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Why Deals Die

by Jason Porterfield

Home Inspection Dissections

For a seller, a poor home inspection can have serious consequences that can lead to even the most upbeat homeowner feeling crushed and hopeless. A serious problem could require immediate – and expensive – attention just to get the home back up to code. Existing conditions that violate current codes, but may have been grandfathered in and are therefore technically legal, can still cause problems for the seller if they show up in the inspection report as required changes. Even recommended changes – such as altering the spacing between balusters – that aren’t required can give the buyer second thoughts. A buyer with small children, for instance, would probably want to insist that baluster spacing be narrowed to prevent accidents, even if the inspector doesn’t necessarily require the change for the sale to go through.

A negative report can also drain the buyer of any enthusiasm they may have for the home. They have every right to take one look at a long list of recommendations and decide to move on, leaving the seller and the seller’s agent holding the bag.

“Sometimes the damage is done,” Fay-Hart said. “The inspection report is out, and there’s no reversing that first impression.”

Because the fire-damaged house had been a foreclosure and the sellers did not have any knowledge of the event, there was no information on how it started, when it happened or what repairs might have been done to correct any problems. Fay Hart’s sellers hired a structural engineer and tried to recapture the buyer’s interest. The engineer’s findings revealed that while there might have been a small fire in the home, the building’s structural integrity was not impugned.

“We had [those findings], but the first impression of them seeing the report and feeling like the integrity of the house was compromised stuck with them, because it had no explanation and no recommendations were made on how to move forward,” she said. “We moved as quickly as we could and got our engineer’s report inside of five days, but that wasn’t fast enough. I did resell the house shortly thereafter.”

Fay-Hart accomplished that by contacting four other prospective buyers who had shown interest in the home and told them about the alleged fire – the Illinois Residential Real Property Disclosure Act requires such information be revealed to potential buyers. She gave them the structural engineer’s report, stating that the structure was not compromised. Her sellers were even able to make a deal for the same amount as the original contract.

Houses can’t “fail” an inspection, though a negative inspection likely will have a negative impact on the home’s appraisal and valuation. It’s not a municipal inspection that’s likely to incur penalties, though if major renovations are needed to correct a problem, it could trigger a municipal inspection. Inspections aren’t required for a sale to be completed. Home inspections are needed only if the buyer requests one be put into the purchase agreement or a financial institution lending money for the purchase requires an inspection as part of the assessment process.

Dealing with the fallout from an inspection that does not go well can be difficult. Agents can help their clients weather these trying situations by cultivating strong ties to contractors. Being able to get in touch with a plumber or a roofer who does quality work at short notice may satisfy both the buyer and the seller. Smaller flaws might be fixable in a matter of days or even just a few hours. The seller will likely have to cover the cost and may take a hit on the agreed-upon price, but if the alternative is to stay in the home when they want to be somewhere else, it may be worthwhile.

Not all problems can be fixed so quickly. A basement that is prone to flooding, for instance, likely isn’t fixable if the geography of the lot is unfavorable. Foundation problems can require major, expensive repairs. Windows and doors are often relatively easy to replace, but installing new flooring or rewiring a home requires major structural upheaval.

Anne Gavanes, a Realtor with Baird & Warner in Saint Charles, has advised her clients to walk away from properties with negative inspection reports. In one case in which she was representing a prospective buyer, the seller had done a full rehab of a home but refused to acknowledge the fact that he hadn’t gotten the proper permits from the city. She cautioned her client that if they ever decided to sell the property, the fact that work was done on the home without proper documentation could come up and foul their sale, even if they weren’t the ones who did the rehab.

“I strongly advised my client that when they go to sell, the city can work out what happened when the home is inspected,” Gavanes said. “I advised him to walk away and we did. We found him a better house and he’s much happier.”

“Sometimes the sellers don’t know about certain situations in their house, and they’re generally open to the inspection,” she said. “If you get a seller that digs their heels in and doesn’t want to do anything, go back to the table and see if you can get your buyer a credit. Try to throw options out there to keep the deal together.”

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