We’re seeing it more now than ever: buyer’s waiving their rights to standard home inspections. With housing inventories at all-time low and sellers in uniquely powerful positions, homebuying practices are straying from time honored traditions.
The imbalances are real. We recently submitted a strong cash/quick close/15% escrow offer with an escalation clause on an older condo and the list agent quickly informed us that “although our offer was the highest by a longshot, it wasn’t the best.” That’s because it was the ONLY one with an inspection contingency in an intense multiple offer situation. Our buyer walked and he was glad he did when a condo in a superior location became available. But our minds are still with the “lucky ones” who are inheriting a mystery package.
What’s the norm?
In Florida, a “standard” due diligence period is 15 days. Once upon a not-so-distant time, a 5 or 7-day inspection period was a meaningful compromise. But in these competitive arenas, even a 3-day inspection contingency could mean the difference between acceptance and rejection. It's understandable that buyers might be willing to absorb the expense of minor repairs to get a deal done. But diving blindly into a lagoon of unknown depths is a decision they may soon regret. The reward for trumping 10 competing offers could be a future financial nightmare.
What’s a buyer to do? Is it wise to surrender knowledge, preparedness, and confidence when purchasing properties? As investors flock to auctions and foreclosures, they gamble like this for the prospect of exciting gains. But today’s homebuyers are spending top dollar to willingly roll the dice with structural soundness.
When to Waive:
In some scenarios, it might make more sense to waive all contingencies. The buyer, for example, who’s purely pursuing location. Or the buyer who plans to fully renovate the existing structure down to the studs and wires. Or the buyers who found a rare, golden unicorn. Or the buyer who personally knows the general contractor of a new remodel and can ask behind-the-scenes questions. Or the buyer who’s a skilled tradesman and can take on big repair projects with ease.
Unless your situation falls into a special and highly calculated category, we do not recommend waiving inspection contingencies. Even if you offer more earnest money for 48 hours of due diligence, every day can bring a plethora of important information and a potential case for a change of direction or further negotiations.
Navigate Wisely if you Waive!
If you do waive your rights to an inspection contingency, try to protect yourself. Here are some ideas that could boost your security:
- Review the Seller’s Disclosure thoroughly and ask questions before you commit.
- Ask general questions in writing about prior insurance claims, leaks, water damage, termites, and recent repairs.
- Bring a professional to important showings to conduct an informal visual inspection to identify any obvious red flags. It’s not ideal, but it’s certainly better than merely relying on sellers’ statements.
- If an open house is scheduled, ask for a mini-inspection for an hour before the doors open.
- Investigate which if any permits have been issued in the last few years.
- Expect the unexpected: set aside an “emergency fund” as part of your total budget so you’re able to deal with large repair bills as they arise.
- Know that waiving the inspection contingency doesn’t necessarily preclude you from hiring professionals to inspect the house. But it does mean that you typically won’t be able to use the findings as a basis to cancel the contract. But any deposit you’d forfeit might be significantly less than the expenses you’d incur to move forward with a problematic property.
- Activate your senses. Without any burning candles, colognes, or open windows to distract, walk carefully through each room to sniff for clues.
- Talk to the neighbors. We can’t even count how many times a quick conversation with a neighbor will reveal hidden secrets behind those walls.
- Investigate home warranty programs. Some of our clients have been shielded from the expenses of normal appliance and electrical failures because they purchased affordable warranties.
- Think back and consider your greatest risks and all their contributing factors: does the age of the home lend itself to asbestos, outdated wiring, toxic drywall, or aging foundation issues? Is the area prone to high winds and storms? Have other properties in the area sustained roof damage? Is the environment regularly humid and conducive to mold growth?
- Schedule a post-settlement inspection so you are more prepared for future expenses.
Before You Waive Goodbye…
No property is 100% perfect. Inspections are not perfect either. Even the most rigorous of examinations can fail to uncover all existing issues. But don’t feel pressured to surrender your rights at your own risk. If a seller accepts another offer because yours had an inspection contingency, there will be more opportunities ahead … and the perfect home for you on the horizon.