Buying your first home is fraught, and that's especially true when the market is as competitive as it is right now. Interest rates are low, supply is down, and demand from new buyers is high. The market is so hot that in September, 1 in 5 houses in the U.S. sold above its initial list price, according to data from Zillow.
"It's too many people and not enough inventory," says Sue Riley, a real estate agent in Northern New Jersey.
The stiff competition is pushing some would-be buyers to get creative with their offers, from upping how much cash they put up front or removing certain contingencies surrounding the home inspection, Riley says. Some are skipping the inspection altogether: Nearly 20% of winning home bids in June waived inspection contingencies, up from 13% a year prior, according to Redfin.
That's a risky move.
"You never want to forgo an inspection. Ever," Riley says. "There's a lot of hidden things that can come up, and you don't want to be on the losing end of that."
Riley cites the example of underground oil tanks, which were commonly used to store heating fuel in the mid-20th century but have since been phased out and usually need to be removed. Having a company pull out the oil tank is costly, but if the tank has leaked, "it can cost upwards of $100,000 to get it fixed," Riley explains.
Given the risk, "it's very well worth $250 to have them come out and do an oil tank sweep," she says.
Not everything a home inspection digs up will be as costly as a $100,000 oil tank in the backyard, but even small-to-medium fixes, from termite damage to areas with asbestos, begin to add up when they're itemized.
Other anomalies can also get flagged, as Grow's Lauren Hans discovered when Riley was helping her purchase her first home earlier this year. Hans put an offer on a house with an artist loft above its detached garage. The inspector suggested Hans verify that the loft had been permitted by the city, and her search came up empty.
"It could have meant a major headache down the road for resale and potentially been an issue with getting the certificate of occupancy," Hans says. That's when she realized she needed to walk away.
Common wisdom agrees with Riley: Home inspections can alert would-be homebuyers to serious problems and save them a lot of money. However, there are certain properties, namely, condominiums, where the risk of forgoing a home inspection is lower.
"You don't need a home inspection on a condo," says Debra Hall, a real estate agent in Northern Virginia.
Condo sales accounted for almost 11% of all home sales in 2019, according to Realtor.com, and Hall explains that many of the most expensive problems revealed by home inspections, like roof repairs or HVAC issues, are already the responsibility of the homeowners' association or condo board.
Instead, Hall suggests potential buyers tour the property with a contractor, a handyman, or another home repair professional and have them check appliances, ventilation systems, and other standard checklist items as a kind of informal inspection.
Video by Jason Armesto
Forgoing a professional home inspection is still a gamble, though. To mitigate the risk, prospective buyers could purchase, or negotiate that the seller purchase, a home warranty service to mitigate that risk, Hall suggests.
If you find a condo that you love and your handyman signs off on it, removing the inspection clause from your offer can entice sellers to pick your bid and move the process along more quickly than it would otherwise move.
"There are little things you can do — sort of a pre-inspection — so that you can waive the [formal] inspection," Hall says. "That's one less contingency, so that sort of puts you above the competition."
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