Are Pre-home Inspections a Good Idea on Older Homes?

Dave,

We will soon be selling our home and looking to downsize.  We have lived here almost 15 years and are the second owners.  We have taken good care of our home and have kept up on routine maintenance and also fixed any items needed over the years.   Our home is older, built in 1976, but has been well taken care of.  We are considering a Pre-home inspection, as one of our friends intimated that it might be a good idea.  Your thoughts on pre home inspections?  Thanks.

Dwight, Grand Junction

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Dwight,

On face value it sounds like you could go either way.   Your friend is right, it can be a really good thing and offer you, the buyer, and the real estate agents some peace of mind that the home is in good condition and free of any major problems.   The decision should be based on your knowledge of the home and how likely you believe it is that a problem may come up during the home inspection period. With any home built in the 70’s there is a reasonable chance that quite a few items will come up on the home inspection, not because you haven’t taken care of your home, but because it is old!   Generally I think it is a good idea, based on the age of your home, but it will set you back $300-$400.  This may be a very small sum in the long run, if it prevents a deal from falling apart.

One major thing that a pre home inspection will do is likely bring any “deal killers” to the surface before you get your home on the market and under contract.  If you do find a significant issue up front this will allow you to get it resolved prior to putting it on the market and getting it under contract.  There is no doubt in my mind that many things that happen during and related to the inspection period, after a home goes under contract, are blown way out of proportion and have as much to do with leverage, emotion, fear and lack of knowledge than the problems that are discovered and their remedies.  Once a For Sale sign goes up in your yard, regardless of what anyone says, everything changes and everything gets magnified, especially in a market where buyers can be difficult to find.

There are two things that I think are a great idea, regardless of the age of your home.    If you are currently on a septic system, I highly recommend you have your tank pumped and inspected prior to putting the home on the market as this serves not only as great preventive maintenance but will also put a stop to any potential septic issues before they generally get started.  Also, have a Licensed heating and air conditioning professional come and give your heating and cooling systems the once over and provide a receipt for a clean bill of health.  Septic systems and your homes mechanical systems (especially heating) are two items that many home inspectors single out and recommend buyers have those evaluated by Septic and HVAC professionals.  It is good preventive maintenance and eliminates the potential for a conflict of interest to have those things checked out ahead of time.   One more thing, if you have any question or doubts about your roof, have that inspected also.  Roof inspections are generally free and will bring any potential issues to light and notify you in advance if your roof is at the end of its expected life. 

I recommend a pre-home inspection if you have ANY concerns about a “deal killer” issue that may come to light.  If you have no concerns about that, then I would not do one.  If you do have concerns that there may be an issue there, some little nagging hunch, then I would pull the trigger on one and not even think twice about it.  You know your home better than anyone and if you think you need to have one done let me know and I will be happy to recommend a few that will do a great job!  A pre-home inspection is not for everyone, but maybe it should be….. I am finding myself rethinking the issue as I write this column.   Thanks for the thought-provoking question.

Dave Kimbrough

The Kimbrough Team

Have a question? Ask Dave!

What Is The Best Way To Estimate The Value of Our Home?

Dave,

We are thinking about selling our house, but we would first like to know how much our home is worth. We’ve seen a few websites—like Zillow and Truila, just to name a couple of them—that say they can estimate the value for us, but we aren’t sure if they are reliable. We know you’ve been doing this for quite a while and trust your advice. When you are selling a house how do you determine if these web sites are a reliable source for establishing the value of our home?

Tom, Grand Junction

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Tom,

I love this question!   For the purpose of this answer we will focus on Zillow as it is by far the most used and relied upon real estate web site.  Zillow is, in my opinion, the best of all the real estate web sites at marketing to the public and to Real Estate agents.  It has established itself as the “go to” web site for helping the public not only keep track of local and national real estate trends and homes for sale, but has also been effective at instilling the perception that it can help you establish a value for your home.  The Zillow.com home valuation tool is called a “Zestimate”. 

I encourage you to go to Zillow.com and click on the FAQ, frequently asked questions, and scroll down to the “How accurate is the Zestimate?” and click to open.  What you will find is what very few know or ever venture to find out.  Here you will find out how good their marketing has been.  The marketing has been so good that the public has willingly flocked to a product that is almost wrong more often than right.  In the terms of statistical accuracy a “Zestimate” is virtually worthless.  What Zillow.com is admitting, in the fine print, is that their Zestimate is not overly accurate.  Actually, statistically speaking it is amazingly inaccurate!  There are too many variables, that don’t have to do with measurable and quantifiable characteristics, to allow a computer to provide an accurate statistical analysis on a home’s value.  Lets dive into some of the specifics!

When the Zillow website states that the Zestimate is accurate within 5, 10 or 20% keep in mind that can potentially mean a PLUS or MINUS percentage number!  In other words, IN COLORADO, if an “off market” (meaning the home is not currently for sale) home zestimate is $400,000 you can figure that value is correct within 10% ($360k - $440k…. an $80k spread) only 68.4% of the time… that means that 31.6% of the time they are even more inaccurate!  In Colorado the Zestimate gets it right to within (+ or - 5%) only 43% of the time!  This means that if you are on Zillow and your home is NOT on the market, the value provided by the Zestimate can not be considered accurate… its more of a poor guesstimate!  On the bright side…. If we look at the Zestimate numbers of “on market” homes the numbers are much more reliable. 

Zillow’s accuracy numbers in Colorado for “ON MARKET” homes (meaning a home that has been listed for sale by a real estate agent or for sale by owner) the accuracy increases significantly (90% are within +/- 5%) and are much more reliable.  Why such a dramatic increase in accuracy AFTER a home goes on the market?  This is because they have a local real estate agent establish a market number so the Zestimate can react accordingly.  In their own FAQ’s they site that after a home is listed that their algorithm incorporates new listing data to provide “valuable signals” about the homes eventual sales price!  I find this statement funny….. the new listing data or “valuable signal” is an accurate list price established by someone with local market knowledge!  

Overall, I would say that online valuation modulators are not a reliable source to establish a homes value.  At Zillow.com it goes on to say that a “Zestimate is a good starting point as well as a historical reference, but it should not be used for pricing a home.”  The very best way to establish your homes value is to have a local real estate professional (or two or three) out to view your home and help you establish a proper market value for your home based on neighborhood home sales and what those numbers indicate that a buyer is willing to pay for similar homes!  These quick computer tools are novel and potentially useful to gauge the overall market temperature, but that may be the limit of their usefulness at this juncture.  No doubt there will be many that work to improve the AI in an attempt to better hone property values, but that day has yet to arrive. 

Hope that helps,

Dave Kimbrough

The Kimbrough Team

Have a question? Ask Dave!

If our home sold in the first week, does that mean that it was under priced?

Dave,

We listed our home for sale about 3 weeks ago and it sold in the first week for what we were asking.  I was elated, but my husband keeps saying “we sold it too cheap.”  I keep telling him it was just the right buyer, but he says it was under priced. If our home sold in the first week, does that mean that it was under priced? Just curious of how you view this, as I am sure you have run across this very situation.  

Jackie, Grand Junction

p.s. I am happy we sold it quickly, even if we could have gotten a little more.

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Jackie,

I have run across this many times over the years and this is one of the real estate questions that is almost always debatable. There is no doubt that every time we sell something quickly that I ask myself the question, “did we price it too cheap?” I am here to tell you that sometimes the answer is yes, sometimes the answer is no and sometimes the answer is impossible to know. I can absolutely tell you that just because it sold quickly, does NOT necessarily mean that you sold it too cheap.  

There are times that we have sold a property within the first few days with multiple offers and in that case the answer would be, more than likely, yes. If something sells that quickly, with multiple offers then you probably could have gotten more money for it, because there are multiple people vying for the same product. The good news is that most of the time in multiple offer situations, we are able to get more than asking price. It usually works out to be about the same as it would have brought if priced higher originally. I really do believe that most of the time you are correct, it is the right buyer and not because it was under priced.   

 I don’t think a day goes by that I don’t tell one of my customers, “there’s a butt for every saddle, we just have to find the right butt!” A little talked about fact, which I might point out is underappreciated, is that there is always a school of buyers in the market and they are circling, just like fish in a pond. When new bait is thrown in, they all swim over to check it out and either take it or wait for something better. In our current market there are more buyers than one would think. They are circling and waiting for just the right bait. When they see it they will strike, but only if the price is right. Today’s buyers are not dumb, anything but. They are very smart and well educated on the market. When a property of interest comes up but is not priced appropriately, it will sit.   

I say it all the time, houses are like any other good to be sold. At a certain price all homes will sell and sell quickly, but the tricky part is establishing the market value for each one when no two are the same. That makes establishing a top of market value much more difficult than one might think. It is much easier to establish a market value for a particular item when there are thousands to be sold and they are all identical. In that case it is simply the law of supply and demand, but when EVERY item is different with its own characteristics, good and bad, it becomes much more difficult. Even the same house in the same neighborhood has a different lot, view, finishes, condition etc... As you can see every house is different. 

Honestly, sometimes I get it just right, sometimes I set the price too high and sometimes too low, but every time it is based on comparable sales in the area and my professional assessment of the unique values the property offers and I am sure your agent did the same. It really is as much art as it is science and you do not get them all right. If your home had not sold in the first week and been 60 days and no offer, your husband would have said it was priced too high. It's really a no win debate. My best advice would be to be thankful it is sold, remind him that he agreed to the sales price and be thankful you can avoid the countless showings and constant cleaning! The bottom line is, it is sold and that is a good thing.  

Dave Kimbrough
The Kimbrough Team