No doubt about it, the real estate market is red hot. And, when the market is red hot, buyers compete for homes and want to strengthen their offers as much as possible. One way of strengthening an offer is to remove certain contingencies in the contract. To get the home you want, waiving your home inspection contingency may seem like a good idea.
But waiving your home inspection can end up being a really costly mistake.
I very rarely recommend giving up your right to a home inspection when working as a Massachusetts buyer’s agent. Giving up something as important as your home inspection should not be taken lightly and is definitely not for the faint of heart.
WHAT IS A HOME INSPECTION?
A home inspection is typically performed by a licensed home inspector. They are trained to assess the structural components of a home, the safety of the home and the general systems that make up the home. An inspector will review the HVAC, plumbing, electrical, building structure and components as well as areas that effect the well being of a home.
The key is they are trained to identify problems and spend the good part of everyday inspecting homes. They will spot defects that you or I would not typically see while touring a home.
While you or I might spot a broken window, it would be near impossible for us to spot 20 feet of sill damage from termites, a cracked heat exchanger in the furnace or even mold in the attic. But most likely your home inspector will.
WHAT IS A HOME INSPECTION CONTINGENCY?
A home inspection contingency is a standard contingency in most Massachusetts real estate contracts. It allows a small window of opportunity for a potential buyer to inspect all the varying aspects of a homes safety, soundness and function.
Most home inspection contingencies allow for the buyer to back out of a deal if any latent defects arise during the home inspection. In reality, if some serious home inspection issues arise a solution is negotiated between the buyer and seller.
WHY WOULD I WANT TO WAIVE MY HOME INSPECTION CONTINGENCY?
Buyer’s are sometimes encouraged to waive their inspection contingencies by sellers or listing agents to make an offer more attractive to the seller in a competitive market.
Let’s look at it from the home seller’s perspective. A home inspection is anxiety provoking to the seller. There is a possibility that unknown issues arise with their home they are not aware of during their occupancy. There is also the risk a buyer can back away after removing their home from the market, leaving the seller to put the home back on the market Or, their maybe home inspections issues that arise that cause a renegotiation between buyer and seller.
A home inspection leaves the seller with so many unknowns.
Take two offers that are relatively equal but one has a home inspection contingency and one does not. The offer without waived home inspection will reduce a sellers risk and quite possible strengthen their financial position. It is far more attractive to the seller.
Many home buyers are opting to remove home inspection contingencies after losing offer after offer in a competitive real estate market. Buyers start to feel desperate and just want to get the process done with.
WHY IS WAIVING YOUR HOME INSPECTION BAD NEWS?
Risk. You are taking the risk that their may be significant issues with your new home that can add up to tens of thousands of dollars. Their can be latent defects in the home you are purchasing that are only detected by a trained professionals and not by a walk through with you and your agent.
The simplest way to explain this is a real life experience. I have been working with a couple to buy a home. They found a beautiful home they fell in love with. The home had so many recent updates and appeared to be in pristine condition. My clients even asked about removing the home inspection contingency to strengthen their offer.
We discussed the the possibilities of waiving the home inspection. But at the end of the day we concluded for them, it was not a wise decision.
And boy, weren’t we glad we didn’t forgo the home inspection on this home. This home was gorgeous. I even went in feeling we wouldn’t find much of anything. Yet when it was all said in done we found about $16,000 worth of issues that needed to be taken care of immediately…. from a leaking soil pipe, to rotted sheathing under the siding to a large amount of mold in the attic.
Without the home inspection, we would have paid top dollar for a home that needed a significant amount of repairs.
IS THERE ANOTHER WAY I STRENGTHEN MY OFFER WITHOUT WAIVING MY HOME INSPECTION?
One way is to state in the home inspection contingency that the buyer can only back away if non-cosmetic repairs result in a repair of over XXXX.XX amount of dollars.
By using a home inspection contingency that sets a dollar amount, you accomplish two things.
First, you retain your right to a home inspection and if any repairs arises that are more than you are willing to or can handle spending comes along, you are still protected from purchasing a home with large safety, structural or system issues.
Secondly, you give the seller a little piece of mind. They don’t have to worry about buyer’s remorse or be nickled and dimed by every little issue with the home.
You still get your home inspection while still strengthening your offer.
Another alternative is to do a home inspection before submitting an offer. By doing so you can put your best offer forward knowing whether you have significant work ahead of you or not.
ITS YOUR DECISION WHETHER TO WAIVE THE HOME INSPECTION OR NOT
Ultimately it is your decision whether to remove the home inspection contingency or not. Don’t let an agent or home seller talk you into waiving the inspection if you are not comfortable with it.
Yes, this market is stressful for home buyers, but don’t let that stress lead to a bad decision. Your misguided decision could end up costing you tens of thousands of dollars down the road. While it may end up getting you the house there will be much uncertainty about what lies underneath. You must be able to assess your own tolerance in first what you can handle for repairs, what the worst case scenario might be and your actual cash on hand if a major repair needs to be done immediately after moving in.
One or more costly repairs can turn the American dream into a nightmare. Don’t let a seller or listing agent strong arm you into removing your home inspection contingency if it is not right for you.