Turn a Grudge Purchase into a Valuable Sales Asset

plugs

With nearly 30 years in real estate if anyone asks me what the most irritating aspect of a sales is, I have no hesitation in answering that it is getting the various Certificates of Compliance for 'amenities health and safety' that are required.  

In 1984 when I started as a rookie agent the only required inspection was for notifiable beetle (which by the way was at that time just two specific little creatures) but then these reports started to be expanded to include another insect or two until it was recommended that the wording in the contract all types of wood destroying 'goggas', many of which didn't even live in the Cape. Then of course came the 'bright spark,' to add electrical compliance certificates and now we have every trade jumping on the bandwagon so we have the need for the seller to also provide plumbing certificates, gas inspection reports and electrical fencing inspections.  In South Africa we have as much certification requirements as Switzerland yet the majority of the country lives in shacks – but be that as it may – that's South Africa.  Of course I appreciate that the buyer of a property has a right to know what they are buying, however when you are buying a second hand home (yes we don't like to call it that but this is what it is), in many instances is a "mature property" and the buyer in making an offer needs to accept that in his offer price.  I not only have my doubts about how reasonable such requirements are, I also have over the years seen far too many things that make me very skeptical about the real value of these reports let alone the ethical behaviour surrounding them.  And these reports are not over yet! There are moves afoot to have Energy Performance Certificates apply to resale properties and not only new homes. 

I need to also point out that the buyer too often has a very different idea to what he thinks he is getting from these reports compared to the actual intention and what is being recorded and inspected.  For example the electrical certificate that is required has a clear focus on safety but the buyer thinks it is to make sure everything is perfect working condition.  These are not one and the same thing!  As an example, a plug on the wall with no electrical connection to it at all will not strictly stop a certificate being issued as it is obviously perfectly safe if there is no connection to it.  This is not a silly example – I have had such an instance.  I have also witnessed many electrical connections being excluded from an inspection because they were simply removed at the time of the inspection.  Further I know of frequent cases where plugs and fittings were never inspected because they were 'hidden from view' (behind curtains) or as in a very recent instance in my own home, where an appliance was plugged into them at the time of the inspection they were excluded because "like many other companies we have a policy not to touch people's equipment" and so the plug was simply exclude from inspection.

I have over the years moved from one inspection company to the other for a variety of reasons.  Firstly as soon as one of them even offers me or my agents any "incentive" for business I terminate the relationship immediately.  This has happened frequently and in itself deserves a dedicated article as it is a shameful practice.  I have even noted a pattern that in a new relationship inspections start with little or modest amount of remedial work being found and then the remedial work discovered increases until we start complaining.  Then it drops for a while as the inspection company fears losing the relationship with the agency. Maybe I am imagining things… 

You must remember that in the case of all these inspections there are three potential money making opportunities.  First the inspection fee, Secondly the remedial work that may be required in order to meet the certification requirements and then thirdly, the re-inspection.  Some companies offer free first inspections or free post inspections if they do the repairs, but sellers need to know that free comes with a price!  Nothing is for nothing as we all know, and I would argue that a free inspection could be an even greater incentive to discover remedial work.  Of course based on the initial report you can get another service provider to do the remedial work but then you would still need to get that work certified by a re-inspection by a certified electrician or plumber or entomologist or gas installer, depending on what certificate we are talking about.  It seems that many of these inspections companies are relying on the fact that the seller in many instances just can't be bothered to get a second provider in and just approves the work to be done. This leads me to the main concern as the owner of a few estate agencies; where a seller is not happy, significant discounts are often obtained to get the work done by other service providers and of course this all serves only to make the estate agency look ridiculous and even complicit as it was the agency that offered to arrange the instruction in the first place.  I very nearly had a fall-out with my own brother-in-law over such an instance as he saved many thousands of Rands getting an alternative provider to do the repair work and when I approached the company who I had instructed their answer was, "you should have told us that the seller was family of yours!"  What on earth does that comment imply?  Of course I terminated yet another relationship right then and there!

I got so upset about the entire issue of inspections that in 2002 I stopped arranging them as part of our sales administration services.  I insisted that sellers choose from a long and comprehensive list of service providers that were members of various professional bodies (a topic that could be another article) however that was even more of a disaster as sellers ending up getting all sorts of incorrect documents from a 'friend who is an electrician" and in one instance a hand written 'opinion' about the quality of the timber in the house from the seller's brother who was a carpenter (who was called Joseph by the way).  Very often we were told that they had been organized only to discover they were not done by accredited people and this delayed the transfer or to discover after the transfer they were not done properly and now we had upset buyers.  Trust me as agents, we just can't avoid getting caught up in this nonsense.

So how in the light of all I have written can this grudge purchase be turned into a valuable asset as I claim in the headline?  Well firstly there is the important decision to be made about how serious you are as a seller.  If you know that the sale of your property is something that needs to happen then my advice is that you do the following.  Firstly once you are start marketing the property get all the inspections done upfront.  Secondly, make a time for them to be done when you can be at the property to see what is going on, and don't get them all there on the same day!  Thirdly, make sure you get a commitment in writing and in advance (an email will do) from each inspector as to what the cost of the inspection will be and that you will be free to have remedial work done by whoever you wish.  Fourthly, that there will be no link to the inspection fee and your choice of who does any recommended work. You also need to get a clear costing on a re-inspection if the remedial work is done by a different contractor (which is fair enough).  Just the fact that you have made the inspection team aware of your understanding of the process is going to keep them on the ball! Fifthly, after the inspection report comes in, should it contain a fair amount of remedial work, you can now get competitive quotes to get the work done without pressure and either the company that does the repair can then give you the certificate (make sure in advance that they are licensed to provide that certificate) or you can call the original company back but it could result in another fee that should be substantially reduced as the re-inspection is only for those specific repairs so it should take a very short time.

As you have to get these certificates / reports for your sale, by doing them at the start of the selling process this means that your agent now has the various Certificates of Compliance to show a buyer during the marketing, before the property is sold.  This can only enhances the value and even enhance the appeal of the property as it can remove potential doubts from a buyer about such matters – specifically if the buyer is the 'analytical type'. You also now know where you stand and eliminate nasty surprises in a process that is stressful enough without substantial unforeseen costly repair bills.

Yes reports do have a shelf life and you need to be aware of the period or conditions of validity, something you may want to ask questions about when getting the inspections done.  If you do a report within a reasonable time to the sale of your property your reports will be valid as long as you do not do anything that could affect them from the time of the inspection.  If for example you moved a plug you would technically need to have that work inspected. I would suggest that you attach the reports you have obtained as Annexures to your signed Offer to purchase when you sell the property and state in the "special conditions" that the Purchaser accepts that the attached reports meet your full obligations in terms of the specific clauses that relate to such inspections.  Lastly if you are selling an old property that is likely to be a renovation tell the agent to exclude the need for such reports from the agreement and to make sure this is known during the marketing process.  It is simply ludicrous that in many instances a house is sold and the seller has to go through all these expenses only for the purchaser to immediately start changing the entire structure and remodel the property.  

I am more than happy to receive email enquiries on this matter sent to andre@everitt.co.za but don't ask me to recommend any service providers, after this article they will probably not be talking to me anyhow!

Andre de Villiers – All rights reserved (c)  15 September 2013

 

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