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Real estate in Colorado presents some very demanding, challenging, and exciting opportunities for the licensee. Naturally, this means great rewards, and great liabilities. You work with a contract filled with carefully selected words to satisfy disclosure requirements, present a clear picture to clients, and protect your commissions.
Other tools used to protect your professional status include continuing education, errors and omissions insurance, home protection plans, and the specialized services of attorneys, tax experts, and others when needed. Each tool has been developed and refined in direct response to your need. Often, the "new" tool is something that has been in place, but kept dormant due to low demand.
Home Inspection Lessens Realtor Concerns
An example is the home inspection industry. Although available in many areas, often used in some, home inspections are not often considered a normal part of the real estate buying/selling process. Home inspections, properly used, can help you address the one continuing perplexing problem you may face: Even though you don't build the product you sell, your client expects you to "endorse" it and holds you responsible when any structural component fails. Defending yourself against claims can be expensive.
An early attempt to deal with material-related problems came from the home protection insurance programs. These programs, widely used in many areas, tell the client you cannot guarantee the garbage disposal will continue to dispose, or that the heater will continue to heat; rather, you can provide them with a cost-effective insurance plan to deal with these potential problems.
The home protection companies have worked hand in hand with REALTORS to continue to provide client oriented services, often repairing items that are not really their responsibilities. They remain a helpful tool.
Unfortunately, the home protection company is unable to answer all of the questions posed by the home buyer. For instance, prior to making an offer, the buyer may be interested in the condition of the garbage disposal, | electrical outlets, bathroom floor, and roof. Often the buyer is aware that problems exist with the property and simply needs to know the extent of needed | improvements.
The REALTOR, likewise, has a vested interest in satisfying disclosure requirements and the client. The investment sales agent may sell property the client doesn't see, the foreign or out-of-state buyer may be unsure of local building norms, and the seller may want to know the real condition of the property before placing it for sale.
Bottom Line: Nobody wants to be surprised. With a home protection plan, the agent can offer post-sale (or limited pre-sale) insurance, but no current condition guarantee.
Useful Sales Tool
This is where the home inspection becomes an invaluable sales tool The professional home inspection company maintains a trained staff of inspectors who provide a clear, concise condition report designed to be easily read and understood by all parties. The company works directly with the REALTOR to resolve any confusion, or misunderstood items.
Additionally, the home inspection firm is available for post-sale questions from both client and REALTOR. Ideally, the report is clear enough and complete enough to satisfy virtually all of the disclosure requirements of a normal sale.
Inspection Procedures
The inspection process begins when the purchaser requests a thorough report on the home's condition. He may want to know if the dishwasher works in all the cycles, if the electrical panel is adequate and if the swimming pool is in good condition. He'll want someone to explain potential problem areas in an easy-to-understand manner.
Normally, the agent and buyer do not go under the house, on the roof, in the attic, or run the appliances through cycles during their pre-offer time. It's often very awkward to thoroughly inspect a home with the sellers present. So the REALTOR contacts the professional home inspection company and arranges for a physical inspection of the home. (Often, the buyer wants to be present, although our experience indicates the buyer wants to be present about 25% of the time).
The inspector comes to the home at the pre-set time, inspects the home according to a thorough checklist, takes photos of major trouble spots for clear identification, and records the information in writing. The final report is prepared and submitted to the party who paid for it and possibly others, including the REALTOR.
The company performing the inspection guarantees the inspection, and the buyer is assured of the real condition of the property. The company also carries insurance to protect against damage done to, or by, the inspector.
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Just as important, the REALTOR enjoys the added client confidence. By arranging for an inspection, you are letting your client know you want him to understand the true condition of the investment.
The inspection may lead to other requirements, such as a request for repair costs. It is important to note here that the inspection company normally will not perform needed repairs because of the obvious conflict of interest possibilities. But the company will usually provide a list of contractors who will provide estimates. This effort can be coordinated by the inspection company, freeing the REALTOR from troublesome and time-consuming arrangements.
With the inspection completed and form in hand, the buyer has a clear picture of his future home. The agent has provided full disclosure, and, equally important, the client has added confidence in his REALTOR.
On the other side, the seller has a realistic assessment of his home's condition: He can look forward to clearly defined repairs rather than nebulous items pointed out by an unqualified source, such as a relative of the buyer. Everybody comes out ahead.
A Service That Complements the Realtors
The home inspection company, as shown above, has an opportunity to perform a very helpful service to the REALTOR. The home inspection company is genuinely interested in complementing the REALTOR's functions will work directly with him to expand and refine its services, and tailor its programs to meet a wide range of the REALTOR's needs.
Selecting the Home Protection Company
If you are considering a home inspection service or need a special bit of information about a client's property, you should know how to select a company. Ask a representative of the inspection company the following questions BEFORE ordering the inspection:
- How long has it been in business? Can it provide references?
- What professional designations/licenses does it have? Fully licensed Contractor? Senior Member of the American Society of Home Inspectors? International Conference of Building Officials? Affiliate member of Real Estate Boards?
- Is the inspection guaranteed?
- How fast can the inspection be done and the report be provided?
- How are its fees set? (No law governs this; so fees generally vary).
- Can it provide emergency, weekend or night service?
- Does it have research capabilities, so that you can get answers to questions not easily obtainable? (For instance, our company provides low-cost formaldehyde and asbestos inspections as a result of REALTOR requests.)
- Does it offer a home protection plan in addition to the inspection? And if so, will your client get a price break?
- Do its representatives understand the real estate sales process?
- Can it provide referrals for needed work? Can it do certificates for FHANA, etc.?
- Can the company provide legal testimony services and qualify as an expert witness in a court of law?
- Does the company engage in conflict of interest activities such as construction improvements, real estate investments, etc.?
- Finally, and perhaps most important, how well will its representatives communicate with your clients? Know their reputation on this.
Will Inspections be Required?
It seems likely that some type of inspection will be mandated in the future. Currently, for example, Texas requires inspectors to be registered. It also mandates real estate salespeople to inform their clients that such inspections are available because of such things as in clauses are consistently being challenged.
In many cases, a law is passed which you must deal with; in the case of home inspections, you are dealing with it constructively now. Many agents consider inspections a "can't be without it" portion of their sales process. By understanding the inspection process and working with the inspection company, your sales can go a little smoother and the client satisfaction level can increase greatly.
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