Why Experts Say Waiving a Home Inspection Is Dangerous
Did you know that it isn't required to get a home inspection and some people choose not to when buying a house?
This is known as waiving their right to inspect and it is commonly used by real estate agents as a negotiation tactic in a bidding war to make their buyers' offer more attractive to the seller without upping the price.
Record-breaking mortgage rates and extremely low inventory are driving buyers to make outrageous offers on properties left and right.
Lately, it has also become common practice for buyers to waive their right to have their new home inspected.
In fact, it has become expected by sellers in many areas.
But experts warn this is leading millions of new American homeowners down a very dangerous path from which they may never financially recover.
In this post, we will answer your most burning home inspection questions like:
- What is the point of getting a home inspection?
- What is the difference between an appraisal and home inspection?
- How risky is it really to sign a home inspection waiver?
If you are even lightly considering purchasing a home without getting it inspected first, you owe it to yourself to read this post. It could be the difference between realizing the American dream or having your life descend into a nightmare.
A home inspection is designed to make a potential homeowner or investor aware of any repairs, code violations, or deficiencies with the property.
The idea is that a potential buyer will be able to avoid buying a lemon of a house that turns into a money pit after closing.
In fact, many real estate investors use home inspections to help them figure out how to budget for repairs on a property.
Therefore, most of the time home buyers are eager to invest a relatively small amount of money to protect themselves against potentially losing five, six, or even seven figures.
It is easy to confuse a home inspection with a home appraisal. While both are equally important, they're very different and it's imperative that you understand the difference.
A home inspection is an elective service usually purchased by the buyer to prevent buying a money pit property. During a home inspection a third party objective inspector conducts a visual and practical test of all the major systems and components of a home such as plumbing and electrical.
An appraisal, required by lenders to obtain a mortgage, assesses the overall value of the property. Banks require home appraisals because they need to be sure they're making a strong investment that you won't default upon.
Appraisals are also done by an objective third party to protect the bank and the buyer. If you are getting a mortgage, your lender will only issue the loan based off the appraised value, not the contract price.
Key takeaway here: An appraisal should never be considered a replacement for a home inspection
Despite how financially sensible it is to get a home inspection during the escrow process many buyers still opt out.
Why?
The three most common reasons buyers waive a home contingency are:
- They use it as a negotiation tactic to make their offer stand out in a bidding war or competitive market.
- They don't understand what a home inspection is or the immense value it offers.
- They're investors or developers with a trained eye to spot and price repairs based on their expertise.
Keep in mind, there are many other ways to get your offer accepted in a competitive market like offering to pay cash, allowing the sellers to choose the closing timeline, or other terms that meet their unique needs.
Not only could it cost you a fortune if you purchase a lemon of a property but it could be dangerous too!
Our latest national home inspection report that we published in June 2021 found that a total of more than one million repairs were needed during the purchasing process across 50,000 homes surveyed, with the average repair cost totaling $10,000 for each home. Other key findings from the report include:
- Almost half of homes didn't have a functioning smoke alarm.
- More than a third of homes lacked ground fault circuit interrupter (GFCI) protection, which leaves homeowners susceptible to electrocution, especially in water-prone areas.
- Almost half of homes had drywall cracks, indicating potential foundation problems.
- Defects across the studied homes ranged from under $100 to in excess of $10,000 in repair costs.
These are serious issues that are being uncovered during the home inspection process that affect not only the value of the home but also the safety of you and your family.
The good news is that, in many states, even if you have already waived your home inspection contingency you can still have one performed after the fact at your expense.
In fact, even in states that bar inspections during the purchase process if you have waived your contingency, smart buyers are having an inspection done after they close on the property.
In many cases, buyers also have inspections performed to prove a seller lied about their disclosures or deliberately left something out.
So just because you waived the contingency on your contract doesn't mean you can't or shouldn't order an inspection for your own knowledge after the fact.
If you're concerned about any of the major issues we mentioned today, it is highly recommended that you do get one done for your safety and peace of mind.
At the end of the day, a professional home inspection is a risk assessment that can help make or break the biggest financial investment of your life.
Of course, many times a home inspection will only turn up minor repairs and issues.
However, it can be difficult to decide how much is fair to pay for a property unless you know what it will cost you to correct the problems in your inspection report.
That is where we come in. If you would like to get an estimate for the cost of making all of the repairs on your home inspection report, learn more about our inspection repair estimates here.
It is always a good idea to seriously reconsider alternatives to waving your valuable inspection contingency just to get your offer accepted.
It isn't necessary or worth it.