RealPodVa continues

We’ve been less consistent than we’d like with the podcast this summer, but that’s reasonable. Listen to the podcast here. This was part one of two of a fantastic discussion with my colleague, Deborah Rutter, about home inspections – how to prepare (as a buyer or seller), and how to set expectations.

Transcription

Automated, thanks to Rev.com, so please forgive errors.

Jim:
This week Bart, Dave and I were joined by Deborah Rutter, a colleague of mine at Nest, and we talked about home inspections. Sexy, sexy content here today, but we’re really talking about setting expectations for buyers and sellers. And how to get through a process that is often much more emotional and fraught with strife than is the initial offer decision process. Hope you all enjoy the conversation.

Jim:
What do you tell your buyers, when you make an offer on a house and you tell them, “Here’s the terms, here’s the price, closing.” All that stuff. What do you tell them about the home inspection?

Deborah:
The thing that we always focus on for home inspection, or at least with my buyers, is the fact that this is sort of your one shot to step back from your love or hate of the house – probably your love because you put an offer on it – but for you to get an objective look at the house when it’s at the emotional low-point.

Deborah:
It’s going to be the time in which the stuff that you thought was clean, and pretty and awesome, is gonna look a little crooked, a little dirty. Some of that shiny patina is just not gonna be quite as noticeable when you’re there for three hours of walking around the house during an inspection.

Deborah:
So for a lot of people, the home inspection is kind of a bummer time, but it’s the time to really understand that you’re not buying the cherry cabinets and the stainless steel appliances. You’re buying whether or not the water heater is gonna go out in five years. You’re buying whether or not the HVAC is gonna completely conk out in the middle of summer. The stuff that’s really important.

Jim:
I tell buyers that this is time to learn everything you can about the house that you possibly can. Time to look under the hood if you will, in the basement, in the crawlspace, and attic and all of that. But also this is the time where it gets to be most fraught with emotions.

Deborah:
That’s right.

Jim:
Because you make the offer on the house, and both parties come to terms and it’s fine. In a lot of negotiations that first part can be a little bit stressful. But the home inspection is where you’re going in, and you’re saying, “I know you love your house, but this part really sucks, and I want 75 dollars to fix this thing.” And the sellers will say, “Nah, I love that. I can’t believe you don’t like that 75 dollar thing, because that’s my favorite part of the whole house. I’m ready to terminate the contract.”

Deborah:
Right, well that 75 dollar thing is something that we’ve lived with for all these years and it doesn’t bother us. I don’t know why it bothers you.

Jim:
Yeah, and that’s the part where I said-

Dave:
Can we get an example of one of these 75 dollar things that’s really screwing things up? [crosstalk 00:02:52]

Jim:
A sticky door, like the door-

Dave:
People have an emotional attachment to a sticky door? Oh man [crosstalk 00:02:58]

Jim:
Because that’s where their daughter went in and she banged the door that one time with the dog, and it made the door a little bit crooked. So the door’s crooked and they’ve lived with it because it’s a reminder of when their daughter and the dog were playing, and that’s a fun thing that happened in the kitchen.

Dave:
I’ll fix that door, man. [crosstalk 00:03:12] The door’s incorrect.

Jim:
No, because I love that door.

Jim:
But that’s the sort of thing, the number of times that we’ve seen in our individual practices, things fall apart because of that 150 dollars, or 500 dollars, or 1000 dollars. And not to diminish the value of 1000 bucks, it’s money. 1000 bucks is a lot of money.

Jim:
But you’re talking about a 475000 dollar house, and parties are ready to blow things up for 800 bucks. Objectively that’s not the right decision. Because the buyers have said, “I love this house, enough to spend this money on it.” And the sellers have said, “I’m ready to move onto the next phase of my life.” Are you kidding me? You’re gonna let-

Dave:
For like a quarter per cent of the purchase price of the house, yeah.

Jim:
.0025, [crosstalk 00:03:58] an infinitesimal amount

Dave:
Yeah, a .25 per cent [crosstalk 00:03:58] of the purchase price.

Jim:
Yeah. A nothing per cent. A nothing per cent of the house value. Because you’re harmed emotionally because of that couple hundred bucks. So that’s where we have to step back and say, “This is not that big of a deal. Y’all are both invested.” I think it’s something that is hard to convey, because I think that the perception, we were talking off-air, is that the realtors want it to go through. Not because – yeah we get paid when it closes – but we want it to go through if it’s the right thing for the client.

Dave:
For both clients, yeah.

Jim:
Representing the buyer, if it’s right for my client.

Dave:
Right, yeah.

Jim:
It’s not that I don’t care, but I don’t care about the seller.

Dave:
No, but the seller’s agent wants it to go through too, because I’ve got a buyer for these peoples’ home, everybody wants [crosstalk 00:04:45] to see that happen.

Jim:
And the seller probably has their eye on a house in Maine where they’re moving.

Deborah:
Right, they’re ready to move onto the next phase, and this is just one of the bumps in the road that needs to happen to make that go through. But for some buyers, it’s an issue of, “I’m paying full price for this thing, and so this inspection process is my opportunity to get a second bite at the apple. So I’m gonna go after the things that … A lot of buyers want a perfect house, right? And no perfect house exists. Even new construction is not a perfect house.

Deborah:
So this is your opportunity to get something that you think might give you an opportunity to stick it to the seller, because look, “I’ve offered you full price for this house, and now I’m gonna want you to take care of all the things that make me crazy.” A lot of buyers will default to that as a position.

Jim:
Yeah, and from a seller’s perspective, I will tell my sellers, one – clean the house, make it perfect, change the filters, do the stuff that you did the day it went on the market. Make it as perfect as you can. But also know that they’re gonna come in, and they’re not gonna come in with that eye towards your sticky door, and giving you the benefit of the doubt. They’re gonna come in, and they’re gonna ask for some significant things you didn’t know about, and they’re gonna ask for some petty things that’s gonna piss you off.

Jim:
And my job as the seller’s agent is to say, “I know, it’s a high loop drain, it’s something that nobody has in their house, but the inspector’s called out the high loop drain on the kitchen sink. It’s 12 dollars or whatever. Just let it go.” You’re not going to do that one. They’re asking for it because they know they’re gonna kick that out, but if it’s a list of 17 things, it’s gonna get kicked out. If it’s a list of one thing, it’s the high loop drain, just fix the drain.

Deborah:
Just fix the drain.

Jim:
So it’s helping put in context of what’s reasonable and normal and acceptable.

Dave:
My question I have to put to the two of you, is how you prepare a buyer, especially first time buyers, about the process of home inspection? Because I remember when we were buying our first home, and they were like, “Okay we’ve got to go to the home inspection.” And we didn’t know any better. It was like, oh okay, schedule the home inspection.

Dave:
You know when you were younger, as a kid, and you could just tell mom and dad were worried about something. Maybe we should be concerned too. It was like we weren’t concerned about a home inspection whatsoever, and then we were realizing, oh our agent is very stressed out about this. Should we be more concerned about it?

Dave:
How do you prepare that? Because the home inspection is a very critical part of the home purchase. Everything can live and die by how that inspection goes, and especially for first time or young home buyers who’ve never really had to go through this process before. Our first home was a new construction, so we did an inspection, but didn’t really need to do it.

Dave:
It was when we bought our second home, where the home had been around 10 or 12 years at that point. There was something that wasn’t up to code, and it was fine then. It’s not fine now, and that was kind of a red flag for us. But we were definitely noticing, oh both agents are very stressed out about this. Should we be concerned about this? So how to do you address those kinds of things?

Deborah:
That’s great that both agents were stressed out because that means they’re taking it seriously, which they should be.

Dave:
Yeah, one of the agents is sitting across the table from us now, but yes.

Jim:
Hopefully you didn’t discern my stress.

Deborah:
I’m working with some buyers now, they’re moving here for retirement. They’re in their late 70s, and it’s clear they have never looked at the inspection process as something they should worry about. I think this might even be the first inspection they’ve ever actually attended. And so we started off the process by saying, “What are you supposed to do while you’re there, right?”

Deborah:
So a really simple approach, like make sure that if it’s raining that day you’ve got shoes to change into so you don’t muck up the carpet. Because it’s going to be really hard to tell a seller that you want to have X number of dollars thrown at a problem if you’ve just tracked in a bunch of mud.

Deborah:
So there’s a bunch of practical stuff up front, like how do you behave at an inspection, right? And as what Jim said, this is the time to go to the places that you’re not going to go. You’re not going to pull out the ladder on a Tuesday afternoon and think to yourself, “I’m going to go up into the attic because I think it’s going to be really fun,” right? The inspection is the time to do that. The inspection is the time to get your pants a little bit muddy, look into the crawlspace and just see what it looks like. So there’s some really practical things you can do to actually get ready for the inspection.

Deborah:
But also remember that for the inspector, they’re a hammer looking for a nail. They’re job is to find stuff that’s wrong. And you have to decide for yourself, are the things that they’re finding that are wrong or that are worthy of note, things that I care about? Because for some people, the things that are on the list are things that people just don’t care about. And for other folk, they’re things that they care about a lot.

Deborah:
So you’ve got to know yourself well enough, or at least have a conversation with your agent enough to be able to break down things between categories like, “I really care about that a lot”, or “In my family that really matters a lot, or “Gee, these are the things that I don’t care about because I can fix them better than the seller did. I can make it better that what’s currently in front of me.”

Deborah:
So the categorization of the things that are found in the inspection I think is key so that you don’t get overwhelmed by the sheer number of problems.

Jim:
I think this also goes to trust of your agent. And I say that because I read some forms online sometimes, and people say, “My inspection just happened. What should I do? I don’t trust my agent.” I think that’s a you problem with you hiring the wrong person.

Deborah:
Yeah

Jim:
But I think to your point though it’s knowing when to ask your agent, “Is this important? Does this matter?” No, it really doesn’t. Or yeah, this is something you really need to be aware and concerned about. Knowing how this will affect the life of the house.

Deborah:
Right, and resale.

Jim:
And resale. So, it was funny. I had this a while ago. I had a seller, and got the home inspection back, and it had a bunch of valid stuff. He’d owned the house for five or six years, and the buyers were asking for my opinion. Not my house. My opinion for legitimate stuff. And, it’s amazing what you can learn when you listen. If he’s pushing back and saying, “Well this was like this, and this was like this, and this was like this…” Who did your inspection? And he said, “Let me find it.” And he found the inspector. And he was a terrible inspector.

Deborah:
So it must not have been your seller.

Jim:
No, he wasn’t my seller. But he was an inspector that we know, if you get that inspector, and you’re representing the seller

Deborah:
[crosstalk 00:11:20] You’re glad.

Jim:
We’re going to be okay. So as we’re going through the report, I’m learning – I asked who his inspector was, and told me who it was, and I said, “Oh, okay. That makes a lot of sense. Why you’re upset at the stuff that they’re finding now, that was present five or six years ago, that your inspector then didn’t find.” And he didn’t have a good inspector. And so his mindset was different of, “Well, why didn’t find the stuff last time.” Well, because you hired the wrong guy.

Deborah:
Yeah, the quality of the inspector absolutely is just so key because of that very thing, right? When you get ready to sell, the stuff that comes up, maybe the stuff that was there when you bought it, and you just didn’t know. And now it’s coming out of left field, and you’re just a little disappointed and a little mad that you’re having to now perhaps pay for things, or fix things that have been problems all along that you didn’t know about.

Jim:
And you’re fixing stuff for the next buyers. You’re going to get no enjoyment out of that new HVAC, or that not-squeaky floor, or whatever that thing is. I get it, it’s the sort of emotional thing that can really try to drive a transaction sideways.

Dave:
We put our house on the market a couple of years ago, and we ended up replacing something. And it improved the quality of our life so much that we ended up taking the house back off the market. We got all new appliances. Sometimes I think those changes were enough. Now my wife is like, “Maybe we should do that again” because it will motivate us to replace the kitchen floor and the cabinets that we need to do right now. But, it did, it improved. I was like, man this fridge is amazing. How are we going to leave this?

Deborah:
Most people love their house the day they put it on the market because it’s clean, it’s bright, it’s awesome. Things are new, and they’re like, “Why are we selling this thing?”

Dave:
And you’re like, “Why are we not living like this all of the time anyway?”

Deborah:
[crosstalk 00:13:09] All the time

Jim:
Because all of our stuff is in two storage units. I mean, this is great. To the inspections though, setting expectations is key and it’s one of the number one things that we do as practicing agents is knowing what’s coming down the line, and knowing how to prepare people for this is kind of going to suck a little bit.

Deborah:
That’s right. When I’m representing the buyer, I wish that the agent who is representing the seller would help that seller understand what’s about to happen, so that the inspection process is, I don’t want to say cleaner and faster, but it’s just not fraught with a bunch of little stuff that makes my buyers just begin to get a little bit nervous. Things like when the light doesn’t work, right? You flip a switch and the light doesn’t work. Now I’ve got to look at my buyer and say, “It could be the light bulb for 50 cents. It could be the switch, it could be the wiring, or it could be the actual light itself.” Right?

Deborah:
So now there’s something that I’m going to have to put on the inspection report because you didn’t prepare your seller and remind them, “Hey, all of the lights in the house should work.” Right?

Deborah:
Part of this process is just making sure that the listing agent prepares their seller. We think about this as a buying process, but it’s a selling process too.

Jim:
Right. Also, one, make sure the light bulbs are all the same color, because with all the LEDs now, you have

Deborah:
And not those ones that take forever to light.

Jim:
No CFLs, but the LEDs need to be the same color.

Dave:
Soft white versus bright white, or?

Jim:
Versus yellow light versus bright white.

Dave:
This is way too in the weeds for me, man.

Jim:
I’ll send you a picture. I’ll put a picture in the show notes. You’ll see what I’m talking about.

Deborah:
It makes a difference.

Jim:
It makes a huge difference. But if you ask for that broken fixture to be fixed, the seller’s going to say, “It’s just a fricking light bulb.”

Deborah:
[crosstalk 00:14:41] But we don’t know that

Jim:
“Why are they even asking for that? Now I don’t want to fix the other stuff.” It sets the tone of negotiations when the buyer’s just saying, “I want to make sure that that destroyed light fit-” They’re going to go to the worst case scenario of, “I have to replace the breaker box because of the bad light.”

Deborah:
Right

Jim:
When it’s just a 50 cent… okay, well LEDs are like seven bucks, ten bucks

Deborah:
[crosstalk 00:15:09] That’s right

Jim:
It’s a ten dollar light bulb. So you do that groundwork. You change the air filters, even if you haven’t changed it in two years. Change it the day before the inspection so it looks like you’re taking care of your house.

Deborah:
Yeah, now I’ve just started providing a list to the other agent that just says, “Hey we’re going to have an inspection in your house. I’m sure you probably provide something similar, but let me give this to you that you can provide to your sellers to make sure the house is ready.” It really bums me out when we have to go back to check out a shed that was locked, because nobody could find the key. The shed’s part of the house, it’s part of the property. Let’s have the keys available. Little stuff like that really makes me look at my buyer and say, “This seller is ready to negotiate. They’ve got it together. They’ve thought about us in this process, and we’re going to go through the secondary negotiation once we get this finished, and it’s going to just be fine because these guys knew what to expect.”

Jim:
It is a secondary negotiation.

Dave:
Or just, if you’re the seller’s agent and you know there’s something, like, “Hey the light fixture in the guest bedroom is wonky.” Just set that expectation so when you the buyer are walking through will be like, “Hey we’re going to have a wonky light.” It’s just a thing. We’re going to accept that this is a thing. There’s going to be no surprises attached to it.

Jim:
Your list sounds amazing. I bet it’s as good as mine. Will you share that with me when we’re finished? Because that would be great.

Deborah:
I will.

Dave:
You get the show notes.

Jim:
I had client years ago that – (I don’t have a list)

Deborah:
I’ll give my list to anybody who wants it.

Dave:
He asked for the list because, he’s like, “I’m going to hijack that list, that’s what I’m going to do.” That’s a lot of work I don’t have to do anymore.

Jim:
[crosstalk 00:16:54] We can get better

Deborah:
[crosstalk 00:16:54] Hey, a rising tide raises all ships.

Dave:
[crosstalk 00:16:54] Absolutely

Jim:
[crosstalk 00:16:54] by taking from people who are better at what they do.

Jim:
But I had a client years ago, and they said, “We bought this house three years ago,” or whatever it was, “And we never had the liquid propane fireplace hooked up. Should we have that thing hooked up before the inspection?” No, that’s fine. Don’t worry about it. That’ll be a thing that ask for in the inspection. And damned it wasn’t the only thing that they asked for in the inspection.

Jim:
The other stuff that my sellers apparently knew was light fixtures, little stuff. They were so focused on that liquid propane fireplace working that, easy fixed. Done. 150 bucks later.

Deborah:
Everybody comes to the process with their own thing.

Jim:
Yeah. Knowing what’s coming and setting the expectation is huge, because every inspection is different, and there’s no answer. People will say, “What should I expect in here?” Be patient.

Dave:
Jim may be referencing me in that fireplace story.

Jim:
I’ve had probably five or six unworking liquid propane fireplaces because they didn’t have tanks. I don’t understand it. If you have a fireplace, have it hooked up and use it. But that’s just me.