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Waiving the Home Inspection to Win a Bidding War?

It’s a crazy housing market! There are far fewer homes for sale than people who want to buy them. I’m hearing stories from Realtors that there are often dozens of bids on a home within hours of listing. Many houses are under contract within a day or two of hitting the market. I’ve heard from buyers that they’ve been looking for months only to continually be outbid once they find the home they want. It’s understandable that many are trying to find ways to make their bids more competitive. One of those ways is skipping the home inspection. ran an article on this subject over the weekend. You can read the article HERE. I'd like to address some specific things in the article as well as add my own thoughts.

Issue #1: The Realtor advising their client to skip the inspection. In the article, the buyers they interviewed said the Realtor advised them to skip the inspection to make their bid stand out. It worked. Their bid was accepted. I don’t know the details of laws governing Realtors, but I know from some that I’ve talked to that advising a buyer to skip the inspection transfers a huge amount of liability onto the Realtor. If a Realtor has a buyer that insists they skip the inspection, I recommend the Realtor get something in writing that the buyer has waived any legal action against the Realtor or sellers. (Maybe they already do this.)

Issue #2: Having a friend or relative “look things over”. The couple in the article was planning on having an uncle who’s a professional contractor look things over. The sellers denied the uncle access, so they ended up backing out. Probably for the best. I’ll skip the whole “I’ll have my uncle inspect it” argument for today. At least the uncle in the article is a professional contractor. But does that qualify him to do a home inspection? Even an informal one? I’ve had quite a few professional contractors hire me to inspect homes they’re buying. Some of these guys have more technical knowledge than I about certain areas of the home, yet they still hire me to do their inspection. Why? The home inspection is not just about technical knowledge. In fact, a home inspection, by definition, is a non-technical inspection. It’s a process that, over the course of about 3 hours, looks at the major systems of the home and how they work together. One contractor I did an inspection for gave the “forest for the trees” explanation as to why he hired me. He said he could identify and know how to address individual issues in the home, but thought home inspectors were better at identifying how everything works together. There are legal implications, too, to having someone who’s not a home inspector doing a home inspection. Back to the couple in the article: if the uncle had gone and found a major issue, would they have been able to back out of the contract? Especially after they said they didn’t want a home inspection? Many sellers won’t accept any demands unless they came from a licensed, certified home inspector. I could write an entirely separate blog post about this subject, and maybe I will someday.

Issue #3: Home inspectors providing “informal inspections”. The article included a home inspector talking about how he’s adapted his business to accommodate people who want to skip the inspection to win their bid. He calls it an “informal inspection”. He’ll meet the client for their initial walk-through and do a visual-only inspection. Nothing is tested. He has the client sign an agreement that they understand the limitations. This may sound like a good idea, but the risk is great for both inspector and buyer. My wife and I though about doing this when we were buying some fixer-uppers. After all, I’m an inspector and know what to look for, right? We decided against this since there’s way too many things that can go unnoticed without a thorough and complete inspection. How am I to know about hidden electrical issues if I’m not testing outlets? How do I know if the furnace and AC are functional and safe if I can’t test them? What else is being left out? Is a seller going to permit me to walk on the roof during an initial walk through? Or take the cover off electrical panels? Run all the water fixtures? Climb up in the attic? What exactly is being left out? With major items left uninspected, eventually a buyer will come across something big and expensive after they move in. And there is huge liability for the home inspector. This “informal inspection” is not a service I plan on ever offering.

So, what can be done to make the offer more competitive without skipping the inspection? The article gives some great advice on this (not just as it relates to inspections). The recommendation is to do an “informational”—not “informal”—inspection. An “informational inspection” is a full general home inspection with the understanding that you’re not going to ask the sellers to do anything regardless of what’s found. You either take the house as-is or back out of the deal. The inspection is for the sole purpose of informing the buyer what they’re getting into. I think this is a great idea! Back during the Great Recession, a lot of people were buying foreclosures. These were bank-owned properties, typically in very poor condition, that were being sold as-is. I heard several times , “I’m not getting a home inspection because the bank’s not going to fix anything anyway.” That’s all the more reason to get a home inspection. Too many people think the only purpose of a home inspection is to negotiate a better price or ask the sellers to fix something. But isn’t it more important to know exactly what you’re buying if you have to fix everything yourself?

Some final thoughts and observations: Something I’ve noticed as the housing market has gotten tighter is a combination of buyers paying a lot more for a home than they normally would, and sellers doing less to make their home competitive. In a normal market, sellers typically make some repairs or even upgrades prior to putting their home on the market. They have to compete with similar houses in the neighborhood. They know it’s getting inspected, so they look at their home with a critical eye before selling. Some even get a pre-sale inspection. That’s not happening as much today. Homes are selling quickly, and buyers are willing to pay well over asking price. How will these buyers feel months later when they discover a major issue—perhaps costing thousands—in a home they overpaid for? With today’s housing prices, it’s important now more than ever to get that home inspection so you know exactly what you’re spending your hard-earned money on.

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