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Homeside: Your Modern Mortgage Blog

What Is a Pre-Listing Inspection?

Posted by Mikey Rox on August 25, 2016

Some sellers are confident their homes will sell quickly, and if they’ve kept up with their home maintenance, they don’t fear a home inspection. But even if a home is well maintained, an inspection can uncover hidden problems—costly problems that must be corrected before closing. These repairs can catch your sellers off guard, but they can prepare for these expenses with a pre-listing inspection.

A pre-listing inspection is a home inspection. But instead of the buyer flipping the bill, your seller hires a home inspector before listing the property for sale.


Purpose of a Home Inspection

Home inspections are encouraged before buying a house because these inspections can find hidden issues with a property. Walking through a home during a showing doesn't give buyers adequate time to thoroughly evaluate the condition of a property. Plus, many buyers don't have plumbing or electrical experience, so they’re unable to eyeball defects or recognize items that need repairing. A home inspection is for their protection so they don't buy a money pit.

But while home inspections benefit buyers, they don’t necessarily benefit sellers. After the home inspector sends a report with his findings, your seller and the buyer will negotiate the repairs. Some buyers ask a seller to repair all items on the inspection report, which can cost thousands of dollars. This eats into a seller’s profit. If some repairs are too expensive, your seller may have no choice but to cancel the contract.

There's no way to know the true condition of a property until after an inspection. Buyers typically have the upper hand with home inspections. But if your sellers get a pre-listing inspection, they regain a measure of control.


What is a Pre-Listing Inspection?

A pre-listing inspection runs about $250-$400 on average, depending on the size of the home. Your sellers can select their own home inspector, or you can recommend one. If they select their own inspector, make sure they do their research and choose one with a high reputation. Sellers shouldn't seek a home inspector who will appease them. The goal is to sell the home, so they need a professional who’s thorough and trustworthy.

The inspector checks the home’s electrical system, plumbing, heating and air conditioning systems, appliances, foundation, attic and roof. He’ll also perform an inspection of the chimney and fireplace if one’s located on the property.

The entire process takes about two to three hours, but you should encourage sellers to be present and walk through the property with the inspector.


Benefits of a Pre-Listing Inspection

One benefit of a pre-listing inspection is that sellers can see for themselves which items need repairing, and at this point they can decide whether now’s the best time to list the property for sale.

A pre-listing inspection also lets sellers complete repairs at their own pace. They have time to shop around and get quotes from different contractors, which results in a less stressful process. On other hand, when there’s already an offer on the table, the seller may only have 30 days to fix items on a buyer’s inspection report. The sooner they complete the repairs, the sooner they can close on the property.

If your seller clients get a pre-listing inspection and make needed repairs based on their report, make sure they retain a copy of the report and receipts for repairs. In cases where a pre-listing inspection took place within a few months of receiving an offer, your seller can provide the buyer with a copy of his inspection report, along with receipts for these repairs.

This information may suffice for some buyers, and they won’t get their own inspection. Other buyers, however, will want their own home inspection completed.

There’s a chance their home inspector will find problems that the previous home inspector didn't catch. But in all likelihood, these will be minor issues.

A pre-listing inspection is also beneficial because sellers can determine an asking price that better reflects the condition of the property. If the home needs several repairs and your seller doesn't have the available cash, he can list the house at a lower price to compensate for these repairs. Once there's an interested buyer, your seller can disclose issues with the property, and then explain that the price reflects these flaws.

A pre-listing inspection can help identify any issues with the home early on and potentially sell the home faster.


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