Do Home Inspections Really Affect Property Value?

May 11, 2021

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When trying to sell your home, you want to sell for as much money as possible. Part of meeting that goal includes avoiding anything that can depreciate the home’s market value. The buyer’s home inspection is one of those things that can negatively impact your home’s value.

Homeowners often ask:

• Do home inspections play any role in deciding the market value of a home?
• Can the home inspection affect the value of my home after I have agreed on a sales price with the buyer?

To answer these questions, let us look at what determines your home’s market value.

Factors that determine the value of your home

To varying degrees, the key variables that impact how much you can ask for your home are:

Its location: The desirability of the area based on its proximity to places that offer certain advantages, plus, the relative affluence of the neighborhood.
Value of similar homes in the neighborhood: How much comparable homes in the area sold in the recent past.
Size and usable space: A bigger home will have higher value; more beds and baths equal more money. Kitchen size also matters.
Age of home and its physical condition: Newer homes are valued higher. If the home’s structures and systems are intact, it will sell for more.
Home improvements: The upgrades and updates you have done on the home can help push its value up.
Other factors: These include the condition of the local housing market, interest rates, and the state of the overall economy.

Among these factors, the one directly connected to the home inspection is the condition of the home’s systems, structures, and appliances. Since the home inspection examines the quality of a home’s features and components, it can raise questions about its valuation.

This is important because the physical condition of the home determines its habitability. If, for instance, the roof, plumbing, or HVAC are in bad shape, the buyer would be unable to live in the home until they have spent some money to fix the damage to the home.

This is the exact situation buyers want to avoid and the main reason they hire a home inspector. So to answer the question; “Can the home inspection affect your property’s value?” The answer is yes! Also, there are three possible outcomes when a home has undergone inspection.

Three things that can happen after a home inspection

Because no home is perfect, home inspections are bound to reveal something wrong with a home. This should be expected. The problem is when there are many such issues or when the detected issues are costly to fix.

Here are the three things that can happen after a home inspection:

• The buyer may decide to proceed with the purchase, despite the problems with the home. This may be because the detected problems do not significantly affect the home or cost a lot to repair. Or because the buyer is buying in a seller’s market.
• The buyer may decide to back out of the deal and terminate the purchase agreement. A buyer might do this because of the high cost of fixing the home or if they don’t want to be burdened with repairs. If the buyer does this, they will not lose their earnest money.
• Thirdly, if there are significant issues with the home, buyers may negotiate a compromise with the seller. They may ask the seller to lower the sales price to accommodate what the buyer will spend on repairs. Or they could ask the seller to do the necessary repairs.

When the buyer exercises this third option, the home inspection has effectively lowered the value of the property.

As a seller, is there anything you can do to avoid this possibility?

Yes, there are steps you can take to keep the home inspection from negatively impacting your home’s value.

How to keep the home inspection from lowering your home’s value

Do a prelisting home inspection
The main reason homeowners find themselves in the situation described above is they assume they have complete knowledge of the physical condition of their home. But this is rarely the case.

A prelisting home inspection is a home inspection paid for by the seller rather than the buyer. Doing a prelisting home inspection eliminates assumptions and helps you operate based on facts.

Do strategic repairs
Based on the report from the prelisting home inspection, you know the exact problems with your home and which ones have the greatest potential to damage its value. You can address these critical issues to secure the home’s value.

Inform buyers beforehand
Give buyers access to the prelisting home inspection report. If you have repaired some of the highlighted issues, show proof of that. But for those issues you have chosen to ignore, the buyer will know you considered them before deciding the sales price for your home. This removes any opportunities to renegotiate the price after an agreement is reached.

When you take these three steps, you inspire confidence in buyers, while also giving yourself an edge in the negotiations. Contact Lucent Home Inspections today to schedule your presale home inspection!