Reasons Home Inspections Kill Deals

Often real estate agents complain that they have worked weeks, months, or even years with a client only to have “their” deal killed by the home inspection or the home inspector. Sometimes home inspectors are at fault, but most of the time there are other issues that led to the terminated contract. I want to look into those issues more closely.

As a licensed home inspector who has worked with countless real estate agents, I can tell you several things can lead to a canceled sale. Some home inspectors can be overzealous, especially new inspectors who may have expertise in one aspect of home construction but lack experience in others. For example, a former HVAC technician who became a home inspector would be more critical of HVAC installations, etc. Other times, an overzealous inspection can be due to prior complaints warranted or not by other buyers. In this scenario, the home inspector is being overly cautious, and the less experienced he or she is, the more absurd the things that are noted. Our job requires us to be transparent and thorough, but we must be experienced enough to know the difference between a major problem and a minor one.

While it is acknowledged that overzealous inspections can happen, the vast majority of times, it is the unique characteristics of the property, buyer’s expectations, or unprepared buyers that result in a cancellation due to the home inspection. So let’s do a deep dive into what a real estate agent does to improve his or her odds that the sale is not canceled.

1. Prepare the Buyers: an agent may not have any construction experience, but they should be able to identify issues that impact the value of a property.

Unfortunately, many agents have to learn this from experience: the true cost of buying a home is the sales price plus the cost of repairs. We like to tell clients that no house is perfect because houses are built by people who are not perfect. When an agent tells their client to expect the home inspector to find things wrong with the property, it makes it much easier to follow up after the inspection. Most agents working with Buyers will try to get the Sellers to do repairs to facilitate the sale. Unless the list is short, this is a bad strategy. The most successful agents I know will either use a percentage of sales contract contingency clauses or a lower contract price on the front end to hopefully deal with home inspection results on the back end.

2. Expectations: Do you prepare a buyer for an offer in a strong seller’s market differently than in a buyer’s market? Of course, you do!

In a buyer’s market, the buyer has the upper hand, and the home inspection results should be expected to be factored into the sales price. A real estate agent must earn their worth in this market. On the other hand, in a strong seller’s market, the seller has the upper hand. The home inspection results should not necessarily be expected to be negotiated unless there are big-ticket items that need resolution.

3. Unique characteristics: No two people are alike, and you can say the same thing about houses. In markets with subdivisions that are of similar age, it is easier to see differences in maintenance and other issues. Obvious signs of deferred maintenance should indicate that you’re in for a rough home inspection. Big ticket items like roofs and structure issues can easily result in a canceled sale, and that is due to no fault of anyone except possibly the seller. Hopefully, the real estate agent has built a trusting relationship with the buyer, enabling them to keep showing the client other properties.

At the end of the home inspection, I often ask, “Would you buy this property?” My response is the same every time: “I’m not in a position to advise you whether to buy a house or not. My job is to show you the problems and report those problems to you. What you do with that information is between you and your agent.” 

So, is the answer to a real estate agent’s dilemma to hire the least experienced inspector or put the least experienced inspector on the official referral list? Not if you want happy clients. The answer is to refer home inspectors with a minimum of five years of experience, follow a high code of ethics, and meet or exceed industry standards. An agent would do well to try to empathize with their buyer.

In other words, “Do unto others as you would have them do unto you.” A more transparent approach will lead to happier clients, better referrals, and more success. If a sale is canceled because it does not meet the buyer’s expectations, but they want to continue working with you; you have done a good job.  Ultimately this is a people business.  You might lose a sale, but you should never lose a buyer!