The last few years saw some of the hottest housing markets in U.S. history. A record-breaking shortage of available homes left many buyers scrambling. At the peak of the housing shortage, it was common for buyers to lose out on multiple properties before finally being able to make a purchase. In February 2022, an astounding 68.6% of all homes for sale across the U.S. received multiple offers that led to bidding wars.
This kicked off a trend of buyers agreeing to waive their home inspections, either to save time or in an attempt to beat out other potential buyers. In fact, in July 2021, 29% of home buyers waived their home inspection contingency.
While the home buying frenzy has started to cool, you may still find yourself wondering whether it’s a good idea to skip your inspection. Before you make your decision, there are a few important things to consider.
The Value of a Home Inspection
Home inspections typically involve a thorough inspection of a home’s foundation, roof, HVAC system, plumbing, electrical system and more. They are designed to ensure that everything in the home is functioning as it should and uncover any issues that need to be repaired or remediated.
As a buyer, having a home inspection protects you from unknowingly purchasing a home that has serious problems or needs expensive repairs. Even if there’s nothing seriously wrong with the home, knowing about smaller issues can help you negotiate a better deal. Depending on the situation, you may be able to ask the seller to lower the price or make certain repairs before you complete the purchase.
Reasons You Might Waive a Home Inspection
One of the primary reasons potential buyers consider waiving a home inspection is to make their offer more appealing. If a bidding war occurs, a seller may be more likely to accept an offer that has waived the inspection contingency. Not only can this speed up the process and get you to closing faster, but it also removes the seller's concern that you might walk away if the inspection uncovers any problems.
A buyer may also skip the inspection because they simply can't get it done in time. During and shortly after the pandemic, labor shortages made it difficult to find inspectors who could complete the inspection within the timeframe allowed in the purchase contract. Other buyers may simply feel that an inspection is not worth the cost or the hassle. However, it’s important to understand that by waiving the inspection, you’re taking a significant risk.
Risks of Waiving a Home Inspection
If you’re like many people, a home is the largest purchase you’ll make in your lifetime. Without an inspection, you could end up finding out too late that the home you just purchased needs major repairs. Before choosing to waive your inspection, consider a few things:
- Are there any indicators that the home may need repairs like the year the home was built or if you noticed any issues during your walkthrough?
- How would a $10,000 or $20,000 home repair bill impact your finances?
Home inspections can also uncover potentially dangerous situations, such as unsafe cooling and heating equipment, faulty wiring or structural issues. Often, these types of problems aren’t visible to the untrained eye, which is why it’s beneficial to have a professional complete a thorough inspection.
Waiving Inspection vs. Waiving Inspection Contingency: What’s the Difference?
A home inspection is the process of having a professional come to the home and thoroughly examine it. A home inspection contingency is a clause in a home purchase contract that states the buyer won’t move forward with the home purchase unless the inspection results and ensuing negotiations are satisfactory. If you choose to walk away due to a problem with the inspection, you'll also receive a refund of your earnest money deposit.
If you’re thinking about waiving your home inspection, you may consider waiving the contingency instead. This allows you to get an inspection “for informational purposes.” While you won’t be able to renegotiate the price or ask the seller to make repairs, you will still have the option to walk away.
In this circumstance, you would lose your earnest money deposit, which is typically between 1% and 3% of the home’s purchase price. However, if there’s a major problem with the home, this could still be a better option than moving forward with the purchase.
Should You Waive a Home Inspection?
In almost all cases, waiving a home inspection is far too risky. If you’re concerned about losing your dream home in a bidding war, you may consider taking other steps to make yourself a more attractive buyer. This may include getting pre-approved for a mortgage, offering a higher price or making a cash offer.
When purchasing real estate, it’s important not to let your emotions cloud your judgment. Remember that you’re making a long-term investment and you’ll want to know exactly what you’re getting into before you make the commitment.
