Today’s episode starts off by digging into the local real estate market with our guest, a Realtor® extraordinaire at RE/MAX Advantage Plus, Jim Starr. He shares what the real estate market’s like in the Twin cities in the last week of February. He shares a couple of listings they had, some overlapping showings they did, and how chaotic they were. Also, he shares an experience he had where the buyer didn’t do an inspection and ended up with some issues and concluded that having a home inspection is indeed important. He then answers the following questions:
Do you recommend a home inspection to potential buyers?
Is there anything in the code of ethics for Realtors® to talk about home inspections? Can you recommend against them? What’s the actual language when it comes to this thing?
Why do you think some people are afraid to forgo inspections?
Why do you think deals which are in a seller’s market still blow up? What are the steps to prevent it from happening?
If somebody gets a pre-listing inspection and something turns up, say there’s an issue, but we’re in this crazy market, what does the seller do at that point?
Should sellers disclose issues that turn up during a pre-listing inspection?
If there is a material defect found with the property, should the owner of that property have to fix it?
How much will it cost if the buyer will forgo or fly-buy an inspection?
Reuben then brings up the new service that the company is rolling out which is called a Walk-Through Consultation. He shares how the company came up with the idea, how it works, and how they are trying to open up schedules as much as possible to help people in these situations.
The following is a transcription from an audio recording. Although the transcription is largely accurate, in some cases it may be slightly incomplete or contain minor inaccuracies due to inaudible passages or transcription errors.
Bill Oelrich: In terms of leverage as a buyer, you have none, and it’s totally a seller’s market, and at Structure Tech, we’re responding to that need by offering a new product. And when we get into this podcast a little bit, Reuben’s gonna unveil it… Welcome, everybody, you’re listening to Structure Talk a Structure Tech Presentation. My name is Bill Oelrich, alongside Tessa Murry and Reuben Saltzman. As always, welcome from the Northland, the Three-Legged Stool is no longer encased in ice, we are melting away in this beautiful February… The last week of February, I should say. We can timestamp this podcast because it’s coming to you, nearly hot off the press.
BO: So on today’s episode, we’re gonna dig into the local real estate market a little bit. And we’ve got a special guest on the podcast today, realtor Jim Starr, realtor extraordinaire. And Jim’s gonna be sharing his views on the market. But we’re rolling out a new product here at Structure Tech because it’s literal chaos out there right now for anybody who’s looking to buy a home in terms of leverage as a buyer, you have none, and it’s totally a seller’s market. And at Structure Tech, we’re responding to that need by offering a new product. And when we get into this podcast a little bit, Reuben’s gonna unveil it, so everybody drum roll, please.
BO: We’re not gonna say it yet. We’re not gonna say it yet, we’re gonna hang here a little bit…
Reuben Saltzman: The title of the podcast may give it away, but that’s okay… That’s okay. We’ll pretend nobody saw it.
BO: Well, as you can tell, I’m just the host and I don’t actually see any of the production material before it gets posted, so I’m sorry, I made that flop, but Jim…
RS: Well now it’s okay. It’s a working title, Bill. It’s alright…
BO: That’s awesome. Well, Jim, I’m gonna ask you to introduce yourself in just 30 seconds, but I have to let my co-hosts get in a word of introduction here too, so… How’s the week going?
Tessa Murry: Good! Oh, it’s going great. We’re looking to hire our next batch of Home Inspectors to train, so we’re super excited about that. Been working hard on interviewing and finding the right people.
BO: Awesome. Reuben? What’s up in your world?
RS: Blogging, podcasting, helping Tessa with these interviews, just narrowing it down. We are in the final scramble to get our new batch of Home Inspectors beginning their training, it is a lot of work and hats off to Tessa for all she’s doing on this. It is incredible. Yeah.
TM: This hiring process that we’re doing now is very involved and there’s a lot of people that play an important role on it, so thank you, team.
BO: Awesome, well, Jim, let’s get you to pull up to the microphone here, and why don’t you introduce yourself, tell us who you’re with, give us some background on who Jim Starr is.
Jim Starr: Sure, thanks Bill. Thanks, Reuben and Tessa, and everyone for having me. I’m Jim Starr, I am realtor with RE/MAX Advantage Plus. I’ve been in the business full time as a real estate agent for it’ll be going on 20 years. I was practicing before I was officially a realtor since about 94, 95, so… And eventually I went in to do it fulltime, so RE/MAX Advantage Plus out of our Eagan office is where we’re at. And in all honesty, I have no idea how many agents are in our office ’cause we’re just too busy to go in. I just went to RE/MAX Advantage Plus recently, and so I couldn’t tell you too much about our office ’cause we’re on the road a good 6-8 hours a day, so…
BO: Well, I think that gives us a slight clue as to what the real estate market’s like in the Twin cities here in the last week of February. So what have you seen out there? Is it total and complete chaos?
JS: You know it is. I had a Coldwell Banker Agent reach out to me… I’ve had a couple of listings… Two come on in the last two weeks that immediately went. Very interesting scenarios, one was in Eden Prairie it was a townhome, one was over in Como Park, literally right on Como Park Conservatory. And the process leading up to it was getting busy about five days before. It was so insane Bill, I had to literally sit last weekend, Friday, 8:00 AM pretty much through Friday night at my computer answering emails, calls, texts. We had… What came down to it, and Structure Tech did our Truth in Housing inspection.
JS: What came down to it was 52 showings in 32 hours, because some people were doing overlapping showings, even though I thought I restricted that, and we ended up having 18 offers total by… Well, I cut off showing Saturday at 6:00 PM, and to give you an idea, agents who knew that they hadn’t made the cut were still contacting me on Sunday afternoon trying to get us to reconsider. [chuckle] So it was a pretty crazy week last week, but literally it was Friday, 8:00 AM taking calls and everything through Saturday evening, and then into Sunday, and I think we wrapped it up with signatures and everything Sunday, at about 6:21 PM.
RS: So, just to complete the picture, there are three things I wanna know Jim. What was the size of the house? What was the age and what was the list price? Can you share that with me?
JS: Yeah, absolutely. Great question. So, the size of the house was 1911 feet, and I wanna say it was 1922, I’ll double check was the age of the house, but for sure it was 1911, I get it officially measured, appraisal measured, but it was listed to that 397.5, which was a very competitive price for a lot of reasons based on square footage, just pushes the envelope a little bit… But it’s a really wonderful, wonderful Micro-Market and block, ’cause this house where you basically step outside the front door, a gorgeous house, you’re literally on the conservatory property, I think it was the historic rail station building at Como Park there is right out their front door and then their trails and everything. So literally, we hit a home run with of location on it or I did, ’cause that’s was indicative of how busy it was, so…
RS: Alright, now the question of essence, and I don’t know how much of this you can share, but I’m gonna push it.
JS: We’re going to be dancing around it, I think I know what’s coming, but…
RS: Of course. What was the offer that was accepted? You don’t need to tell me the exact numbers, but… What was it?
JS: Gotcha. So… Again, another agent from Coldwell reached out this morning, ’cause there’s another home maybe coming on that he caught wind of, and you’re about the sixth or seventh person who’s asked me, all other six people were agents in the business, ’cause people want any kind of edge. Ultimately, what came down to it was many factors. I’ll say it right up front, this was not the highest offer in terms of price. So it came down to a combination of the strongest offer in terms, in addition to price, in addition to buyer flexibility, in addition to… The lender was fantastic, ’cause the lender reached out to me twice.
JS: The agent was phenomenal. He did a masterful job, I thought, with texting, emailing, calling, following up, staying in touch with me without over doing it, and he was very cordial. I’ll just say upfront, there were some agents that submitted offers and they went, one in particular went from first to worst during a conversation because of that encounter. And I told my sellers about it, and they said they weren’t interested. So listing at 397.5, what can I tell you for price? For sure, it’s north of 425, out of 18 offers about 50% of them were north of 425.
TM: Oh my gosh.
RS: So somewhere close to 30 grand over asking price.
JS: Correct. So, okay, the price is even north to that [chuckle], so even more than that…
BO: Well, we’ll just save Jim, the cold sweat that you’re putting him in right now Reuben and just say…
JS: Come on Reuben, what are you doing? I am the realtor.
BO: Somebody paid a premium price to live in the great city of Saint Paul.
RS: We don’t even know the address of the house…
BO: No, it was at Saint Paul, it was in Como…
JS: There was a handful of offers north of 430 even, so we’ll just leave it at that.
RS: I assume that the offer was accepted contingent upon a home inspection. Correct?
JS: You would be incorrect in your assumption actually. So in preparing for the podcast, I was thinking, “Okay, let’s go back over the 18 offers”. Every agent I tried to call, I really wanted this to be fair for not just my sellers, but all the agents, all the buyers. Right out of the gate, seven of the buyers dropped out based on our conversations with their agent. They just weren’t gonna be playing ball. So we went from 18 to 11, and then of the top 11, a top five. Of the top five, then it came down to some really grueling terms negotiations that took place. The winning… Actually, I’ll just say this, I know there were at least five of the 11 remaining offers that did not have inspection contingencies built into the purchase.
RS: That is crazy. So I didn’t even discuss this with you beforehand. I mean, we could have teed this up really beautifully, but I thought that this was where it was gonna go, and that’s the whole purpose of this podcast today, is to discuss that exact topic. People writing proof that are not contingent upon the home inspection to get their offers accepted.
JS: Absolutely. Well, it’s a darned if you do, darned if you don’t situation. First of all, what I could tell… I’ve been… I’m a buyer’s agent too. Buyers are losing offers left and right. It’s for a lot of reasons, whether it’s… Interest rates are great, so it’s not free money, but pretty free as it gets if you’re mortgage-ing to price point to some buyers are writing, I call them buyer love letters to the sellers that may or may not be delivered depending on the listing agent. There’s a lot of different terms when it comes down to inspections, it’s really interesting because it depends on not just how the purchase agreement is structured, but it depends on how the buyer’s agent does the set up with it.
JS: Sometimes in my purchase agreements, I’ll make something purchase contingent on inspection, but then there’s another field, and I’ll say buyer’s choice to decide if they choose to perform a radon inspection in addition to a sewer line scope inspection during the inspection contingency period. And that was a pretty standard statement I’d put in, but I also know the more I put in, the less likely the sellers would go, “I don’t want these people digging into everything”. And so it just depends on the situation and whether or not I’m gonna be overly descriptive or less descriptive, but I always recommend an inspection.
JS: This particular home I’m referring to, it was really interesting because of just high velocity, it was so insane about half of the ending offers had inspection contingencies and half didn’t.
RS: So… What do you think about that? I mean, is that something where you’ve ever been involved in a transaction where you’ve brought that up to your clients and you said, “Hey, it’s competitive, you wanna buy this house, you wanna get it, if you wanna make it more competitive, let’s make it not contingent upon a home inspection.” Have you ever done this before?
JS: Well, my clients have done it. I honestly cannot remember ever telling clients, even in new construction, ’cause Structure Tech did an inspection for us back in 2011 on a house in Maple Grove, brand new construction, wasn’t finished yet. Actually Reuben, I think you were the inspector. The buyers didn’t wanna do an inspection. I’m like, “You be better do an inspection ’cause new construction, I think you guys have a class on it, there’s issues”. And sure enough, the carpet guys carpeted over a heat duct in the dining room, a whole section of the front half of a dormer had above a…
JS: I don’t know if it was the dining room or the foyer had no insulation. I mean, there must have been five or six issues at that particular house back in the day for this one… Now it’s tough because buyers are really, really… I won’t say desperate, but they’re desperate because they’re exhausted, they’re losing out multiple offers. Sometimes there’s only a few multiples, sometimes I heard from somebody in our office had a 25 multiple offer last week. I wouldn’t say they’re losing hope, but it’s really a dire situation, trying to win an offer sometimes and it’s stressful.
BO: I thought, Jim, I thought it was just that somebody wanted to live in St. Paul that badly.
JS: Yeah maybe. Well…
BO: I advocate for it.
JS: That’s a good point Bill, ’cause we had professional photos done on it. Some of my descriptions, I was rocking it last Wednesday night, I may have had a martini, I don’t know for sure, but I had the headphones on, listening to music. So I was putting in music quotes in my picture descriptions, I’m like, “This listing was set to take off, like it did”. I mentioned that because it is on Como Park Conservatory and some of my pictures I typed in, “This brings me back to childhood. This would be fantastic.” And I didn’t say families, but your entertainment is Como Park Zoo, it’s the Conservatory. You know it’s a free zoo, walk over there, you get to grow up on Como Park.
JS: It literally brought me back to my childhood. And it was such a good, happy feeling listing that I was feeling good just typing in descriptions in the pictures about it.
RS: So Jim, you’ve never actually been involved in a transaction where you’ve told your clients, “Hey, if you wanna it make more attractive offer, let’s forgo the home inspection”, but you have had clients to bring that up to you anyway, right?
JS: Well, I appreciate it. Reuben you sound like an attorney there, I gotta be careful on what I say to you. [chuckle] No, I’m just kidding ya. I won’t say I haven’t mentioned it before. People ask, “What are our options?” I’ll say, “Well, this is a possibility, it’s up to you.” Ultimately, I just don’t advocate for it, when buyers ask me in particular, I always say, “Well, we don’t know what we’re gonna encounter.” I’ll have a pretty good idea, maybe they will. You look at farms and infrastructure, I know enough to be dangerous, but you don’t know about stuff you don’t know about. I always try and advocate for it. Sometimes buyers just… They want it so bad, they don’t wanna do an inspection…
RS: Sure, sure. No judgment here, if you do it’s… [chuckle] I do not… I’m not trying to put you on the hot seat.
JS: Yeah! I’m like, “Oh my gosh!” I’m like, “Reuben’s gonna send this right on over to realtor Joe. I’m gonna give you a great example. A friend of the family I’ve known since literally fourth, fifth grade. We bought a home for them south of the river, it was listed… It’s mid-fours, gorgeous house. Newer construction, I don’t remember the year off the top of my head, but newer construction. And they chose not to do an inspection. And it was recently remodeled, gorgeous finishes, a really cool game room downstairs. This thing had me going goo-goo over it.
JS: Literally, the day before closing, we had a little water issue that the sellers told about, “Oh, don’t worry about it, there’s something backed up and we cleaned it up, it’s drying.” Okay, well, that’s fine. Inspection happened within the first week, summer 2020 basement flooded and my buyers were freaking out. And they called me, I’m like, “Well, we didn’t… ” Obviously, I knew we didn’t have an inspection, I’m like, “I have no idea. Did we… ” Was it coming up from a floor drain in the utility room?
JS: That’s what everyone thought was happening, but really what happened was there was water in a half bath nearby the utility room, water was coming up actually through the toilet line, out the bottom of the toilet, that was seeping out into the main living area in this game room and utility room and things like that. So upon further investigation, they had a camera scope done post-inspection obviously, and it’s actually, it’s somebody that you use at Structure Tech. So that guy is awesome. I always use Joe, actually.
BO: Sewer Joe…
JS: So Joe came out and literally found… He’s like, “Yeah, it’s weird, this line pitches, but right at about this… I think it was seventy some feet that main sewer line, the main line to the house was disconnected, and this was new construction. And so now it’s outside the foundation. [chuckle] This had to have been known ’cause it had seemed to have happened before the basement was newly remodeled, and then all of a sudden, the story came together, we put two and two together. Did they have to remodel ’cause they had a flood previously? Yada yada yada. And that was as a result of not a home inspection that would have found it, but a home inspection with a sewer scope inspection on a newer house. I don’t know what the totals are so far, but we’re still going through that process right now with the previous owners.
RS: Such a good story, right on the heels, and we just had Sewer Joe on our podcast recently, so…
TM: Yeah, a shout out to Drain Busters.
JS: I love Drain Busters, I love Joe. When you get to his office and I’m like “I always tell my clients, I’m like, listen to Joe’s narrative when he does it.” It’s funny. I had some other major stories with Joe that happened in Edina a few years ago, and we were all in shock. Joe was like, “Oh my gosh, I hit the crown jewel of sewer scopes!” [chuckle] And it just seems to happen to me and my clients. I think I invite chaos. I don’t know. [laughter]
BO: We’re gonna have to have you back to dig into this house that you’re just talking about, because there’s a good story there, and after it all plays out, when we white wash all of the names and protect the guilty or… And the innocent, it’ll be curious to know who said what? What was held back? That’s the question that’s going on in my head. It’s like, “Hmmm, this doesn’t add up.”
JS: Well, you know, other than the one last summer with the sewer line there, and then what we just sold last week in Como… Here’s the new… Invariably, what may happen, really good thorough agents who will follow up with a listing agent, try to engage what’s going on, see what the activity is, try and text me, try and email you, try and call you. The loan officer may try and call you and reach out, that’s just the start, before they actually submit an offer sometimes. Other agents won’t, and they’ll just submit an offer in email and go, “Hey, let me know if we get it.” That’s just amazing to me but it still happens.
JS: It’s the agents who are very thorough about the process, who inevitably their buyers, whether or not it’s recommended by their agents, get to the point of going, “How bad do we want it? What do we do? What are we willing to sacrifice? What are we gonna risk, not risk?” So on and so forth. That’s where I think it gets to that point of inspection or no inspection, and how much in the inspection or how do you word it? Which is really what we’re starting to talk about because this offer last week, it ran the gamut. We had no inspections to verbiage and purchase agreements, it’s an inspection, but it’s not contingent upon the inspection, so I don’t even know what that one meant… That was second and last place.
JS: Another one was not contingent upon an inspection, but an inspection the buyers wanna have for educational purposes, and within four days. And I’m like, “Wow, four days. You can get someone out there. Good for you.” To… Inspection only if major structural or HVAC issues above $2000 potentially be asked for, but this isn’t gonna be a nickel and dimming thing, it’s we wanna make sure something major is not going on. So agents are starting to get creative in the other fields under inspection to describe exactly what it is they’re looking to do.
TM: You know, Jim, to me, it sounds like people out there realize they need to do something to be more competitive if they’re gonna get the house, but they’re all afraid to forgo the inspection.
JS: Yeah, yeah, that inspection, it’s tough. Well, it’s a great point Tessa. A lot of times, what we see in the industry, I’m sure of it, a lot of agents would say this, listing agents, is it depends on who your buyer is and what their confidence is and if it’s their first home or it’s their move up home or their third home. If it’s their first home, that is a grueling tug of war probably going on, and if there’s a married couple, it’s probably between spouses, but a lot of times what we see is we also see parents that are involved and they may be out at the house with the buyers and they go through it during the original showing or during the inspection.
JS: And parents even have a very different perspective versus maybe not an unsuspecting first-time home buyer, their children, but a little more naive buyer who just doesn’t have that experience yet with knowing what someone might something might cost or… It looks like an easy issue, it’s really a big issue or it’s an expensive issue. So parents sometimes play a part in a first-time buyer situation. Move-up buyers seem to be more confident, but they still do hesitate because you don’t wanna buy a limit, and hopefully you don’t and you shouldn’t based on disclosures, but I think it’s a confidence issue.
RS: That brings us up to the new service that we’re rolling out here that… Well, that we have officially rolled out, which is, [chuckle] it’s to fill the gap, it’s a stop-gap service that we’re offering now called A Walk-Through consultation. And this is something where if somebody is insisting on writing an offer that’s not contingent upon a home inspection and of course, we don’t advocate skipping the home inspection. Of course, we don’t, we’re home inspectors, but we realized people are going to do it in this market today, and we’re doing what we can to help them out.
RS: And it’s basically where one our home inspectors will attend one of the showings and we will go through with a trained eye, and we will look at as much as time will allow us to look at, to look for big red flags. Let the home buyers know what they’re getting at least from a [chuckle] 30-minute walk-through. That’s what these are geared towards is a 30-minute walk-through with our clients, it’s not a home inspection, we’re not bringing tools along, we are bringing a flash light. That’s it.
RS: That’s it. There’s no ladder, there’s no combustion analyzer, there’s no opening the electrical panel, none of that stuff. If we were doing that kind of showing, I think we’d have some people really freaked out. So there’s nothing crazy like that happening. It’s just a trained eye, and we’ve got a group of our home inspectors who are going to be as on call as they possibly can be. We’re not making any promise that we can be there in a half hour if you got a showing on a Saturday evening, but we’re trying to open up our schedules as much as we possibly can to help people in these situations.
JS: You bet. I think that’s a great idea. It’s funny, I just pulled up, I’m on MLS and I’m looking at… Boy, when do I start remember it going sideways with multiple offers and yada yada yada. 2015 and I wanna say Structure Tech inspected that home as well. It was in April of 2015. These buyers I worked with, I think they were on their third or fourth home that they lost in multiples. I’m like “What’s going on? This is weird.” You pull up to our house and there’s other parties there, and they’re all waiting in line, and it used to happen before the recession too, but when I came, I started to notice it, and then what are you gonna do to get creative to win a house specially at a certain price point.
JS: So I think that’s a good idea, that Structure Tech do it, I’ll call it a fly-buy walk-through. The fly-buyings pertain to listing agents, if it’s really busy, we’re starting to limit showings to a half hour or even 15 minutes because 15 minutes is tough. I get a half hour is probably more suitable. It’s just ’cause the demand is there. If you do from 8:00 AM to 8:00 PM, that’s 24 showings, half hour on the hour. So every half hour on the hour. So…
BO: Hey Jim, can I ask you a question? In terms of the national association of realtors, I know you guys have a code of ethics that you’re supposed to adhere to, is there anything in the code of ethics that outlines that a realtor has to talk about home inspections or they can’t recommend against them, or what’s the actual language when it comes to this thing?
JS: Yeah, great question, Bill. So I’m gonna try and go back to 2002, when I remember I worked with a lot of FHA home buyers. FHA explicitly, if somebody’s doing an FHA financing, literally the language is “You must get a home inspection”, it’s part of their inspection FHA process when you do it… At that time, you did an FHA financing addendum and actually accompanied the addendum. Whether it’s NAR or MAR or Minneapolis Association of Realtors, basically this Code of Ethics is, there’s so much to it now that hopefully you’re advising your clients from a representation standpoint, so you don’t have misrepresentation to be very prudent in what their decision-making is.
JS: And when it comes to inspections, it’d be my hope, at least you’re having the conversation, ultimately you can get them to the cliff, but you’re not gonna be the one jumping off as the realtor, they are. You just have to make sure you address the issue.
BO: So and then you can become what we are, which is fact finders, and you deliver what they need to know, the risk benefit of all of this, and then it’s up to them.
JS: Absolutely. Well… Well, good question, a lot of times buyers, they’re gearing the headlights, you gotta protect your clients, you have to make sure that you’re taking care of them, sometimes they’ll just defer to you 100% whatever you think, you write in what you wanna write in, we don’t wanna lose this house. So the agent is guiding the process anyway. Sometimes buyers will be a little more desperate and they’ll tell you how they want something to go, or they’ll ask you quite a few questions or 100 questions, just to exhaust the issue so they could have analysis paralysis around it.
JS: But it… When it comes down to it they think any agent that’s submitting an offer as a buyer’s agent, they’re having the conversation around inspection and inspection contingency. Now, a part of the issue is availability for inspection to be done, but also agents can put in too many days for inspections and that might throw sellers off sometimes, so… What I saw in last week’s listing of the ones that did have inspections, there were some within four days, there was one at six days, there was one at seven days, there was one at eight days. I’m gonna say the other… The last one was a 10-day inspection I think it was… So it run the gamut.
TM: I had a question for you, Jim, before we started recording, you brought up an interesting perspective I hadn’t even thought about before with someone who’s selling their house, even though this is a seller’s market, you can still have a deal blow up and you were taking steps to prevent this from happening. And I thought it was really interesting what you do with your clients in this situation.
JS: Thank you for reminding me Tessa, I’m like, “I knew I was gonna forget that. That we talked about it.” Yeah, it’s interesting ’cause I went in… I… Okay, so just literally, our podcast started at two o’clock, I left the listing appointment in Edina at 1:35, and I told my sellers, I would strongly consider a pre-list inspection from the inspection company. I talked about Structure Tech, but also ’cause I swear I helped bring Reuben into the business when he didn’t even have chin hair, [chuckle] so…
JS: Anyway, today I threw it out to the sellers as an option. I said, “Here’s what I’m starting to see in multiple offer situations, if your home even gets into that”, which is if there’s no inspection, you might have buyers start to hesitate to wanna get into a multiple offer because if they think they have to do an inspection or they wanna do an inspection and they don’t think the sellers would want it, it creates a conundrum for both parties, where seller… Your buyer might be scared away ’cause they don’t think you’re gonna allow one or you did not do a pre-inspection, and on the flip side, the buyers might think the sellers don’t want any inspections and so they’re… You do a waltz.
JS: You dance around the issue. I’m starting to recommend to the sellers, get that pre-inspection, get that pre-radon test done, get your stucco tests done ahead of time, start loading it up and think of it as an investment, because if it is gonna be as busy as this market seems to be, people are gonna be a little confident if you provide that upfront.
TM: Was that Rhonda Wilson we had on when we were talking about pre-listing inspections a while back? Not a whole lot of agents do or recommend, but with this market it’s… Yeah, it’s interesting.
JS: Rhonda is at Coldwell, right?
JS: Yeah, I like Rhonda, her and I have some good conversations once in a while. There’s some great Coldwell agents who recommend them. I know of two or three Edina Realty agents who recommend pre-inspections and pre-warranties all the time. It’s just starting to be something that I’m seriously, I think helps in the entire transaction process.
BO: Hey, Jim, if somebody gets a pre-listing inspection like that, and something turns up, say there’s an issue, but we’re in this crazy market, what does the seller do at that point? Do they just disclose the thing that turned up and said, “Hey, the list price is factoring that in, so don’t ask me to fix that, but I need you to know that it exists.”
JS: Yeah, good question Bill. Well, it’s a six and one half dozen of another, if you get an inspection as a seller and there clearly is maybe some items that may or may not need to be addressed, you have to make sure you’re disclosing it. Every agent should be telling their clients disclose, disclose, disclose, do not avoid disclosing something you should. Sometimes people forget about certain things that’s understandable.
JS: An inspection is also a little bit of CYA to go, “Hey, I don’t know how the interior of this furnace is working, maybe it’s pushing seven, eight years old, we don’t know if it has a cracked heating chamber” or something like that where it’s really interesting because if stuff comes up in the inspection, what I tell my sellers in that scenario is “Hey it would have came up anyway,” we don’t want it to scare away a buyer after the fact, when we’re finding out about it down the road, versus upfront, knowing how we could either address it or if when you disclose it, that they know about it. So again, it’s part of the disclose, disclose, disclose.
JS: That inspection in my mind, it’s not just peace of mind, it’s, “Hey, there it is. We’re not trying to hide anything.” Obviously, never from a seller standpoint, an agent standpoint, ’cause material facts is we’d have to disclose it anyway, as listing agents, everything’s out there for everyone to look through because we’re all above board, but this is a stressful time, particularly with inventory down where it’s at.
BO: So a follow-up question, just because there’s a material defect with the property, doesn’t mean that the owner of that property has to fix it, it just means it has to be disclosed.
JS: Absolutely, it depends on if it’s a TISH city and it’s a hazard, it’s an age versus a blow or meets or something like that, if it’s a code issue, whatever, a lot of times when… Ultimately, what might happen is it’ll get down to any inspection could have 15 to 30 items or more flagged.
JS: Of those, hopefully agents are guiding their clients to say, “Hey, we don’t wanna ask for necessarily a $2 switch plate” and things like that. We wanna make sure it’s safe sanitary sound, that it isn’t gonna aggravate the other party, if it’s asked for. But if it’s an electrical issue, if it’s a double tap wire, it’s electrical box sunk into a wall too far, plumbing, heating, something gas-related, obviously, it could be a roof issue or whatever, it’s more along those things, but at least it’s in an inspection, hopefully it’s caught in an inspection, because it’s stuff sellers may not know either, it’s just good to have…
JS: It’s good practice to have that out there, not to be taken advantage of, but just as informational purposes… That was a long answer. I apologize [chuckle] Bill if I didn’t even answer it. But I…
BO: Well, I have a follow-up to the follow-up, but I’m gonna pivot here and just say if a buyer’s gonna forgo an inspection or they’re gonna try to do something, a fly-buy, as you call it, what do you expect for something like that to cost?
JS: A good question? Right away, Bill, my answer is gonna be, I’d hate to know what the cost is down the road, if you don’t catch the issue. If you choose not to do an inspection, it comes up after the fact, whether it’s like that sewer issue I talked about last year, which I think ran, I think it ran 17, 19 grand, 150 bucks, 200 bucks, whatever. I don’t think that is out of the question, especially from a schedule availability that it would be sure and equitable to ask if the issue is, is how many people are gonna be interested in it?
JS: There’s bigger challenges versus make sure you get that walk-through inspection done because then at least you did some due diligence as a buyer.
RS: All I heard Jim is that these are priceless and…
JS: Priceless. Okay.
RS: To definitely be four figures whatever we’re charging. That’s all I got.
BO: Yeah, there you go.
JS: Well, it’s interesting you guys… The types of stuff I’m negotiating now and in the last several years are things that, again, safe sanitary sound, but I know based on tonnage, how big a furnace or an air conditioner needs to be. You start getting in to several thousands of dollars, and if it’s rough or whatever. The issue is, is you have some buyers who might already be going up to their max, they only have so much for down payment, they have earned this money obviously that would go towards their down payment. They’re paying for some inspections.
JS: They don’t wanna risk not having an inspection, only to find out if they get that home after the fact and all of a sudden they don’t have an emergency fund started, and a $5000 issue slaps them across the face. It’s happened to clients that I know, it’s not necessarily ’cause they didn’t have an inspection, it’s just stuff breaks and stuff goes out, stuff needs to be addressed. So obviously, anything you can do to help the cause upfront or during the process, I think is very prudent. An ounce of protection upfront is huge in general. It’ll come down to how badly did they want the house. It’s a commodities market.
JS: It’s almost gambling right now based on if you’re gonna make an offer with or without an inspection, that’s one of the terms that you’re gambling on, for sure.
BO: Reuben, I wanted to turn to you and ask you, this is something that’s different than the industry is accustomed to seeing. So tell me, how do we put parameters or brackets around this? What is this? Do you have standards of practice now that you’re following? What are we doing here?
RS: This does not fall within home inspection standards of practice, simply because it is not a home inspection, and when we do these, we make it abundantly clear to our clients that this is a verbal consultation, we are there, we are there to look, we are there to talk, you do not get a report. You’re gonna have to take your own notes, and again, maybe if I didn’t make that clear, it’s not a home inspection. So I know there’s a lot of home inspectors who have heard about this and they’re freaking out and they’re going, “You can’t do that, you gotta produce a report, it violates the code of ethics!” And… Shaking the fist, but I’m sorry, this is not a home inspection. [chuckle]
RS: This has nothing to do with home inspection standards of practice. This is a consultation only. And by the way, just to work in the price, we agreed this will be a $200 consultation and it’s up to a half hour, and if we have people who are going to multiple homes, one right after the other, it’s $100 for each subsequent consultation. I almost said inspection there.
TM: It’s interesting, ’cause I think most home inspectors, if you’re a home inspector and you’re listening to this, have you ever had a family member or a friend ask you an opinion on a house? Or if they’re about to buy a house, “Hey, can you come look at this for me quick?” And they just want your expert opinion about it, right. I’ve had that happen to me. I’ve helped family members, friends, and I’ve done this kind of walk-through consultation many a time before for people, not a full-blown home inspection, I didn’t bring my tools, it was just a quick walk-through looking at… Looking at the exterior, the grading, the drainage, the roof, the furnace, the water heater, the big systems.
TM: Making sure the foundation looks good, if it’s visible. If it’s an old house, what kind of plumbing material is here, all those things. Is there a Federal Pacific dialog panel in the corner, looking for the big things. And that’s all that we’re doing. It’s not a full home inspection.
BO: Awesome, well, Jim, thank you for your time. I wanna ask you back some time ’cause I’d love to get into the strategy of pricing houses. And that’s a whole different conversation, and I think we’d get off into the ditch if we started doing that now. But thank you very much for your expertise and just sharing the story with the Como Park House, which is unbelievable.
JS: You’re very welcome, my pleasure, thanks for having me.
RS: And hey Jim if people wanna find your work, where can they go?
JS: What’s best? Give me a call or send me a text. 612-247-5898.
BO: Awesome, thank you very much, Jim and Reuben, let’s set up a realtor roundtable to discuss pricing strategies. I wanna know who’s coming in with what, when they’re sitting down at the listing. I’m fascinated by that conversation… Anyway, I digress. Sorry. Everybody, I’m sorry to be on the air talking about the next episode. You’ve been listening to Structure Talk a Structure Tech presentation. My name is Bill Oelrich alongside Tessa Murry and Reuben Saltzman your Three-Legged Stool in the Northland, thanks for listening we’ll catch you next time.