The Market Has Shifted: What Real Estate Agents Need to Know

The Market Has Shifted. The Inspection Conversation Needs to Shift With It.

The real estate market has definitely shifted.

Multiple reports are showing more sellers than buyers in the market. Interest rates remain higher than buyers became accustomed to over the previous decade. Fewer buyers are entering the market, and listings are sitting longer before they sell.

We’re seeing two important side effects of that shift during the home inspection process: buyers are more willing to walk away after an inspection, and sellers are more likely to become upset by what happens after the inspection.

I’ve heard the same thing from a lot of real estate agents lately, and I’ve been asked what agents can do about it.

My answer is simple: Have the inspection conversation earlier.

Buyer Agents: Find Out Your Buyer’s Tolerance Before You Find the House

When you first sit down with a new buyer, you’re probably asking the obvious questions.

How many bedrooms do you need? How many bathrooms? What neighborhoods are you considering? What’s your price range?

I think there’s another conversation that belongs right there:

What is your tolerance for dealing with issues in a home?

Explain the process before you’ve found the house they fall in love with.

At some point, you’re going to find a house. You’re going to open escrow and have a home inspection. The home inspector is going to find things.

Every house has issues. No house is perfect. That’s one of the reasons the home inspection exists, to give the buyer information so they can make an informed decision about the property.

Talk about that before the inspection.

In my experience, too many agents wait until the day of the inspection to have this conversation. Some wait until after the inspection.

At that point, it’s too late.

The buyer may have already developed unrealistic expectations about the condition of the home. Then the inspection report arrives with numerous findings and suddenly they’re overwhelmed.

Something that could have been evaluated rationally becomes emotional.

I’ve always said that almost everything we find during a home inspection can be fixed by someone. The questions are usually who is going to fix it, when are they going to fix it, and who is going to pay for it?

That doesn’t mean a buyer should ignore significant problems or buy a house they aren’t comfortable owning. It means they should be prepared for the reality that buying a house with absolutely nothing wrong with it isn’t a realistic expectation.

The earlier you have that conversation, the better prepared your buyer will be to evaluate what the inspection actually reveals.

The Market Used to Cover Up This Problem

This conversation matters even more today because buyers don’t feel the same pressure they did a few years ago.

During the hottest seller’s markets, a buyer might have been disappointed by an inspection but still felt compelled to move forward. They usually already had a bidding war on another house. They often knew there were other bidders on this house.

Buyers felt that if they walked away, they’d be right back competing against dozens of other buyers the following weekend.

That pressure frequently kept transactions together.

Now, for the time being, those days are over.

Today’s buyer sees homes sitting on the market. They know there are other choices. Buyers are looking at a monthly payment affected by today’s higher interest rates.

So now they receive an inspection report and think:

Why am I paying this much money, at this interest rate, for a house with all these problems when there’s another house for sale down the street?

Buyers have always walked away from homes when an inspection revealed conditions they weren’t comfortable accepting. What’s different today is how willing they are to exercise that option.

Over the years, we’ve sometimes performed two or three inspections for the same buyer. Eventually, some buyers have an interesting realization:

Oh. Every house has issues.

Sometimes they even realize that the first house wasn’t so bad after all.

That’s why preparing buyers ahead of time matters so much. They need to understand what an inspection is and isn’t before the inspection begins.

If you don’t know your buyer’s tolerance for repairs, deferred maintenance, aging systems, and unexpected expenses before you enter escrow, you may only find out when escrow is canceled.

Listing Agents: Prepare Your Sellers

The same conversation needs to happen on the other side of the transaction.

When you’re taking a listing and preparing a home for sale, talk to your seller about the inspection that’s eventually going to happen.

Waiving inspections is largely a thing of the past in today’s market. Buyers are being more selective, and sellers need to understand what’s coming.

It doesn’t matter how well someone has maintained their home.

No house is perfect.

I’ve never performed an inspection where there was absolutely nothing to report.

That doesn’t mean someone has been a bad homeowner. An inspection report isn’t an attack on the seller. It isn’t a judgment of their character. The report isn’t a judgment about how well they’ve maintained the property.

It’s information about the condition of the house on the day it was inspected.

Getting that into a seller’s head before the inspection can make everything that happens afterward much easier.

When sellers aren’t prepared, they can become defensive.

“We’ve lived here for 25 years and never had a problem with that!”

“That’s ridiculous!”

“Why is the inspector making such a big deal about this?”

Then the repair request or request for credits arrives, and emotions go through the roof.

Prepare the seller before any of that happens.

And Yes, I’m Going to Say It: Get a Pre-Listing Inspection

I know some listing agents don’t want to hear this.

Home inspectors have been recommending pre-listing inspections for years, and sellers and listing agents have resisted them for just as long.

I understand the objections.

Some listing agents worry that once an issue has been identified, they’re going to have to disclose it.

Many Sellers don’t want to pay for an inspection because they believe that’s the buyer’s responsibility.

Often, listing agents don’t want to pay for it because they don’t know with certainty that they’ll ultimately receive a commission from the sale.

But in my experience, homes with pre-listing inspections tend to have smoother, more predictable escrows.

A pre-listing inspection gives you the opportunity to learn about issues before the buyer does.

The seller can decide what they want to repair. Other conditions can be disclosed upfront. Buyers can consider that information before opening escrow and make their offer with a much clearer understanding of what they’re buying.

That is a very different situation from accepting an offer, changing the listing status to pending, having the buyer discover something unexpected during their inspection and then watching the transaction fall apart.

Now you’re putting the house back on the market and explaining why it fell out of escrow.

Buyers have more leverage in today’s market.

A pre-listing inspection is one way for a seller and listing agent to regain some control over the process.

Don’t be afraid of knowing what’s wrong with the house. The buyer is probably going to find out anyway.

The Inspection Conversation Has Changed

Buying and selling homes has always been emotional.

Right now, those emotions are amplified.

Buyers are more selective. They’re taking their time. They’re thinking seriously about what their monthly payments will look like at today’s interest rates.

Meanwhile, sellers are frustrated because homes may be sitting longer than they expected. They’re not necessarily getting multiple offers immediately, and escrows can become more contentious when buyers feel they have room to negotiate.

A few years ago, a buyer might receive an inspection report with numerous issues and think:

I’ve already lost several houses. This is the only offer I’ve gotten accepted. There are other buyers waiting behind me. I should probably keep this transaction moving.

Today, that same buyer may think:

I have choices. I don’t have to buy this house. There’s another one for sale down the street.

Neither reaction means the inspection report changed.

The market around it changed.

That’s why both buyer’s agents and listing agents need to get ahead of the inspection conversation.

Talk to your clients before they’re emotional.

Explain what a home inspection is. Explain that issues will be found. Talk about their options. With buyers, understand their tolerance for repairs and uncertainty. With sellers, prepare them for the fact that the buyer may ask for repairs, credits or additional evaluations.

Waiting until the day of the inspection—or until after the inspection—is too late.

I can see it in buyers’ faces when nobody has had this conversation with them ahead of time.

They’re shocked by information that shouldn’t have been shocking.

The inspection shouldn’t be the first time your client learns that houses aren’t perfect.