A home inspection is almost always the best route to take before purchasing a property. In a competitive market, however, buyers recognize that submitting an offer with a request to conduct a traditional inspection can hurt their chances of winning a bidding war.
Sellers generally receive multiple offers, with at least a few without a home inspection contingency. They often look for the cleanest bid with the quickest closing date.
Buyers are put in a difficult position and don’t want to only rely on their senses when considering the biggest purchase of their life. Do they submit an offer without an inspection request to stand out from others or do they reduce their exposure to a home with possible defects by attempting an option that provides some peace of mind?
When coaching a buyer/client, I like to give as many reasonable options as possible. Assuming the seller has not shared an inspection report, here are four options for buyers to consider:
Request a pre-offer inspection
This is the best option when a traditional inspection is not viable. The buyer formally seeks seller approval to hire a licensed home inspector and conduct a full review of the property, from checking appliances and systems to examining crawl spaces and attics.
There is usually a tight window to complete the task since many listed homes – particularly in hot areas such as on the Eastside of King County – are on the market for only a matter of days. How can one find an inspector and squeeze a full inspection – which can last up to three hours in and around the home – with other buyers clamoring to visit too?
My suggestion is to coordinate one inspection for the benefit of multiple buyers, with the costs and findings shared among those interested parties. Prices can vary from $350 for a condo to about $1000 for a mega-sized home with outbuildings – though you can often find inspectors will discount pre-offer inspections while providing less detail.
Schedule the inspection minutes after the initial visit (or even before) to get your name on the inspector’s appointment calendar. You can always cancel.
That leads to a more simplified, less costly option.
Request an ‘information’ inspection with the offer
Recognizing an offer with a traditional inspection contingency and lengthy timelines will likely kill the chances of winning a bid, buyers could submit an offer with a request to inspect the property for informational purposes only. Buyers can include a home inspection addendum with their offer (though highly risky for both parties as it can introduce ambiguity in the agreement unless carefully crafted) or a blank addendum expertly drafted by a real estate attorney for the purposes of collecting information on the condition of the home.
These “Information only inspections,” coupled with an accepted offer, essentially shift the responsibility of the home’s condition from seller to buyer. It is mutually agreed that the prospective future homeowner is hiring an inspector to glean as much information about the property without using the results as ammunition to request repairs or monetary credit from the seller at closing.
Yes, buyers could terminate their offer after learning of something significant from the inspection. In that case, buyers walk away from the home and typically walk away from their earnest money deposit (up to 5% of the offer price, based on Washington law).
It’s important to note that a buyer cannot have the home inspected without receiving written approval from the owners. Buyers may not simply bring an inspector – or even an uncle who is an experienced contractor (unless his name will be on the purchase contract) – while touring the home without sellers’ written acceptance.
In addition, buyers and their brokers should NOT share findings from the inspection report unless those details are requested in writing by sellers. Should they back out of a deal and share inspection-related details, buyer/broker may be in hot water for breaking Washington real estate law.
Sellers could seek damages for learning of the inspection findings if not requested and it puts them in the uncomfortable position of relisting the home with new-found insights. Seller disclosure must be truthful and transparent.
That leads to an even more simplified option.
Request a ‘pass/fail’ inspection with the offer
With many homes going on and off the market in less than a week, buyers are also taking the unusual step of submitting an offer with a contingency to conduct a “pass/fail” inspection. This is typically conducted to determine whether the home passes a general review by an inspector.
This unabridged examination usually looks at the structure, plumbing, electrical and age of appliances to determine the home’s general condition. It is not a close-up, hours-long check of each part of the home. Inspectors generally do not write a formal report or provide photographic evidence; they simply inform buyers verbally or with a short message whether the home passes or fails his/her review.
These are legally acceptable types of inspections, with little or no liability against the inspector should something crop up after purchasing the home. Buyers still must have a fully signed inspection-related addendum – preferably with many portions of the traditional contingency form stricken by a real estate attorney to remove ambiguity and limit liability – that makes clear to sellers the purpose of the review.
Depending on how the addendum is written, buyers may be able to back out of the deal and retrieve their earnest money. More likely, buyers can terminate their offer if the inspector issues a “fail” grade and lose their deposit.
Get a home warranty when purchasing the home
If all inspection-related options fail (or even if they don’t), it’s wise to have a home warranty service contract when moving into a new place.
These are huge safety nets for new owners who may not be able to afford costs for a shock repair or replacement in the early months of ownership. This is not the same as homeowners’ insurance, which covers loss from flood, fire or theft.
Home warranties protect owners from breakdowns of appliances, HVAC systems or other items in the home. There are different levels of protection, with prices starting at around $300 in our Washington area for an annual contract and they can run almost triple that amount for complete protection (with a $75 fee per service visit).
Sellers or real estate brokers sometimes offer the warranty as a show of goodwill and can be a less expensive option to procuring an inspection, requesting repairs and waiting for contractors to visit the property one or more times.
To be clear, home warranties are not a replacement to a full home inspection where defects could be found with the roof, foundation or with little critters in the attic or crawl space. A home warranty will not cover these and many other issues.
But, yes, buyers have options to reduce risk before closing a deal – and after.
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Note: I am a licensed real estate broker in Washington and do not wish to characterize this blog post as legal advice. The post is strictly informational to anyone wishing to understand the risks associated with purchasing a property.