Home Buyer’s Scenario
Two sellers, Sue and Greg, are each listing their home for $200,000. Sue gets a pre-listing home inspection that uncovers nine items that need repair. She fixes five of those items and will disclose the other four issues to potential buyers. Greg decides not to get a home inspection before listing his house for sale.
Both Sue and Greg put their homes on the market and within days get multiple offers. Sue’s highest offer is $10,000 over list price. Because she had a home inspection prior to listing and was honest and upfront about the work done and additional repairs needed, none of the offers were contingent on a home inspection.
Greg also receives three offers with the highest $10,000 over list price. However, this offer is contingent on a home inspection. The next highest offer he receives is $205,000 and is not contingent on a home inspection. Now Greg needs to decide if he’s willing to risk $5,000 and find out what a home inspector will uncover in his home. His options:
- Accept the lower offer, which has a greater likelihood of the sale going through since no inspection will be required. The home inspection that Greg could have done before listing his house would have cost as little as $300, but instead it’ll cost him $5,000.
- Accept the higher offer and risk the sale on a home inspection. If issues are discovered during the inspection the buyer could back out of the sale and Greg will need to put his house back on the market. This often gives homes a bad stigma, which also translates to lower offers. In Greg’s case this could mean selling his home for $190,000, five percent below his asking price. In this scenario a $300 home inspection would cost Greg $20,000.
Meanwhile, Sue has closed on the sale of her house and moved into her new home. She is also enjoying having an extra $20,000.