In 2022, housing is still a seller’s market. Of course, if you’re a seller, you need to know how to pass a home inspection, but buyers are obviously in a very different boat. Homes are in short supply, and demand is high, so many buyers resort to tactics they would not consider in a buyer’s market, like making offers well over the asking price or waiving home inspection liability for the seller. Also described as waiving home inspection contingency, the buyer signs away the seller’s responsibility to pay for any problems that an inspector discovers. However, waiving the home inspection altogether could leave you stuck buying a home that needs serious repairs. On the other hand, waiving the contingency just means the seller is off the hook for minor repairs and you’re still able to cancel the deal if the inspection discovers any major problems.
Waiving home inspection contingency
Unless specified otherwise, when a buyer chooses to waive inspection contingency, the buyer retains the option to walk away if a major problem is discovered but pays for any other minor repairs required after the sale. This way, the seller is let off the hook for repair costs, and the buyer retains the option to cancel the deal over anything significant. The idea is that if a buyer were to waive inspection contingency, it might tempt the seller to sell to this particular buyer despite other offers that lack the waiver, and the buyer might be more likely to get the house they’re after, even if they have to shell out a little extra for as-yet-undiscovered repairs. It’s only a viable solution for buyers who have the extra financial means to cover these undefined additional costs and expect them. Otherwise, it can be a risky move for a buyer.
What is a pass/fail inspection?
In 2021, pass/fail inspections became popular. The idea here is that within a limited time frame, the buyer could accept the property as is or cancel the deal and retain the earnest money they already put down. Either way, this contingency absolves the seller of any liability for repairs and, at least theoretically, accelerates the closing of the deal, incentivizing faster decisions and eliminating any haggling over repair costs. When you’re buying a house, you may also wonder whether you should get a home warranty, another worthy topic for your consideration as you embark upon the journey into home ownership.
Appraisal versus inspection
An appraisal differs from an inspection, so it’s best to think of the appraisal as more of a financial evaluation in relation to other houses recently sold in the same area. An appraiser might not even enter the home when making the appraisal, which is typically a more cursory estimate of what the home and property might bring when placed on the market. Most lenders require appraisals before agreeing to lend. The inspection is a much more in-depth review of the home, including its structural soundness, systems and functionality, plus any potentially hidden damages that the average person can miss, like mold, leaks or foundation issues.
Managing risk
No home purchase happens without a degree of risk, but there are things you can do to protect yourself, and you should never sign any deal that you don’t fully understand. As a buyer, it’s never a good idea to waive the inspection entirely, unless you have plenty of extra money and enjoy gambling. The waiving home inspection contingency option protects you in the event of major, costly inspection revelations. It also increases the attractiveness of your bid to sellers because they won’t be bothered with minor repairs or demands that they pay for them. The contingency means you can still walk away, and you won’t be stuck buying a money pit, like Tom Hanks and Shelley Long did in the 1986 film. Once you’re in the home, a great way to avoid additional and ongoing risks is to consider the many benefits of protection plans.
Getting competitive
In a seller’s market like this one, especially if you’re bidding in a popular area, making your offer stand out among many can be a real challenge. In these in-demand neighborhoods, it’s not unusual for sellers to receive offers far above the asking price, but most sellers will not want to deal when offers aren’t a sure thing. If you can’t manage a cash offer, there are still things you can do to make your bid stand out. Do everything you can to ensure your loan eligibility, going beyond pre-qualification into preapproval, and get a letter asserting your lender’s secured underwriting of your financing, which you can share with your real estate agent and the seller. When many buyers are even making site-unseen offers, you may also want to consider making an offer well above the asking price. Once you’ve landed a home of your own, consider a home warranty from Cinch to give yourself additional protection and peace of mind.
The information in this article is intended to provide guidance on the proper maintenance and care of systems and appliances in the home. Not all of the topics mentioned are covered by our home warranty or maintenance plans. Please review your home warranty contract carefully to understand your coverage.