Yes. Well, is it ever not a good idea to have the seller do their presale inspection?

Scott: Yes. Yes, it is because we’re looking for profit, generally speaking, from the seller side. There are some inspections, and I’m going to call these the specialized inspections, that were particularly problematic. Let’s just list this down. This are not the general physical inspection. We’re recommending that one. But there might be inspections that would include mold, asbestos, lead, radon gas. The chimney is a specialized item. The foundation is a specialized item. Drainage, a sewer video, or just a standalone roof inspection — all these are specialized inspections. This takes a conversation with the seller and a bit of the knowledge of the agent, but these are the areas where you can get yourself into trouble if you end up with a bad report in one of these areas because they can be very expensive to fix. Many real estate agents representing buyers are going to be ignorant of the value of these inspections. They’re not even going to do them.

Jonathan: Well, so you would do those inspections maybe if you thought there was a problem with one of them? When do you decide to do those inspections?

Scott: Yes, let’s use mold. If you walk into a house and your nose says, “Wow. It sure smells misty. It smells like a sponge that’s been sitting on the sink for too long in the house,” you’re thinking, “Okay. I can’t miss it. We may have to find out where’s all this smell coming from.” There, you have a specialized and expensive one with high costs that you may not be able to avoid.

Jonathan: Right. How much is a normal presale inspection versus some of these other ones?

Scott: Well, the general one that comes from the physical inspector ranges on the low side of about $600 to about twice that amount. In a particularly large house, it could be three times that amount. Generally, from $600 to $900 covers the majority of homes, unless you have a very large home.

Jonathan: Now, I know you have some information about what’s called a pinnacle program, which relates to inspections. Can you tell us a little bit about that?

Scott: Yes, the pinnacle program is part of Berkshire Hathaway. If you are a seller of a home and we discover that there’s quite a bit of work to do and you personally don’t have the money, maybe you received the house from your parents or whatever financial situation you’re in. You don’t really have the money to do all this work; we have a company that will do all of the work for you. They’ll accept payment at the close of escrow for all of the work. You don’t have to have the money to fix up your house.

Jonathan: That’s kind of nice. It’s a nice perk for doing business with…

Scott: We have definitely done this to the great benefit. Oftentimes, it’s children who have received their parents’ house and they go, “It’s a great house, but Mom and Dad sort of let it go over the last 20 years. If we could just fix it up, we could really make a lot of money. We just don’t have the money.” It’s perfect for that situation.

Jonathan: Now, let’s say you have an abysmal fixer upper. How can you use inspections that might make that more saleable and more profitable?

Scott: I was in one just this week. It was a Goleta tract house. They had been in there for more than 45 years. The family had gotten older. They didn’t have any money. They let the roof leak, and they let leaks happen underneath the sinks. They had a series of dogs and cats. The place smelled like a kennel as well as the mole that kind of like… It was a fixer upper. This is a traditional fixer upper. The real estate agent very wisely decided that everybody who came into the house could see these many problems of the house and decided to inspect all of them including mold, asbestos, lead, the physical inspections, the plumbing, the roof, everything. Instead of walking into the house and just holding your nose and walking out and going, “Gosh! What a mess!”, they presented you with a list of everything that needed to be done to finish this house off. Even a casual observer of this home could see what was less expensive. Even though there was a lot of work to do, you knew exactly what it would take. Once it’s all done, you would have a very nice home. This is a case where those inspections invited you in and made it possible to consider buying such a difficult home otherwise.

Jonathan: Right. It can be used in a lot of different cases. Well, any last words about seller inspections? I know we’re going to be doing another podcast on buyers’ inspections, but from the seller’s point of view, what else can you say?

Scott: I think we come back to the market. If the market is… We go back to that previous podcast. If you haven’t heard it, you should listen to it. It helps to tell you whether or not you should or shouldn’t make these inspections. That’s really important. Your real estate agent needs to really consult with you. Generally, you should with a few exceptions. Talk to your Realtor. Make sure they are really experienced in this area because a lot of money is made or lost right here.

Jonathan: Speaking of connecting with a realtor, how do people get a hold of you?

Scott: I’m Scott Williams. The email is scott@scottwilliams.com.

Jonathan: Great. Well, I look forward to hearing the buyer’s perspective in our next episode. Until then, thanks for listening to Sweet Home Santa Barbara.

Scott Williams: Thank you for listening. Please subscribe to our podcast on your favorite app. If you know someone preparing to sell their home, please tell them about the podcast. Visit scottwilliams.com to contact me and download the two free E-Booklets — “Is My House Saleable Now?” and “How Not To Buy A Money Pit”. Thank you for listening.