Some buyers may waive the home inspection contingency included in a purchase agreement to present a more attractive offer. Here’s what you need to know.
In competitive real estate markets, some buyers feel pressured to waive the home inspection contingency that is usually included in a purchase agreement. While this, on its face, seems to present a more attractive offer to the seller, decreasing the likelihood that the deal will fall through, failure to complete a home inspection prior to closing the deal can be troublesome for all parties. Home inspections provide valuable information that allows the seller to disclose all of the information they are legally required to and provides additional context for the buyer regarding the true state of the home they intend to purchase.
“At the end of the day, the consumer — the end buyer — is the weakest part of the food chain,” said Michele Pugliese, a HomeTeam Inspection Service owner in Massachusetts. “No one is protecting them, and no one is reaffirming their rights to at least know the condition of the ‘goods’ they are going to buy, and we’re not talking about a microwave or a TV.”
For most people, a home is the biggest investment they’ll ever make, and it is crucial that they are able to understand the state of the home and make a truly informed decision.
The Immediate and Long-Term Effects of Waiving a Home Inspection Contingency
The most immediate and obvious consequence of waiving the home inspection contingency is that you may complete the purchase of a home that has safety and structural concerns. This completely removes your ability to negotiate the purchase agreement based on any repairs or adjustments that may be necessary, and you could be left to bear the costs of any necessary repairs.
“As home inspectors, we are the only party in the transaction that doesn’t have a vested interest. We don’t benefit from the deal happening or not happening,” said Massimo Taurisano, Puliese’s business partner in HomeTeam. “Our loyalty is to our client, the buyer, to make sure they know what they’re buying. And as a result of that, some sellers prefer to cut off the home inspector from the transaction, which basically leaves the buyer by themselves.”
While the homebuying process can be an emotional one, and a buyer may feel moved to waive the inspection contingency in an effort to more quickly close the deal, it is important to consider the long-term consequences of making a purchase without having a home inspection first. Whether the home is meant to be an investment for resale or a place to live for the foreseeable future, having as much information as possible is crucial.
In the investment case, purchasing a home without an inspection can place an investor in a position to pay more for the property than it is actually worth and can present resale challenges — two major issues that directly contradict the purpose of an investment property. Hidden defects or issues that are never uncovered by the investor can disrupt the sales process later on when the next buyer requires an inspection.
While buyers intending to live in the property for the foreseeable future may have less concern about resale value, purchasing a home without a home inspection can place the new residents in a position to have safety concerns and long-term financial strain. There are some major issues that may not be visible to the untrained eye, including electrical and structural issues, that can decrease the safety of the home.
Other defects, even if they do not present an immediate threat to safety, can be expensive to fix, and the cost falls entirely on the shoulders of the new owners. This can substantially increase predicted costs associated with ownership, potentially creating financial strain or hindering other long-term financial goals.
The Benefits of Having an Inspection
A home inspection will equip potential buyers with the information they need to negotiate a purchase agreement and feel fully confident in the final purchase, as well as mitigate safety and financial risks over the course of the ownership of the home. However, these protections are not the only benefits.
“One of the biggest advantages of having a home inspection is the education we provide,” said Charlene Bonzey, another Massachusetts HomeTeam owner. “We spend so much time educating the buyers on how the house and its systems actually function. We explain how to do maintenance — little things that can save them a lot of money in the future. There are little tricks like maintaining sealants on electrical lines and extending gutters away from the house that are inexpensive when done preventatively but can save thousands of dollars in the future.”
While it is always best to have an inspection prior to finalizing the purchase, Bonzey, Taurisano and Pugliese all shared that it is very common for new owners to request an inspection, even though the deal has already been finalized.
“This is the biggest investment most people are making in a lifetime, and if you’re not protecting that investment by knowing what you’re actually purchasing, you’re just opening yourself up for financial failure,” said Bonzey. “When a buyer comes to us after they’ve finalized the purchase, our whole goal is to give them a checklist of what they need to do in the future and what they need to plan for. Having that information and those educational tips we provide allows them to plan for the future.”
While the trend of waiving a home inspection contingency is all too common, especially in highly competitive markets, there is progress being made. Bonzey shared that there is legislation in the works in Massachusetts that, if passed, would not allow a seller to know whether a proposed offer will or will not waive the home inspection contingency.
“The seller would still have the option to have a home inspection should they choose to, but waiving the inspection cannot be part of the buyer’s offer,” she explained. “Now, I don’t know how this will play out legislatively, but it is certainly a step in the right direction for protecting the home buyer.”
Until legal protections are in place, it is up to the buyer to understand the importance of the home inspection.
“To home buyers: struggle and defend your rights,” said Pugliese. “Defend your right to have a home inspection done when you are making such an investment. Because, like I said, buying a home is not the same as buying a microwave.”
