Should you waive a home inspection if you think you will lose out on buying a property over it or if you’re purchasing a new home?
The answer is definitely not.
It is true there are stories of people who have waived a home inspection and ended up with a sweet bargain to show for it. But the number of those happy stories pales in comparison to the number of horror stories about hidden home damages discovered by new homeowners only after the fact.
What makes waiving a home inspection so risky? Why do you need to know what only a home inspection can tell you before you commit to buying a home? Read on to find out!
Why Are Home Inspections Performed?
According to FindLaw and the American Society of Home Inspectors (ASHI), an estimated 90 percent of all home sales transactions are accompanied by a home inspection.
That is a lot of home inspections! There must be a good reason why so many prospective buyers elect to schedule a home inspection even with the known risk of perhaps losing the sale because of it.
There are actually two good reasons why so many home inspections are performed every year: mortgage loan approval and sales price.
Loan approval is contingent upon it.
Having an independent home inspection done before you decide to buy is not a legal requirement, per se, but in some cases, your lender may require that an independent inspection be done before they issue your final loan approval.
This can especially be the case for loans administered through the Office of Housing and Urban Development (HUD).
Setting the sales price requires it.
A home inspection often plays an important part in the final negotiations of a home purchase. A home inspection report that has significant findings and deficiencies will in certain instances offer the buyer negotiating power.
The Number One Risk of Choosing to Waive a Home Inspection
If you are a first-time homebuyer, there is no doubt you are on a steep learning curve. There is terminology to learn, forms to fill out, processes to go through.
Perhaps the most important term of all is “option period.” This refers to the time period, typically 5-10 days, after your offer has been accepted and when you have the opportunity to do your due diligence on your potential purchase.
How do you evaluate whether a home purchase is a good deal? Simply put, you get your own independent home inspection done by a licensed, certified contractor of your choosing.
Getting a home inspection done is so important that real estate mega-giant Zillow calls it the “get-out-of-jail-free” card for home buyers.
Most contracts allow the buyer to walk away from a deal, for any reason, including home inspection findings with only the loss of their option fee money. Confirm the details of your option period with your Realtor.
You Have Two Choices: Trust a Stranger or Do Your Own Inspection
The next time you are in a public place, take a minute and look around you. Study the faces of the strangers as they pass by. Imagine any one of those strangers is the seller of your dream home.
Would you take them at their word if they assured you nothing was wrong with the home they want to sell you?
If you choose to waive your right to an independent home inspection, you are essentially opting to trust the word of someone you know not at all or perhaps only casually.
For most residential transactions, the seller is required to provide a Sellers disclosure that details known issues or past work done to the home. However, these can often be incomplete or not reveal latent issues that may be unknown to the seller.
Even if you are in the process of transacting a home sale with a friend or family member or building a brand new home, it is still important to protect your investment by having a neutral, third-party home inspector perform a thorough review of the property.
Escrow 101: Inspect It or (Potentially) Lose It
In the vast majority of cases, you will be asked to put one to three percent of the home’s sale price into escrow as earnest money, where it will be held until the deal either goes through or you exercise a contractually-stipulated contingency right and walk away.
For ease of calculation, let’s say the price of the home you want to buy is currently set at $200,000. The seller requires a two-percent earnest money deposit into escrow, which is $4,000 of your hard-earned cash.
In an earlier section here we talked about your biggest contingency protection, which comes in the form of scheduling your own independent home inspection.
As long as you have read the seller’s contract carefully and verified that it contains a home inspection-based contingency clause, you can still get those funds back and walk away without being out of pocket for more than what you paid for the home inspection itself.
According to the latest data available via Home Advisor, the average cost of a home inspection ranges from $200 to $487, with an average cost of $328. Compare $328 with $4,000 – which amount would you rather part with if choosing one is not optional?
Here, it really does pay in every way to hire your own independent home inspection professional.
Home Inspectors Can Go Where You Can’t Go & See What You Can’t See
For the sake of argument, let’s say you wake up tomorrow morning and your lower back molar really hurts. You head for the mirror, turn on a flashlight, open wide and stare into your mouth.
You see nothing. From the surface, there is no sign that anything is amiss. But you can’t ignore the throbbing, aching, burning pain when you try to bite down on your breakfast bagel.
In this case, would you try to diagnose and fix the issue yourself? Or would you call your dentist, who has gone to medical school for four years and can describe the inner workings of your oral anatomy in mind-numbing detail?
You’d probably call your dentist. It just makes sense.
Unfortunately, the home you want to purchase can’t send you pain signals to let you know what is wrong. But you can send in a home inspector to go crawl around in the attic and under the crawl space and peer into places no home buyer really wants to go.
The home inspection report will bring to light deficiencies and repair issues that are obvious to a professional who knows what to look for. This will make short work of both your negotiation process and the decision of whether to move ahead or walk away from the table.
Should You Ever Waive a Home Inspection?
The best answer to this question is always going to be “no.”
However, there are times when buyers decide to waive the home inspection, especially when the seller offers to share results of a previous home inspection they say is still current. Every home inspector is different and its important that you use a third-party inspector that you trust.
If you are ready to schedule your home inspections or if still have questions about whether a home inspection is right for you, call us today at 512-587-0726.