People are trying to get into homes more than ever. That's leading them to abandon common sense and let fear take over.
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Imagine going into a Porsche dealership, pointing, and saying, “I’ll take that car, as is. Don’t care about the warranty, don’t care about a test drive, don’t want an inspection.”
Now imagine buying ten Porsches that way. Or maybe even twenty.
It’s nuts, but people are doing this. Not with cars, but instead something even more life-ruining: houses. Homebuyers, and especially first-time homebuyers, are plunking down a million dollars, often more in tight markets, with no inspections.
They’re playing Russian Roulette with their futures. While pushing each other out of the way to do it.
Since a house is such an investment, the following figure may shock a lot of people. It shocked me:
Twenty-two percent of homebuyers waive the home inspection contingency when making a purchase.
Your read that right. Twenty-two percent, nearly one in four. That’s according to the National Association of Realtors.
Why would anyone skip the inspection contingency?
I remember when my parents bought a home. They were only married a few years, neither had a college education, only my father had a job, and the home cost something like $13,000. Brand new split-rancher in a quiet suburban neighborhood. Lots of working class people were moving in: Owning a house back then was just something almost any American family did. And there was so much land. The area my parents bought in was all woods; people still hunted deer and rabbit. Now it’s endless strip malls and car washes and fast food restaurants, and there’s no deer without a hundred miles.
I don’t have to say now times are very different. Especially those first-time homebuyers, who are increasingly having a hard time finding properties to match their price point.
To make matters worse, there’s not much supply at the moment. Thanks in large part to high interest rates, and in part to the rise of remote work, people are able to stay put in many instances. Expect this to continue for a while, even as more folks get called, kicking and screaming, back to the office.
So when a potentially affordable house does appear, everyone wants it. This is understandable. And to get a leg up on the competition, some opt to skip the home inspection.
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Understandable, but a big mistake
This is where the Porsche analogy fails a bit. There are many Porsches on the market. Ditto with any other car. Miss out on one, go to a different dealer and odds are they’ll have another that’s very similar.
Homes are unique. When you find one you love you want to build a moat around it and say “Mine!” It’s perfect. You’ve been looking for months. This is it.
I know someone who went into the other room to discuss the purchase with his wife, and was informed fifteen minutes later the house had been snatched out from him by another buyer.
Everyone wonders, when they express interest in a home (or anything else that’s one-of-a-kind) how many others are eying the same item, and how big their wallets are. Foregoing an inspection could be seen as a way of getting to the front of a long line.
Besides, if it’s new construction, it should be in good shape. Right?
Not necessarily
Michael Cholewa, a Portland Oregon home inspector, puts it simply. “There was a marked drop from 2019 to 2020 in terms of quality construction.” The reason? Homebuilders are struggling to keep up with demand. Workers are struggling to do quality work in rising temperatures and other climate extremes. Yes, climate is beginning to impact the quality of construction everywhere.
Aside from the obvious long-term health issues, recent research by the Federal Reserve Bank of San Francisco and Williams College in Massachusetts says that extreme heat will reduce the US capital stock, or the value of accumulated investment, by 5.4 percent and annual consumption by 1.8 percent over the next century and a half, in terms of both lower labor productivity and fewer houses being built.
That makes home inspections more necessary than ever. “You’re always going to find something,” says Joe Hunt, a Phoenix-based market manager. Those somethings may be minor and waivable. Or they may be deal-breakers. But one thing’s for certain—ignorance is not bliss.
A leaky roof or a dilapidated foundation can hit you for $15- to $25 thousand dollars, says CEO Manny Angelo Varas of Miami homebuilding firm MV Group. These are things you can’t detect no matter how closely you may eyeball the property yourself. While cosmetic blemishes and we-and-tear are to be expected, even some seemingly “minor” issues can hide bigger problems.
One home inspector told me he would’t worry about uncovering something as minor as a loose or wobbly toilet. But as Mary Home Inspector on Reddit explains, “The loose toilet shouldn't just be tightened; it needs to be removed, the subfloor examined for any water damage, a new wax ring installed, and the toilet re-seated. Loose toilets are responsible for a lot of flooring damage when the waste water leaks out. And remember, it's not just water.” We’ve all seen the movies where one small issue uncovers a bigger issue which uncovers a still bigger issue that causes the whole house of cards to come tumbling down.
What if I’m told I have to skip the inspection contingency if I want the property?
Then put on your cross-trainers and run. Yes, in this market you put yourself at a “disadvantage,” but just as you will have to pay more for a (used) car if you expect a warranty, you’ll have to pay more (offer more than asking) for a house. At least in a hot market.
What about just getting a pre-offer inspection?
A “pre-offer inspection” is just what it says, an inspection before you make an offer. When you learn the results, you can do…whatever you like.
Ruth Shin, founder and CEO of Brooklyn, NY-based PropertyNest, advises pre-offer inspections for properties that seem “too good to be true.” They may be hiding something, Don Wax, an East Texas Realtor adds. “You want to make sure the deal is square.” And perhaps most importantly, with a pre-offer inspection you can know what you’ll have to shell out for after you sign on the dotted line…or maybe you might decide not to, because you can’t force the buyer to take action if you find any defects most of the time. The POI is just for your information.
So should you get one? It depends on various factors, including the condition of the home, the local market, and your tolerance for risk. I don’t have a high tolerance.
The bottom line
So is the step of a home inspection worth the risk of being seen as "less desirable" by the seller? If they have nothing to hide, I would say yes. I used the examples above to point out how easy it is for one of the best potential experiences of your financial life, home ownership, to turn into a nightmare.
Samantha Barker, a North Carolina woman who bought a ranch-style house last year, says unforeseen expenses to the tune of more than $65,000 have ruined her. My own brother-in-law found water issues after his first winter. I don’t know his warranty status, so I don’t know what recourse he has. But these problems are not rare. Remember that before agreeing to buy a property sight-unseen.
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