Should you waive your home inspection in today’s competitive housing market?

In a market with high demand, and a low supply of homes - as a prospective buyer is it a good idea to skip on inspecting the home for a chance to get your offer accepted without a home inspection?

Generally, I would say it is not a good idea to skip a home inspection as it is your strong layer of defense to identify any issues with the house, and to be able to go back to the seller to cure these items, or to reduce the selling price so that you can cure these items yourself. A home inspection can also give you all of the red flags up front helping you to make the decision if this house is, or isn’t for you.

A home inspection is equivalent to a pre-purchase inspection (PPI) for a used car – you should never buy one without first doing an inspection by someone certified that can help you, and identify what you are getting yourself into.

The answer depends on your tolerance for risk.

Who could benefit by waiving an inspection?

• Someone with strong financial reserves who can handle the risk of purchasing a home that may require a significant financial investment.
• This is a person who can gamble on the condition of the house, and can handle fixing high priced items such as foundation cracks, roof leaks, electrical repairs, heating repairs, water damage, mold, air conditioning repairs, etc. The cost to fix some of these items can exceed tens of thousands of dollars.
• Someone purchasing a new construction home from a builder that comes with a warranty does not necessarily need to do a home inspection.

Who shouldn’t waive an inspection?

• Someone who doesn’t have the financial resources to pay to fix a large problem should it occur.
• Someone looking for a turn-key home that doesn’t like surprises, or have the time and/ or money to fix problems when, and if they come up.

There are ways to make your offer stronger without necessarily having to waive a home inspection.

• Get a pre-approval from a reputable lender that checks your credit, income, and assets and confirms your ability to get the mortgage. A pre-approval is done by a loan officer.
• Obtain a commitment from a reputable lender which will make your offer stand out and be equivalent to a cash offer. It will be subject to a title search, an appraisal, and the conditions of the loan approval. A commitment is provided by the underwriter of the lender who will verify your application, income, assets, credit, etc.
• Increase your down payment – putting more money down at closing will make the seller feel more secure in the transaction.
• Include an escalation clause – this is a section in the real estate contract that states that you are willing to raise your offer up to a certain point (cap) should the seller receive a higher competing offer. The clause will state how much more a buyer is willing to pay over the highest offer and will state their spending limit. An escalation clause will show the seller how serious the buyer(s) are about the property, and how much they are willing to spend to beat the other offers.

When deciding which option is the best option for you - you may want to consult with your attorney to determine if this is something that may, or may not make sense for your short / long term financial plan, and objective.

Steven Paul Ross