Last Things First 2

So the last time we talked about moving one of the last things in a real estate transaction to first - the property appraisal prepared by the licensed appraiser.

Why?

To avoid the inevitable renegotiation of the sales price after the appraisal is completed by assuring that the true value of the property as it is related to the bank is exposed to the Buyer and the Seller much earlier in the transactional process.

Today we will explore the next most common cause for renegotiation of the transaction.  The home inspection conducted by a licensed home inspector.

Every prudent real estate professional completes a Seller's Disclosure form at the time of the listing.  You know the one that has the Seller state that they have not done anything to the property that was not without a permit and that the Seller knows of no defects in the property.  That is all well and good but that does not remove the pain of discovering things not known to either the Buyer or the Seller at the time an offer is negotiated.

So what do we commonly do now as it relates to property inspections?  We do them last.  After the offer is made and negotiated and we treat them as  a buyer contingency.  Once again, we suffer through a painful "root canal" process of settling on a final sales price just in time for the home inspection to upset the fragile balance of the transaction yet once again.

Huge mistake.

The property inspection needs to be first, not last in the transaction.

Sellers that do not have a licensed property inspection ask for nothing but trouble and after an offer is negotiated. 

AKA - huge headaches. 

Despite what is disclosed on the Seller's Disclosure form, very few Sellers truly know the condition of their property especially after living in their home for years and years.  Stuff happens and things age.  These conditions will always become the topic of discussion in any property inspection report and they will always be associated with an estimated cost to remedy.

This will always trigger a renegotiation of the sales price - always.

Don't get me wrong.  Just because a Seller does an inspection of the property doesn't mean that the Buyer will not do one as well.  The Buyer will and the Seller should.  That's the difference.

If something is made aware to the Seller in a property inspection report completed before the property is marketed, the Seller has time to consider the cost and to disclose allowances made in the price for such costs.

In the ideal situation, the Seller would take the appraised value of the home made by the licensed appraiser, adjust it for the historical listing to sales price difference and then deduct from that value the cost of what needs to be done in the inspection report to bring the property into marketable condition.

Why isn't this being done as a normal course of business today?  You got me.

Sometimes I think that we are afraid to suggest there is a cost to listing and marketing property.  Most times I think it is because we are simply afraid to do things differently.  Why?  Because we fear that others in our business who practice the current "process of least resistance" will win the at business. 

What a shame.  What a lost opportunity.

The industry continually gets low marks from consumers because its common business process management is never examined and truly improved - it is just practiced every day.

Time to reFresh the transaction again? 

I think so.  So far we have added about $700.00 (appraisal and inspection fees) to the cost of listing and marketing a home for the Seller. 

And what would we get in return for suggesting this vastly improved process?

Lots.  Two very relevant sources of valued information and disclosure that will serve to remove a tremendous amount of confusion and stress from the transaction sooner than later.  And second, the acknowledgement from the consumer that as an industry we have a better plan and a renewed transactional process that creates - by design - a higher degree of consumer care.

And that's precisely when putting last things first in the transaction alters the business of providing quality real estate services in a very good way.

Forever.