The past several years has seen one of the hottest housing markets in recent memory. Sellers are enjoying high prices while buyers face bidding wars for limited stock. These market conditions have resulted in buyers employing several creative tactics to give them the edge in a competitive market. Many homeowners are skipping the building inspection as one tactic to make their offer stand out.
While this tactic can help a buyer stand out and be the determining factor in closing a deal, it is not without serious risk.
A standard home building inspection can increase your confidence about a home before closing a deal. Having a professional home inspection can work as a negotiating tool if issues are found during the process. It also gives a buyer cause to walk away from a deal.
With just 1.04 million homes for sale by the end of 2020, home inventory supplies in the U.S. were at the lowest level since the National Association of Realtors began collecting data in 1982.
In this climate, with multiple buyers competing, the pressure to make an offer that stands out is intense. The National Association of Home Builders Trends Report found that in the 4th quarter of 2020, buyers' most common reason for not purchasing a home was being outbid.
In a hot market, it's not unsurprising that desperate buyers are amenable to waving the building inspection. For the seller, this makes an offer look more appealing. This can often be the deciding factor that can close a deal. However, most professionals suggest that waiving the inspection is a bad idea.
There are few benefits to skipping an inspection, but there are scenarios where it can make sense and be beneficial.
Besides these specific scenarios, there are a few advantages to skipping the inspection process. Waiving the building inspection means less hassle for the seller and can result in increased interest in an offer; however, buyers are putting themselves at significant risk by skipping this step.
The building inspection is intended to provide the buyer with accurate information on a building's current condition and alert a buyer to significant problems in the home. This information is crucial for both buyers and sellers.
A thorough home inspection will examine the following:
Problems in any of these areas could result in costly repairs. Armed with this information, a buyer can negotiate with the seller to make certain repairs or may choose to offer a lower price or walk away from a deal to avoid costly projects.
Buying a home is probably the most significant investment you will make in your lifetime. The building inspection process is the best way to know what you are getting yourself into. After the close, it becomes your problem. A missed problem can potentially cost you thousands of dollars in repairs.
Waiving the inspection is one way to get your offer considered. These are a few other tactics you can take to make your offer more appealing to the seller.
Have your finances in order – Get a preapproval letter from a lender. A mortgage preapproval in hand shows a seller you are serious and have the financing to close the deal.
Ask for an "informational inspection" rather than a contingency. This language lets the seller know that you will be getting the home inspected. Still, it is for informational purposes only, so the seller will not be responsible for any issues you uncover.
Make a larger down payment – More cash upfront is another way to show a seller you are serious. A larger down payment puts more money in the seller's pocket right away and signals that your financing is solid, and the deal will close.
Include an Escalation Clause – Sellers like this because it eliminates back-and-forth negotiations between buyers. For example, an escalation clause will automatically bid $1000 over any offer up to $250,000 on a property listed at $200,000.
With a careful offer in a hot market, you still might not close the deal. But remember, a home is a significant investment, and going in without a building inspection can lead to serious financial ramifications down the road.