Home Inspections and Disclosures
Home Inspections and Disclosures: What to Expect as a Seller
As a seller, one of the best practices you can implement is to put yourself in the shoes of the buyer. There are a lot of little nuances in a home that a buyer will not see through the same lens of a seller. So, put on those “buyer glasses” and take an objective look around for anything that might need to be changed, fixed, or updated. Squeaky doors, peeled paint, and finicky light switches may not be a big deal after living in a home for years, but too many issues can add up and leave a prospective buyer disinterested or concerned. The practice here is to make the best impression possible and create a desirable experience for someone taking that first walk-through the home.
An easy and effective way to get over any attachment and help identify some overlooked items is to hire inspectors. At a minimum we recommend a home and pest inspection. Typical costs for inspections range from $1,000 - $3,000 combined depending on the size, condition, and other outside factors or issues with the home. When looking for an inspector chose reputable service providers with experience in the industry. It’s important to note that some cities have resale inspection requirements where a city building inspector will look for health and safety issues as well as unpermitted work and other city/county requirements for sewer lateral conditions or vegetation management requirements.
A general home inspection will look at the major systems in the home like the plumbing, electrical, HVAC, general roof observations, and structural elements. A pest inspection report will show Section I items, and Section II items. Section I items detail any active infestation issues - like rot, mold, wood-boring beetles, and termites to name a few. Section II items are recommended actions to take to prevent issues in the future. Some of their findings may suggest obtaining further inspections (like a mold inspection if there is a presence of mold detected) Inspection reports over 6 months old tend to be a little stale, and some of the city mandated reports expire after 6 months. As a homeowner, it’s good practice to keep those reports current. For example, if you have a home inspection done in the summer prior to heavy rains 6 months later, a buyer is going to want to see if there is any intrusion or damage from those rains and not want to rely on a report during a dry period. So be mindful of the environment and wear and tear on the home as you plan out your inspection timing. Sellers also want to keep record of any major repairs or updates made to the house or property over the years. Remember all materials have an end of life, and even a new home has issues that need to be addressed.
A Rule of Thumb with Home Inspections and Disclosures
If you have to ask your agent or advisor about and whether or not to disclose, it should probably be disclosed.
A significant number of dispute issues that arise after the sale stem from non-disclosure items. Sellers should also refer to their state’s Department of Real Estate guidelines for disclosure and inspection requirements. This is where you want to be thorough with your documentation. As a seller, one of your goals should be to give the buyer a chance to write the cleanest offer with as few contingencies as possible. Disclosing all pertinent information and inspections upfront shows a buyer that the seller has nothing to hide and creates a much smoother transaction. Buyers today expect to see inspections upfront so come prepared. Make that list, and check it twice!
One of the disadvantages for sellers is that they wait until after an offer comes in to present your disclosures and for a buyer to conduct inspections without any knowledge of the property. They will have the option to conduct their own inspections during the transaction, but by providing reputable inspection reports prior to going into contract, issues will be discovered and presented to a buyer so that they can factor them into their offer. When this doesn’t happen, buyers can use it to their advantage and create more leverage by asking for credits, reducing the sale price, or even backing out of the contract if there are material items that would have prevented them from offering in the first place.
With disclosures sellers should consider more than just the property itself and share any material information about living in the home and the neighborhood. Maybe you’re a music aficionado and don’t mind your neighbor’s band practice every Tuesday night, or maybe you live near a school and find the sounds of the playground charming. These may not be material to you, but could be deal breakers for a buyer, and if you want to avoid a headache or potential dispute after the sale it’s imperative to disclose upfront.
Pre-Sale Disclosures and Inspections for Unpermitted Work
In the case of unpermitted work done on the home or property it is highly recommended to disclose this information upfront. Where you don’t want to find yourself is in a situation where additions, renovations, or landscaping that are not permitted or up to code are disclosed once you are in contract. You could very well have the buyer cancel the transaction depending on the work needed to be done to resolve the situation or worse, a seller could be faced with a major liability after the sale. These items can sometimes be missed by the city or a seller didn’t even know a permit was required when they did the work - then it becomes a problem for the buyer when they go to get a permit for something else. Needless to say, there is a lot to consider regarding your disclosures - the main take away, be very thorough!
For buyers and sellers alike we recommend being very cautious of any proposed plans, renderings, or marketing materials showing additions, landscaping, or a pool for example. Be mindful that unless those plans are approved by the city and work begins (some approvals are subjected to time constraints and can expire before work begins), they are not part of the property and therefore should not be considered part of the sale unless detailed in the contract. Even casual mention of slated plans could present issues after a sale.
We recommend that buyers contact the city planning office and review the home inspections and disclosures on file.
Clear and transparent communication pays off in the long run with peace of mind and profits over headaches and litigation. Take those necessary steps to prepare your home for the best possible end result.
If you have any questions about inspections or disclosures please share them with us at firstname.lastname@example.org. We’d love to hear from you, and we’re here to help!
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.