DEAR MR. MYERS: My wife and I have been thinking about listing our home for sale, but we have received conflicting advice from two real estate agents. One agent said that we should pay for a “pre-inspection” of our home before we list it, because a good report would help our marketing efforts and boost the eventual sale price. The other agent said we’d be foolish to pay for a pre-inspection, because we would then have to disclose any defects that the report uncovers, which could lower the final sale price. What do you think we should do?
ANSWER: Agents are indeed split over the idea of pre-inspections. But I’m in the camp that’s against such reports, because the potential pitfalls often outweigh the possible benefits.
Sure, a pre-inspection report that shows that the home is in pristine physical shape can be a valuable marketing tool. The ability to provide such documentation to prospective buyers can sometimes help the home sell faster and for more money.
And even if the report finds hidden defects that the current homeowners didn’t know about, it allows them to make repairs before listing it for sale as to improve its marketability.
There are, however, some big downsides of a seller getting a pre-inspection. The first is that too many homeowners think their property is in terrific shape, only to find out from the report that their property has one or more previously unseen problems – anything from a shifting foundation or slow-leaking pipes to termite infestation, dry rot or mold.
If the sellers’ pre-inspection report uncovers problems like these, they could spend tens of thousands of dollars to repair them in the hope of getting a better price after putting their property up for sale. But if the sellers do nothing, they would be legally required to tell a buyer about such issues under the state’s real estate disclosure laws. The potential buyer would then (understandably) lower the offering price to offset the cost of making the needed repairs.
It’s better to just skip the cost of a pre-inspection. Any savvy buyers are going to order an inspection of their own. If problems are found, both parties would then have the option to re-negotiate terms of the deal rather than watching it fall apart.
REAL ESTATE TRIVIA: A survey of members of the American Society of Home Inspectors found that the most common problem discovered in a home that’s for sale is “improper surface grading and drainage.” It’s responsible for many costly maladies, from cracked foundations to flooding in a home’s basement, attic or crawlspace.
DEAR MR. MYERS: Are the monthly dues I pay to my homeowners association tax-deductible?
ANSWER: No, if the HOA governs your personal residence. But if the dues you pay are associated with a rental-property investment, they can be deducted to offset part of the annual rental income that you receive.
DEAR MR. MYERS: We are reviewing different bids from contractors for an upcoming remodeling job that we are planning. All three of the bids have something called a “force majeure” clause that would seem to allow the remodelers to avoid penalties if they can’t complete the work on time due to a severe storm or other act of God. Is this common? Is it legally enforceable?
ANSWER: Yes, such clauses are common in most remodeling contracts today, and provide a layer of legal protection if certain types of unexpected events prevent a job from being finished by the time that the contractor originally promised.
Force majeure is a French term that roughly translates to “greater force.” Examples include the hurricanes that devastated the South last summer, or the Northeastern snowstorms and California wildfires and mudslides that struck more recently. Those catastrophes left tens of thousands of real estate projects stalled in midstream, and countless others that still were in the planning stages in limbo.
By exercising such a clause, a contractor or home developer may avoid financial penalties if an unforeseen problem makes it impossible to finish a job on time. In some cases, a homeowner or buyer also can cite a force majeure to cancel a remodeling job or a planned purchase without penalty.
Though most uses of a force majeure clause involve some type of natural disaster, they sometimes stem from a “manmade” act. Past examples include riots, arson and even labor strikes.
David W. Myers’ column is distributed by Cowles Syndicate Inc.