Why MIC doesn't work

[Sean Fogarty]

Here you go Nick. Right from the brokers mouth. I was chatting with a couple of agents and they wnated me to discuss some type of inspection like this.

This is the response..

Sean,
XXXXX mentioned you have a pre-inspectionprogram for the seller when a house is listed. XXXXX XXXXX has anational program called XXXXXXXXX. We made an attempt a few yearsago to encourage agents to have their listings inspected at the time oflisting, but it didn’t go over so well.

The first thought is that if the sellerbecomes aware of deficiencies that they didn’t know about before, thatnow all of that has to be on a disclosure which can scare away potential buyers. Same thing for agents…if we know about it, we have the responsibility todisclose any adverse facts. It’s less of a liability risk to us asselling agents if we don’t know.

It is sometimes better for the seller towork out any home inspection issues at the time of the home inspection, aftersecuring a buyer. It’s not until the buyer is under contract thathe has any skin in the game and it is often easier to work through repairs then,with the buyer on the hook, provided there aren’t major issues.

I know you know that many of today’s sellers are strapped for cash or even underwater. Not only are theyhaving to sell for less, but they are being asked for more by the buyers. I agree that a pre-inspection is an act of good faith and should prove to thebuyer that the seller has nothing to hide, but it may also produce a list ofitems that the seller simply cannot afford to repair but now has to disclose,which could push the sales price even lower.

So…there you have it, the agentperspective on pre-inspections. There are surely instances where thiswould be a good thing, especially if the seller has equity, if the home is in adecent state of repair, and if the seller isn’t too proud of their houseto start with.

If you have an idea that would help usout, I’m all ears, but I would like to know about it before it issuggested to my agents. I also think it’s fair that you understandwhat their objections may be before you step into a hornet’s nest.

[Nick Gromicko]

She writes:

I agree that a pre-inspection is an act of good faith and should prove to thebuyer that the seller has nothing to hide, but it may also produce a list of items that the seller simply cannot afford to repair but now has to disclose,which could push the sales price even lower.

My reply to her (been here done that):

Don't have a sellers inspection performed "as an act of good faith." Do it for the reason you explained, "to produce a list of items that the seller simply can't afford to repair." If the seller can't afford to repair them, only one of three outcomes can happen:

1. There is no deal. In which case it is better for your agents to find out now before they waste their time on a deal that isn't. Let them move on to another deal. Agents aren't paid by the hour ya know.

2. The buyer takes the home anyway. In which case it is better for your agents to have an offer where the buyer knows of the defects and is buying the home anyway, than to find out later that the defects are a deal breaker and have the deal become a #1. The purpose of MIC isn't to keep a deal together but to alert everyone immediately when a deal isn't going to fly so your agents can move on to new offers quickly.

3. The seller reduces the price and the deal goes through. It is better for your agents to have the seller soften up now using reality, than to have the deal turn to #1 again. The purpose of MIC isn't to sell homes for more necessarily, but rather to sell homes for less if that's what it takes. Again, it is better for your agents to sell something for less than to not sell at all.

Any way you look at it, it is better for your agents (and their clients) to find what they're going to find now, than later.

[James H. Bushart]

It's not that the seller and agent don't want to know.

It is that the seller and the agent do not want official documents that can be used to show, at some later judicial event, that they knew and failed to disclose.

This is a legitimate fear that can only be sufficiently overcome, IMO, with the knowledge that it is that same fear of the unknown that will motivate a buyer to have his OWN inspection after the acceptance of his offer.

At that time, the window is shortened and the undisclosed defects recorded on the inspection report will spark further doubt as to other items not disclosed that the inspector had possibly missed...and at the most inopportune time in the sales process.

I don't market to brokers or used house salesmen but I do know that the majority of them are NOT professional salespeople. Those who are professional salespeople automatically know that the VERY BEST time to introduce a possible objection is when the buyer is hot. That time is at or before they make their offer.

That level of enthusiasm begins to lose steam at the time the offer is accepted and the buyer begins the complicated and frightening process of indebting himself for 30 years. That ... honestly and truly ... is the worst possible time to introduce the fact that the water heater is 20 years old, the electrical service panel is improperly wired and the attic insulation is insufficient. To provide him with the same information while he is marveling at the view from the kitchen and excited about the school district and extra floor space would have much less of a negative effect.

This is how I have successfully sold pre-listing inspections. I never have used the MIC program, however, for I refuse to "certify" any home to be move-in-ready. All I do is describe its condition and leave the "certifications" to others.

[Nick Gromicko]

The thinking behind MIC should be no different for any agent than the thinking behind getting pre-qualified for a loan. Why the heck do you think agents require their buyers to go and get pre-qualified? So that they don't waste time on a deal that isn't. MIC works identically.

[James H. Bushart]

Originally Posted by gromicko

The thinking behind MIC should be no different for any agent than the thinking behind getting pre-qualified for a loan. Why the heck do you think agents require their buyers to go and get pre-qualified? So that they don't waste time on a deal that isn't. MIC works identically.

From the agents point of view, I believe that they perceive that it saves them work to eliminate a potential buyer who does not qualify for enough money to buy the house .... whereas, they perceive that it will create work for them to try to sell a house with a complete disclosure of all known defects. A convenient level of "ignorance" (as to defects and their potential to be deal killers) can be beneficial to them in that regard.

[David Garton]

Originally Posted by sfogarty

Here you go Nick. Right from the brokers mouth. I was chatting with a couple of agents and they wnated me to discuss some type of inspection like this.

This is the response..

Sean,
XXXXX mentioned you have a pre-inspectionprogram for the seller when a house is listed. XXXXX XXXXX has anational program called XXXXXXXXX. We made an attempt a few yearsago to encourage agents to have their listings inspected at the time oflisting, but it didn’t go over so well.

The first thought is that if the sellerbecomes aware of deficiencies that they didn’t know about before, thatnow all of that has to be on a disclosure which can scare away potential buyers. Same thing for agents…if we know about it, we have the responsibility todisclose any adverse facts. It’s less of a liability risk to us asselling agents if we don’t know.

It is sometimes better for the seller towork out any home inspection issues at the time of the home inspection, aftersecuring a buyer. It’s not until the buyer is under contract thathe has any skin in the game and it is often easier to work through repairs then,with the buyer on the hook, provided there aren’t major issues.

I know you know that many of today’s sellers are strapped for cash or even underwater. Not only are theyhaving to sell for less, but they are being asked for more by the buyers. I agree that a pre-inspection is an act of good faith and should prove to thebuyer that the seller has nothing to hide, but it may also produce a list ofitems that the seller simply cannot afford to repair but now has to disclose,which could push the sales price even lower.

So…there you have it, the agentperspective on pre-inspections. There are surely instances where thiswould be a good thing, especially if the seller has equity, if the home is in adecent state of repair, and if the seller isn’t too proud of their houseto start with.

If you have an idea that would help usout, I’m all ears, but I would like to know about it before it issuggested to my agents. I also think it’s fair that you understandwhat their objections may be before you step into a hornet’s nest.

This is what I would tell them


For Professionals - Win More Business
Get a Home Inspection

Set yourself apart from your competitors and win more listings by using a home inspection as a business tool. You and your clients will not be surprised by unknown problems. Make the home more attractive to the buyer by saving them the cost of a home inspection. Removing one major contingency will help you get paid faster and win more business. Get a professional home inspection to:

Know the home you are selling
Prevent escrow delays and concession negotiations
Stand out from your competitors

[Robert Ernst]

The smart agents do it. I've done them for an agent that won't list a house with out one. He sells houses faster than most agents do because it's all set and ready to go and priced right. The used car sales men figured this out a while ago. Why let someone take the car to their mechanic and then come back and bicker on the price. Time is money. The seller can spend a few hundred but sell the house sooner it saves them money in the long run. Plus they aren't all pissed off at their agent when the house doesn't sell for what they though it would after the buyer gets the inspection and beats down the price or walks. At that point they need to disclose it any ways.

[Bob Elliott]

Now convince the Banks.
They are the sellers.

[Billy Boerner]

Originally Posted by jbushart

From the agents point of view, I believe that they perceive that it saves them work to eliminate a potential buyer who does not qualify for enough money to buy the house .... whereas, they perceive that it will create work for them to try to sell a house with a complete disclosure of all known defects. A convenient level of "ignorance" (as to defects and their potential to be deal killers) can be beneficial to them in that regard.

Bingo -- I also don't promote MIC due to "Certified" being in the verbiage. James, start a Active Rain post on this subject and lets see what the consensus is. Nick, respond to the agents on Active Rain. Lets see if you can sell them on the MIC program.

[Robert Ernst]

There a;ready have been several posts on activerain about sellers inspections. Another one couldn't hurt the more people see it the more they believe it. I've done sellers inspections and then had the seller hire me when they buy. It's not the key to tons of money but two inspections from one person I'll take any day.

http://activerain.com/blogsview/2300...pre-inspection-

One for Canada http://activerain.com/blogsview/2593...me-inspections

[Nick Gromicko]

http://www.mainstreet.com/article/re...me-sale?page=1

[Brian C. Hoagland]

Try asking a real estate attorney if they think it is a good idea. Most will advise clients against it. The benefits of plausible deniability outweigh the potential for costs of repairs of defects they currently have no knowledge of.

[Nick Gromicko]

Every article on seller's inspections has a top producing agent, broker, or real estate attorney touting them. I have yet to read an article where the agent is against them. In some markets, they are slowly becoming the norm.

Would an agent recommend not getting pre-approved for a loan for fear that if not approved, it would wreck the deal?

[Michael J. Parker]

Just like anything else. If you have a pre-conceived notion that something doesn’t work, it probably won’t. Some agents don’t believe in it and some do. Focus on the ones who do. As an inspector if you don’t believe in MIC read/study more about it till you do know how it works and how it benefits your clients and the realtors. It makes it much easier to sell when you are on board and know why the program does work.

[Eric C. Van De Ven]

Originally Posted by gromicko

The thinking behind MIC should be no different for any agent than the thinking behind getting pre-qualified for a loan. Why the heck do you think agents require their buyers to go and get pre-qualified? So that they don't waste time on a deal that isn't. MIC works identically.

That is all well and good, except for this:
The seller gets an inspection done and the inspector, who has been in business for all of a year and is trying to make every dollar there is, finds a couple of things wrong. The Realtor relies on that report to make a contract.

The Buyer gets his own inspector, as he should, and that inspector who is far more experienced and been in business much longer, finds 20K worth of things wrong.

What happens now?
The deal falls apart, the Realtor looks foolish, the Seller legally has to disclose everything, a bad deal all around.

It is the exact scenario above which is why a majority of Realtors I have spoken with want nothing to do with a pre-listng inspection.