How a Pre-Sale Property Inspection Can Increase Your Sale Price
So, you've decided to sell your property and you want top dollar. Sounds pretty fair. As the owner and now seller, you've come to realize that the property is never going to be perfect, there is always something that needs to be fixed or replaced and you have little control over how the tenants maintain their apartments. These could be reasons why you want to sell in the first place.
To maximize the value in a sale, it's important to make it as easy as possible for someone else to purchase your property. When dealing with income property, buyers aren't expecting perfection but they will consider the overall condition of the building when making an offer. As a seller, taking the time to complete a pre-sale property inspection can help you identity potential deal breaker inspection items before you take the property to market.
For out of state and absentee owners, I often recommend hiring a professional building inspector. This is a $400-$700 expense but it can be well worth the cost if potential issues are uncovered that could prevent a top dollar sale. For the owner who stays on top of maintenance issues and is familiar with their property, hiring a professional to inspect the building is still beneficial. No property is perfect and a fresh perspective might shed some light on potential issues that could hinder a sale.
Let's look at one bigger ticket item that's easy to flag during a property inspection and how a buyer might react based on their perception of the scale of the problem and what it might cost to fix.
Inspection Item - The electric (service, panels & breakers):
A lot of repairs done on income properties tend to be made on an "as needed basis". The electric in a building, especially an older one, won't be an exception to this rule. Assume the following scenario: You have updated service to the building from the street to meet all of the power needs in the building, but the individual electric panels are a rats nest of wires leading to under-sized breakers with no labels.
Maybe you knew there were some issues with the electric, but didn't think it was a big deal because that's how it was when you bought the building. The building inspector your future buyer hires is going to flag every under-sized breaker, spliced wire and double tap he can find. That's what he gets paid to do. While the inspector is doing this, he's probably going to discuss how to fix the problem and what it might cost the buyer.
The inspector may go on to volunteer his over-all opinion of the situation, good or bad and discuss what he might do to fix the problem if it was his building. The buyer, assuming the worst case scenario, is going to start thinking that he overpaid for the property. His broker is going to assure him everything is fine because he knows the inspection report is going to give him the ammo he needs to request an inspection credit that reduces the overall purchase price.
Now assume you completed a pre-sale inspection before going on the market. Your building inspector flagged the electric panels and identified everything that needed to be fixed or updated. You then paid an electrician a few hundred bucks to whip the panels into shape. While your broker shows the property to prospective buyers, he points out how clean and neat the electric panels are. Your broker stresses how this indicates the property is well maintained and has little or no deferred maintenance issues for the next owner. You receive an offer, agree on a price, the buyer completes a property inspection, the electric doesn't get flagged and the buyer is satisfied with the purchase price.
Replay this scenario for the plumbing, windows, roof, exterior/siding, porches, garage, basement, structure, etc. and you begin to see how a lot of little things can add up to big dollars. Going over your property, either by yourself or with a trained professional, to uncover potential inspection issues that will prevent you from selling quickly and for top dollar, should pay for itself many times over.
Brent Hall is a Broker Associate with Jameson Sotheby's International Realty, Chicago. Contact Brent Hall to discuss buying or selling real estate in Chicago.