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For Sale by Owner: Pros and Pitfallsby Nick Gromicko, CMI®
When deciding how to go about the process of selling their homes, homeowners should carefully consider the pros and cons of hiring a real estate agent. While most sellers opt to hire an agent to assist them with the sale, a minority of them choose to sell it themselves. In 2006, these "for sale by owner" (or FSBO) sellers totaled 12% in 2006, according to the National Association of Realtors. FSBO sellers stand to save an enormous amount of money, but to do this well, they must be knowledgeable and shrewd in a territory which they may find unfamiliar.
In the U.S., real estate agents typically take 4 - 6% of the price of the home, which many homeowners view as unjustifiably large, considering the agent puts none of their own money into the home and comparatively little of their time. Yet, sellers must consider that this fee is usually split between the the buyer’s agent and seller’s agent, and the brokerage must be paid too. After taxes, the average real estate agent makes a humble living. Although, understandably, the seller doesn't care about how the commission is split up, as they'd much prefer to pocket the whole amount.
There are also psychological reasons why homeowners choose to sell their homes themselves. Some people enjoy the feeling of being in control of the transaction and unencumbered by the potential mistakes or ulterior motives of professionals. The agent might want to accept a low offer because they’re in a hurry to sell the home, get their commission and move on, even if the seller is in no rush and wants to proceed at their own pace. Moreover, the amount of the commission will be affected little by a change in the final sale price, leaving the agent with little incentive to dicker over a few thousand dollars.
Of course, many sellers will gladly pay a real estate agent a hefty commission, especially in buyers' markets, when the seller can’t garner sufficient attention to sell the house on their own. Also, the idea of a property transaction – perhaps the most important financial move of someone’s life – without a professional may be unsettling to both the buyer and the seller. Agents know what agreements need to be signed and which laws must be observed (such as disclosure requirements), saving a lot of hassle for the buyer and seller, and keeping them both out of court. A real estate agent will also act as a buffer between the buyer and seller, who might feel uncomfortable dealing with one another directly.
Perhaps the best reason to hire a real estate agent is that they know how to price a home, and, without their assistance, the seller may waste months trying unsuccessfully to sell an overpriced home, or, worse, sell the house for too little. When selling a home without an agent, owners will be responsible not only for paying the fees charged by various professionals, but they will also be responsible for finding these professionals in the first place. A competent real estate agent will know to not skimp on the home inspection, for instance, by exclusively hiring InterNACHI inspectors.
Sellers can save thousands of dollars by avoiding the services of a real estate agent, but to do this well, they are going to have to earn that money. The following tips are a good start for FSBO home sellers:
- Don't skimp on house preparation. Your house will be in competition with houses listed by agents who coach their clients on how to prepare their house for showings.
- Learn about legal requirements for disclosures in your area. If you do not disclose certain information to the buyer, they might be able attack you later in court.
- Familiarize yourself with the paperwork and contracts required by a real estate transaction. It often pays to hire a lawyer to review the contract.
- Research advertising and marketing tools available to you on the Internet. There are some sites that will even help you develop a video tour of your home.
- Hone your negotiating skills and be prepared to turn down some offers. Real estate agents are expert negotiators, and the buyer’s agent might try to take advantage of your inexperience.
- Hire an InterNACHI inspector to perform a Move In Certified inspection.
In summary, it might make sense to hire a real estate agent to assist with the sale of a home, but savvy, responsible homeowners can save a great deal of money by selling their homes themselves.
OverSeeIt inspectors offer a variety of services:
- Project and contractor oversight
- New-construction phase inspections
- Final walk-through inspections
- One-Year Builder’s Warranty Inspections
- Annual inspections for home and commercial property owners
- Investor consulting
- Pre-Listing Seller Inspections
- Foreclosure inspections
- Insurance inspections
- Home inspections
A home inspection is a visual examination of the home's major structure, systems and components that are visible and safely accessible. The inspector should substantially adhere to a standards of practice that outlines what should be covered during a general home inspection, as well as what is excluded. Some inspectors may strictly follow the standards of practice, while others may exceed the standards and inspect other items, or perform a more detailed inspection. Whatever the inspector includes in his or her inspection should be discussed prior to the inspection – this is known as the scope of work. The inspector should be able to provide you with a copy or online link to the standards of practice they follow. The inspector should provide you with a written report, which may include photos and/or recommendations, of his or her findings of the inspection. Read InterNACHI's Standards of Practice to find out what is typically included and excluded in a home inspection.Buying a home is typically the biggest investment you will ever make, so it's important to get a home inspection because the inspector should be able to discover and document defects that may or may not be obvious to you as a prospective buyer. Such defects can range from simple replacements or repairs, to severe damage or safety and health concerns. Additionally, most mortgage companies require a home inspection on a property before approving the home loan. Read InterNACHI’s Top 10 Reasons to Get a Home Inspection.It is important to choose a home inspector who is qualified and holds a license or certification in the field. Many jurisdictions do not regulate home inspections, meaning that anyone could call themselves a home inspector. However, just because someone performs home inspections doesn't mean that they're actually qualified to do so. If you are buying or selling a home in an unregulated jurisdiction, make sure to look for a home inspector with the proper certifications. The International Association of Certified Home Inspectors – InterNACHI® – is the largest and most trusted home inspector association in the world. Its members undergo rigorous training to become Certified Professional Inspectors (CPIs)®. They also follow a Standards of Practice and adhere to a Code of Ethics. This will ensure that you are hiring only an individual who has received the best training to become a home inspector. There is no set cost for a home inspection. The cost will vary based on the inspector, the local market, the geographic region, the scope of the inspection to be performed, and more. Before the inspection, you should find out what will be included in the inspection and what won't, and these details should also be outlined in the inspection agreement that you will need to sign prior to the inspection.Depending on the home's age, size, and location, as well as the home inspector's own work protocols and ethic, your home inspection may take up to three hours. Adding square footage, outbuildings, and/or ancillary services (such as mold testing) will increase that time. It may be necessary for your inspector to bring in a helper for a very large property. If your general home inspection takes significantly less than two to three hours, it may indicate that the inspector was not thorough enough.A home inspection is usually scheduled after an offer has been made and accepted, but before the closing date. That way, the inspector can rule out any major defects that could be dangerous or costly. In rare cases—due to timing or contractual issues—the inspection can be scheduled after the closing date. If this is the case, the home buyer should schedule the inspection for the earliest possible date after closing.You should attend the inspection, and you should reconsider hiring an inspector who doesn't allow this. You can learn a lot by following an inspector through the home. You will certainly gain a better understanding of the home's condition, which will give you insight into its potential sale points and defects. Additionally, you will likely learn information about the home's maintenance, systems and components that may provide useful for the transaction.What if your home inspector is also a licensed contractor? Sounds great, right? Not always. Although it may seem convenient to have an inspector who is also a contractor, it poses a conflict of interest. According to InterNACHI's Code of Ethics: The InterNACHI member shall not perform or offer to perform, for an additional fee, any repairs or associated services to the structure for which the member or member's company has prepared a home inspection report for a period of 12 months. This provision shall not include services to components and/or systems that are not included in the InterNACHI Standards of Practice.If an inspector financially benefits from finding any defects, this can impact the accuracy of the report (whether intentional or not). Make sure the inspector you hire abides by a Code of Ethics and Standards of Practice. If your home inspection reveals any problems, it is important to understand the severity of the defect. For example, a missing shingle or dirty air filter can be easily fixed at a low cost. However, if the defect is more extreme, such as a major foundation crack, wood-destroying organism infestation, or evidence of mold, you should find out how these problems can be addressed, and whether you can negotiate their cost with the seller. If it is determined after you move in that your home has a severe defect that wasn't reported by your InterNACHI® Certified Professional Inspector®, you should check to see if he or she participates in InterNACHI's "We'll Buy Your Home Back" Guarantee. Here’s how this program works:
- It's valid for home inspections performed for home buyers only by participating InterNACHI® members.
- The home must be listed for sale with a licensed real estate agent.
- The Guarantee excludes homes with material defects not present at the time of the inspection, or not required to be inspected, per InterNACHI's Residential Standards of Practice.
- The Guarantee will be honored for 90 days after closing.
- InterNACHI will pay you whatever price you paid for the home.
Pre-Listing Seller Inspection
Are you selling your home? Let an InterNACHI Certified Professional Inspector® inspect it before you even list it. A Move-In Certified® home has been pre-inspected, which means that the seller can confirm that there are no major systems in need of immediate repair or replacement, and no known safety hazards. A Move-In Certified® Seller Inspection informs you of any defects or problems with your home so that you can address them before prospective buyers discover them. You can then take the time you need to obtain reasonable repair estimates. Show prospective buyers that you are dealing in good faith. Avoid 11th-hour negotiations and delays, and justify your full asking price by having your home pre-inspected now.
- The report provides an unbiased, third-party, professional opinion about the condition of the home to potential buyers.
- The report may encourage the buyer to waive his own inspection contingency, so the deal is less likely to fall apart the way they often do when a buyer's inspection reveals unexpected problems at the last minute.
- The report can be hosted on www.FetchReport.com, which can be used as an effective marketing tool.