Getting home repairs completed BEFORE you put your home on the market is critical!
I often have clients tell me “I really don’t want to do any repairs because I want to sell the home “as-is”. This approach may or may not be a good idea depending on the extent of repairs needed. Below I discuss
Please consider the following:
- Your home is likely to be free of major defects because major defects are normally quite visible to the untrained eye. However, many homes have a long list of minor problems which may or may not be readily apparent. You may firmly believe your home is without defects but the only way to know for sure is to have the home thoroughly inspected professionally before you list the home but after you make your initial round of repairs.
- Even in multiple offer situations where the seller has all the control, buyers are likely to discount their bid amount to cover problems both known and unknown if the home has not been professionally inspected. You might wonder, “how in the world can they account for unknown problems?” That’s precisely the point; they can’t so they will guess and bid low enough to cover any unknowns to compensate them for their risk. If a buyer sees a long list of items called out in the termite and/or property inspection report they are likely to assume there are additional problems which are yet to be discovered. It is logical to assume that an inspector cannot spot all existing problems – especially problems which are hidden from view (i.e. water damage, rot, termites etc.)
- Whether it is in the form lower priced offers from buyers or up-front repair costs, one way or another you WILL pay for the repair work called out in the inspection reports. My job is to help you minimize the financial impact and frustrations associated with getting your home properly ready for sale.
Regarding repairs, the best piece of advice I can give you is this: “Make Repairs When You Can, Not When You Have To.” This is a very important statement worthy of your careful consideration.- Sometimes a buyer or lender will insist on certain repairs as part of the deal and these repairs must be completed prior to the close of escrow. If you wait until you are in escrow to make repairs, you will be painted into a corner by escrow deadlines and the availability of contractors.
- It is impossible to get repairs done quickly, at the best price and good quality. You can get two out of the three but never all three together. If you need repairs done quickly you will pay a higher price and perhaps the quality of work will suffer. Repair work is always a much more orderly process if you can take your time and get the repairs done right at a slower pace and a good price – which means you must make repairs before you list your home for sale if you wish to get top dollar for your home.
Section 1 vs. Section 2 repair types:
- Section 1 – Section 1 repairs can only be called out by a certified pest control operator. The term “pest” here refers to termites as well as mold, fungus and rot – these are generally referred to as “wood destroying organisms”. UNLESS the contract is expressly an “as-is” contract, the seller is automatically responsible to perform ALL section 1 repairs and obtain a “section 1 clearance” from a certified pest control operator. Even an “as-is” sale is not the cure for a home with a long list of repairs even if they are minor repairs as buyers will discount their bids to cover the known and unknown costs associated with repairs.
- Section 2 – is defined as “conditions deemed likely to lead to infestation or infection but where no visible evidence of such was found”. How section 2 repairs are to be taken care of is not automatically called out by the contract but are sometimes manually inserted into the contract by the buyer’s agent.
- Repairs which are neither section 1 nor section 2 – these are problems which are not associated with wood destroying organisms. These issues can be anything from electrical problems to cracked windows.
What Is A Section 1 Clearance Certificate?
Unless the contract is “as-is,” the lender will want a “section 1 clearance” before they fund the loan. This is a certificate issued by a certified pest control operator (termite company) stating that all of the section 1 items called out in the termite report have been taken care of and that the home is currently free of active infestations of any kind. It is very important to be aware of this up front at the beginning so you can plan accordingly. The last thing you need is to be surprised a week or two before the close of escrow by a lender requesting a section 1 clearance.
Who Should Perform Section 1 Repairs?
I have had very good success advising clients to get a termite inspection & report early in the listing process then address the problems on their own time and with their preferred workers. Once the work is done, have the termite company come out and re-inspect and issue a section 1 clearance. Most of the repairs called out by termite companies (mold, fungus, rot, termite damage) are quite easy to repair. They normally involve cutting out damaged wood and replacing it. Very primitive stuff and readily handled by a competent handyman for a fraction of the cost charged by the termite company.
Please note, if you are having the termite company come out to re-inspect the damaged areas make sure you leave the repaired areas open – do not finish the repair. The ONLY way a termite company can issue a clearance is if they see that all of the damaged/affected wood has been removed. Once re-inspected, you can putty, paint and close things up. This repair process is something we can oversee for you with our preferred contractors.
Termite Company Pros and Cons:
- Con: In my opinion, termite companies should be your repairman of last resort. They usually charge 2x – 3x more than what you can get the work done for elsewhere.
- Pro: They can usually get things done much quicker than other contractors because they are accustomed to working with tight deadlines (close of escrow).
- Pro: They are very knowledgeable about their repair work. This is what they do every day for a living. You can just give them the inspection report and tell them to fix it. No further instructions required.
- Con: They are often not the most honest of individuals or companies. I know this is a gross generalization but I believe it is better to operate under the assumption of dishonesty when dealing with termite companies. Termite companies are a bit like auto repair shops. They know that most people do not have the background or knowledge to question their findings so they sometimes behave accordingly.
Here are a few points to consider:
- They know you are under pressure to get things done quickly so they take advantage of that fact by charging more.
- The termite business is to some extent a “black box” type of business. Homeowners usually do not have the skillset to question whether or not certain repairs really need to be made or if they are being fabricated or exaggerated by the termite inspector.
- Due to the location of the damage it is often difficult for a homeowner to actually see the damage being called out. This gives inspectors some leeway to call out marginal/questionable problems.
General Contractor or Specific Trade Contractor:
- These guys run the gamut from highly paid, highly professional and highly reliable to the very irresponsible and unresponsive. Unfortunately there is no certain connection between how much they charge and their level of competence and professionalism. General contractors are not often readily available or willing to drop their other project(s) and jump to yours. Good contractors are busy and often take days to simply make an appointment to come out to look at your situation.
- Many of them don’t actually do the work; they hire subcontractors (specific trade contractor) to do the work.
- You can just give them the inspection report and tell them to fix everything. Very simple, not much in the way of guidance is needed.
Handyman:
- Most of the repairs called out by inspectors are fairly simple and readily handled by a competent handyman.
- Handymen also vary greatly in their competence and pay.
- They often require more guidance and instruction than professional contractors.
Who should perform the section 2 repairs?
The vast majority of repairs can be handled by a competent handyman. They normally charge $40 – $75 per hour. The less you pay the more involved we will need to be in the repair process. Please let me know if you’d like to receive our “preferred providers” list with contacts for each type of repair.
Your Path To Inspection Report Nirvana
Rarely do inspection reports come back perfectly clean. There will always be a list of repairs called out by the inspectors. Unfortunately you as a seller are obligated to provide a copy of all reports to buyers – even any old reports you have in your possession. When buyers see items being called out by the inspector they may or may not have concerns.
These concerns can give buyers a cause to pause and wonder if the problems run deeper than what is being called out by the inspector. And of course buyers are always concerned about the costs, risks and inconveniences associated with repairs. This is why it is always in the best interest of sellers to repair all items called out by the inspectors before you list your home for sale. You as a seller WILL pay for these repairs in one of two ways:
Hire the appropriate tradesmen to make the repairs
Accept a lower price for your home. Buyers will discount your home not only for the actual hard costs associated with the repairs, but also they will reduce further for their risk and inconvenience associated with having to get the repairs completed themselves. Buyers will further discount the home for the uncertainty associated with possible unknown needed repairs once the contractor opens things up. It is not uncommon for repairs to appear simple on the surface only to find out the problem is much more in-depth than originally estimated. Some types of repairs (wood rot & termites) are very difficult to assess accurately without tearing things open to fully understand the extent of the situation.
My recommendation is always to pay up front, get the items fixed and have the inspector issue your home a clean bill of health. Leaving items unrepaired forces the buyer to try and figure out how much the repairs might cost and adjust his offer accordingly. In my experience, the amount of the offer adjustment is always greater than the cost to get the home repaired up front before you list it for sale.
Who should you get to do the repairs?
Many of the termite inspection companies also do repair work. If not, they have relationships with tradesmen whom they can bring in to get the work done. However, repair work prices charged by the inspection companies are always higher than what you can find on the open market. If the work is minor it usually makes sense to just let the inspection company do the repairs. You may be able to save a little money by finding someone else to do the work but this forces you to go through the hassle of making some calls, getting some quotes etc.
Unless the transaction is an “as is” sale, the buyer’s lender will want a “section 1 clearance” issued by the termite company. This simply states that all section 1 repairs have been completed to the satisfaction of the termite company. Some termite companies generally will not issue a section 1 clearance for repair work THEY didn’t perform and if they ARE willing to issue a section 1 clearance they will charge a re-inspection fee. It is best to figure this out up front before you choose a repair person.
For work not requiring a section 1 clearance you can save some money by having a third party come out and do the repair work. However, this again involves more effort on the part of the listing agent and seller to get the proper trades people out to give quotes then select one and oversee the process. If the work is relatively minor it often makes sense to just let the inspection company do the work.
An additional upside to having the inspection company do the work is that they will re-inspect for free and issue an updated report showing the repairs have been completed. If you have someone else do the work many inspection companies will charge you a fee to reinspect. The alternative to getting the inspection company to issue a clean bill of health is to make notes on the inspection report stating which repairs were completed, when and by whom and attach paid invoices detailing the work performed.
The more expensive the repairs the more it makes sense for the seller to get involved, get some quotes from various trades people and supervise the process or have the listing agent handle it for you. Often a majority of the repairs can be handled by a skilled handyman at a fraction of the cost charged by the inspection companies but this again requires your time and involvement. With a handyman you will need to be more hands on to ensure you get exactly what you need. For most of us time is money so it may not make sense to hire a handyman.
Taking the idea of “getting needed repairs completed before you put the home on the market” one step further, it is also advisable to repair any items you are already aware of BEFORE the inspector comes out so they don’t show up in any inspection report. Generally, inspectors are diligent individuals. If you are aware of a problem you can be pretty sure the inspector will find it as well. Once he finds it he is obligated to call it out in his report. In light of the fact you are obligated to provide buyers with a copy of this report your goal should be to do everything you can to obtain a clean report the first time.
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Here what I consider to be the optimal sequence of events for getting your repairs handled ahead of time:
Assess your repair needs – Take a pad of paper and tour around the interior and exterior of your home. Write down anything and everything you see which you think might need repairing. Even if you are unsure, write it down.
Get a second opinion – Depending on your capabilities and the extent of the problems you may decide to involve a contractor or handyman. Even if you don’t plan to use a contractor or handyman it makes sense to get someone out to examine your home (even if it is a handy neighbor), make recommendations and give you a quote. Even if you don’t end up hiring him, he will most likely provide some valuable insight into your situation and probably point out some additional repair needs you had not noticed.
Make the repairs – take care of as many as possible of the items you discovered in section 1 and 2 above.
Get a general property inspection and a termite inspection – These inspections are likely to yield additional repair items you did not previously notice so be prepared for more repair work. Hopefully not much!
Make repairs pursuant to the reports – Decide which items you want to fix and get them fixed.
Get repairs re-inspected and revised inspection reports issued – Once repairs are made all inspectors will come out and re-inspect for free or perhaps a small fee. Once they re-inspect they will issue revised reports hopefully indicating all items have been repaired satisfactorily.
Being able to provide buyers with clean or “nearly clean” reports really helps buyers get comfortable with the repairs you made and the overall condition of the home. Depending on how much repair work is needed, following this process can be a dramatic improvement over just getting inspections, making no repairs and giving sellers “dirty” reports.
