Inspection For Informational Purposes Only:
What’s The Deal And How Is It Being Abused?
Any good businessman knows that making sales is all about building relationships. But in today’s lopsided seller’s market, we’re seeing more and more sales that are all about maximizing profit. With demand for houses so high and supply so low, real estate etiquette is falling by the wayside. A primary fad at the center of this erosion of honest real estate is the “Inspection for Informational Purposes Only”. Now, there is certainly a time and place for this type of inspection and there are realtors who use it in an honest and forthright manner, but sadly for others, the value of trust and relationships is secondary to gaming the market.
QUICK BACKGROUND ON INSPECTIONS:
A property inspection is a basic part of the buying and closing process. In short, a seller posts an asking price and after potential buyers have made offers, the seller chooses to accept one. It is expected that an inspection will be part of the process but from time to time prospective buyers might waive the inspection to make their offer seem more appealing. In most cases, the inspection takes place and based on the maintenance issues that are found and need to be addressed, the buyer and seller will come up with an action plan, most commonly consisting of credits (reduction in sales price so that money can be spent by the buyer on the needs) and/or repairs by the seller. Again, if you’re the seller, and a buyer offers to skip this step OR they offer to just have an “Inspection for Informational Purposes” you are very happy not to have to worry about concessions based on the current state of the property. It makes sense that these would be attractive options as a seller, on top of just the price the prospective buyer has offered.
WHERE THE PROBLEM ‘LIES’:
As a kid I can remember going to Disney World with a family friend whose mom broke her foot while we were there. The next day, she, and the six of us in her party, were allowed to skip the long lines (before the days of FastPass) and we had one hell of a time. But later on at dinner, it was quite apparent that she was fine...maybe a twisted ankle at best...maybe. Nothing that stopped her from making dinner and clearing the table afterwards. She had clearly decided to game the system to gain preferential access for her family and friends. Not illegal, but kinda messed up.
The same strategy has become commonplace with the “Inspection for Informational Purposes Only”. Potential buyers (and their realtors) are making themselves more attractive to sellers by offering something that will differentiate them from the competition: exemption from any maintenance issues that may exist as determined by an inspection. As a seller you love this idea of not having to worry about hidden structural costs that might exist. There’s plenty of value in this offer and seller’s will be more likely to accept these bids.
This offer is getting the buyer to the front of the line, which shouldn’t be a big deal because it appears they’re adding value to the seller... but once the inspection has been performed, that buyer who said it’d be for “information only” is then turning around and asking the seller to fix any deficiencies that were revealed by the inspection. They’ve lied! In essence, now that they’ve got a (broken) foot in the door, they’re putting the crutches down and revealing that they’re no different from the line of potential buyers they skipped in front of. They won’t buy unless concessions are issued, either credits or repairs, which then puts the seller in a tricky spot and it gums up the whole process. Not illegal, but kinda messed up.
WHY IT MATTERS TO US...AND SHOULD MATTER TO YOU:
As we’ve been very open about in the past, Nexus Property Management® does not sell homes and we do not assist in the selling process. We strongly feel that profiting from selling homes would not align with our clients’ objectives because they want us to bring them as much long term value as possible from property ownership. So this isn’t as much about us. But we do help clients find and purchase rental properties if they are interested in expanding their portfolios [More Info: Nexus’ Nvest® Buyer’s Agency Program]. From that lens, we certainly want to see an even playing field for our buyers.
Just as important, Nexus also has a mission of building up the reputation and opportunities of real estate investment. We do not use these dishonest practices and we fear that this could become more and more common. For real estate investment to grow and meet its potential there needs to be a culture of trust. Etiquette matters, especially in smaller markets like we see in this region. In regard to realtors who are employing this tactic, thinking long term and about your reputation as a real estate professional will hopefully dissuade you from trying to maximize short term wins at the expense of your good name.
JOIN US:
If there are other real estate issues that are bothering you or that you might want to discuss, or you’re interested in property management, please contact us. As a company that focuses on solutions, we know the best way to come up with viable options is to begin with meaningful conversation. For access to some of the discussions we’ve already had as part of our Business Spotlight Series, be sure to click on the linked text. If you’d like to engage through that platform there’s an invite to be featured. Plenty more ideas, issues, and advice can be found at our Youtube Channel. Thanks for reading and for taking whichever steps you choose in helping to improve the real estate world we’re all so invested in.
Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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