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A typical step in nearly every home-buying process is a home inspection. This is when a certified home inspector examines the house's structure and systems looking for issues such as a cracked foundation, significant termite damage, or improper wiring. The inspection usually occurs after a purchase offer has been accepted and can be a point of renegotiation should problems turn up.
When you're in a seller's market, competition among buyers can lead to bidding wars, causing some buyers to waive contract contingencies such as the home inspection. Redfin, a nationwide real estate listings website, revealed that by midyear 2020, 1 in 5 of the accepted offers handled by their agents included a waiver of the home inspection. But is it a good idea to skip a home inspection?
Waiving a Home Inspection Contingency Is Risky
It's one thing to have to fix a faulty furnace or replace a dishwasher, but it's another thing entirely if a home has major structural damage. Any structural repairs are costly and sometimes even impossible to fix. Your mortgage provider might even insist on a home inspection before approving your loan depending on when the home was built and where it's located.
There are Other Ways to Boost Your Bid
When you fall in love with a house and would do anything to get it, you might be tempted to forgo the safeguard a home inspection provides. Consider these alternative options for making your bid stand out: You could remove the appraisal contingency, meaning you'd have to bring more cash to the table if the home doesn't appraise for an amount that suits your mortgage lender. You could be flexible with the closing date, allowing the seller to set the timeline for moving. You could also offer to pay the seller's closings costs. These solutions all mean coming up with more cash, but eliminating the inspection could also wind up being costly.
Protect Yourself as Best You Can
If you're in an extremely competitive market with multiple-bid situations that might require waiving your contingencies, you could have a contractor or inspector tour homes with you. They might notice problems you don't, and if the problems are big enough, you'll know to avoid the home entirely. Home warranties can also be purchased for around $400 for one year and can be extended for years with additional premiums. To protect yourself further, search public records to see if any permits have been issued for major work on the property, as any large jobs require permits.
In hot markets, bidding wars among home buyers are common. It might be tempting to waive your home inspection contingency to make your bid stand out. Consider carefully, though, before taking such a risk and try to protect yourself against any possible ramifications.
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