Is saving money worth the potential of stigmatizing your home after a failed sale?

In all fairness, this practice of presale seller inspection began in Silicon Valley.

Regarding your March 24, 2023, column titled “Successor trustees need to recognize the value of presale seller inspections” on The Mercury News and East Bay Times websites:

Q: We had an identical situation in our family. My brother-in-law is the successor trustee of our parents’ estate. As a successor trustee, he thought presale seller inspections were “unnecessary.” He said the same statement in your column, “If the homebuyers want inspections, let them pay for them.” 

My parents made my brother-in-law the successor trustee because of his frugality. Well, his thriftiness got the better of him and us. We introduced the family home to the realty marketplace in Silicon Valley without presale seller inspections in late April. The multiple-offer bidding war lasted the better part of a week. In the first week of June, the homebuyers’ inspectors gathered for various inspections. In mid-June, the “winning” homebuyer canceled. All the offers received were noncontingent. There were no back-out clauses. My brother-in-law refused to refund the homebuyers’ $85,000 earnest money deposit. By late June, the homebuyers filed a lawsuit. Yesterday, I learned my brother-in-law, the successor trustee, used our parents’ money to pay a real estate attorney a $6,000 retainer fee to fight the lawsuit. 

Many of us siblings are now believers. Investing in $1,500 to $2,000 of presale seller inspections can offset surprises, renegotiations and litigation. Interestingly enough, under the cloud of litigation, we are putting the family home back on the market on July 19, the same day that was supposed to be the close escrow date.

How will the marketplace of homebuyers and their agents react to a house with a failed sale? More importantly, do we have to show the reports and inspections ordered by the canceling homebuyers?

A: Your family home is now stigmatized. Over $2,000 in presale seller inspections, no less. First, thanks for reading that column. Secondly, sharing the advantages of presale seller inspections with your brother-in-law was laudable. Lastly, in all fairness, this practice of presale seller inspection began in Silicon Valley. Home sellers and their agents in the rest of the state and country wait until after property preparation, open house weekends, marketing, and negotiations to have homebuyers hire unknown inspectors. It is a financial disaster in the making.

Now, you have a stigmatizing property, aka Transaction Fell Through (TFT). You must share the canceling homebuyers’ reports written by inspectors of unknown experience and credibility. You can expect a 5% to 15% price decline. After all, homebuyers can’t afford surprises with the following May 2023 median three-bedroom Silicon Valley home costs per the California Association of Realtors:

•   In Alameda County, the median price of a three-bedroom home of $949,000 with a 3% down payment of $28,000 is a monthly payment of $6,861; with a 20% down payment of $190,000, it is a monthly payment of $5,850.

•    In San Mateo County, the median price of a three-bedroom home of $1,700,000 with a 3% down payment of $51,000 is a monthly payment of $12,279; with a 20% down payment of $340,000, it is a monthly payment of $10,469.

•    In Santa Clara County, the median price of a three-bedroom home of $1,500,000 with a 3% down payment of $45,000 is a monthly payment of $10,843; with a 20% down payment of $300,000, it is a monthly payment of $9,245.

There are exceptions in real estate. The home could sell well again if you are in a great neighborhood. Hire top-notch presale seller inspectors, address alarming deferred maintenance items or both. If not, it will be a long summer.

For Housing Market Data in your area, visit my webpage for trends here. Do you have questions about home buying or selling? Full-service Realtor Pat Kapowich is a Certified Trust and Probate Specialist, Certified Real Estate Brokerage Manager and career-long consumer protection advocate. He is based in his hometown of Sunnyvale, California. Office: 408-245-7700; Broker# 00979413 Pat@SiliconValleyBroker.com