Dear Monty: Is it wise to waive a home inspection? We recently bought a home, and we agreed to waive a home inspection. There were multiple offers on the house. Our agent suggested a competitive advantage by waiving the home inspection. Yesterday, a heating contractor told us we should replace the twenty-year-old furnace. Since moving in, we have made a series of discoveries that have already cost thousands of dollars. For example, a $4000 leaking shower stall was the most expensive until this happened. Do we have any recourse options with the seller and the agent?
Monty’s Answer: There is not enough information to provide specific help. If your state requires a homeowner to complete a seller condition report, it may be worthy of additional investigation. Is a seller condition report required? Did you receive a copy of the report? For example, did the owner state in the condition report that they were unaware of any issues with the furnace? And did the next-door neighbor tell you XYZ heating company was at the house often? It may be worth visiting XYZ to see if they will share any repair records with you. If repair records indicate the seller should replace the furnace, you have several options to consider; call the seller, the agent, or contact your lawyer.
The inspection waiver
Events of the past two years created an unprecedented real estate market. Below market interest rates brought millions of home buying consumers into the market. Then, a significant lack of supply created by the pandemic developed. These two factors drove competition to the point that the fear of losing a home overrode the traditional home buying process. Waiving inspections were only one surprising effect. Consumers were buying homes sight unseen, securing the house with over-the-top prices, and only viewing one or two homes. While this situation has somewhat cooled, these events still occur in specific markets. The stampede caught up with many consumers.
Who is to blame
As the stampede grew, the industry adapted. Real estate agents, appraisers, lenders, title companies were all confronted with different issues. Agents quickly realized that writing ten offers-to-purchase only to be outbid by a competing buyer was costing them productivity. We may never know whether a creative agent or a creative buyer spawned the inspection waiver idea. No database keeps track. We may also never know if doing so actually made a difference in a seller’s choice. Suppose your situation is typical, which we will also never know. In that case, it suggests that waiving a home inspection is not a good idea.
the pros and cons of waiving inspections
The pros are: It may make a difference in which offer a seller accepts. It may reduce the chance for a second negotiation. It may save you a small amount of money.
The cons are: It may not make a difference in which offer a seller accepts. It may not reduce the possibility of a second negotiation. It may cost you a lot more than the cost of the inspection.
What is the solution?
The solution is to avoid the temptation to use the inspection waiver as an incentive to influence the outcome. Remember that the agent will not participate in the cost of repairs that an inspection would likely uncover if you succeed in obtaining the house.