Waiving Contingencies - Inspection

Now as we are rapidly approaching the season it’s time to talk tactics. Traditionally, more homes exchange ownership in the spring than during any other season, even here, where we talk more and more about year-round market there is still a peak in listings during the spring months.

Buying a home in sellers’ market is no game for the weak at heart, and we need to make sure our clients know what is likely to happen. I like to talk contracts and tactics along the way so that once you are there, in the heat of the moment you sort of have an idea on what’s to come. Most of us are not amazing at understanding legal language under pressure, and it tends to be better in many ways to be prepared.

On Sunday I was teaching a home buyer class at the Redmond library and one of the questions during the event, walking future buyers through the process from pre-approval all the way to closing, was; “how will we ever be able to buy a home in this market with all those cash offers and people whom are able to pay crazy amounts of money?” It was a great question and there really is no simple answer to it, however there are ways to make you look more appealing in the eyes of the seller. This is called tactics.

Anything on the contract considered to benefit the buyer is usually labeled a contingency. The sale is contingent to something that will have to happen first and if it doesn’t the buyer will not be obligated to buy. Waiving contingencies involves a risk for the buyer, having one in the contract is a risk for the seller. In a seller driven market, where the inventory is sparse at it’s best, sellers tend to get to be the drivers of the deals.

So before waiving anything let’s look at the contingencies one by one and see what waiving them means. The potential benefit is most likely always that it’ll make your offer more appealing to the seller, but what are the cons, what are the potential dangers. The first condition we’ll be looking at is the inspection.

Every buyer has heard about waiving their inspection but what does that really mean. 

An Inspection Condition allows a buyer to have the property inspected and to terminate the contract or ask seller for concessions (repairs or credits) if dissatisfied with the condition of the property based on inspection.

Got it. An inspection allows the buyer to learn more about the property and then make final decisions based on the acquired knowledge. One can either choose to walk away or to negotiate with the seller.

Washington State is a “caveat emptor” – buyer beware – state. This means that in the end the buyer must make sure they are happy with the property prior to buying it and in the end, after closing you will have to live in the bed you made. Whether we’re talking big time repairs, potential mold problems or even your next-door neighbor. If your dishwasher does not work, that will be covered by home warranty – the one that I get all my clients for their first year of homeownership - as will your furnace or the water heater. No, we are talking major stuff here.

So, no inspection means you will be stuck with what you got, no matter how big the problem. If that sounds scary, it should. Your broker is not an inspector and should not be giving you advice on the structural soundness of a building any more than anything else that the inspector would be looking at. Yes, I may be able to point out some potential issues, but I am by no means equipped by the knowledge to tell you if there is something that does not meet the eye. I cannot see electrical problems, plumbing issues, moisture damage or water in the crawl space. Your inspector should and would.

With the Inspection Condition also comes the ability to do a Neighborhood Review. This means more than driving up and down the street, checking out the parks and what the neighborhood looks like in general. However, this is also something that – many times and at least partly – you would be able to do beforehand. This condition pertains to the schools, the crime stats and anything else you might want to know. Do you have sex offenders nearby? Has there been car prowls? How about noise complaints in the neighborhood? It’s more than checking out the nearby neighbors lawn maintenance.

Every so often you see a home listed “as-is”. That does not mean that you couldn't have it inspected and make your final decision after you have all the information you should. It simply means the seller is trying to tell you they are not willing to fix anything for you. However, your lender will require the home is in livable condition and a leaking roof, no heating and/or no water is going to be a problem when it comes to financing.

For the seller the inspection is a walk-away for the buyer. Having several pre-inspections could also potentially harm the property. What we sometimes see now is a pre-inspection done buy the seller or a pre-inspection done by a third party, available for potential buyers. The bottom line is, an inspection will also protect the seller.

As a broker I want you to understand that waiving your inspection is major gambling, and I need you to truly understand what you are about to do before you check the box on Form 35, the one saying you will be waiving your right to inspect the home. I will rather be urging you to either do a pre-inspection, meaning having an inspection at your expense prior to even submitting an offer and taking the risk that you just paid for an inspection for a property that someone else ended up buying, or to just ask for a tight timeline. No one needs to have a 10-day inspection period, you should be able to get it all figured out in a day or two. If you end up waiving your inspection, the home warranty will pick up some of the potential problems, but not everything.

Coming up:

• Financial Contingency
• Title Contingency
• Earnest Money
• …and more.