What Are the Dangers in Waiving a Home Inspection?

by | Jul 11, 2022 | Uncategorized

Since the beginning of the COVID-19 pandemic, prospective home buyers relocating from metropolitan hubs to the suburbs have driven a white-hot housing market. Yet, the recent spike in mortgage rates has buyers and sellers scrambling before the market dips.

According to Realtor.com, housing inventory rose 9% in mid-May since one year ago. Meanwhile, Redfin also reported double the number of listings in the four weeks ending on May 15, 2022, compared to the same four weeks in 2021. However, inventory is still insufficient to meet buyer demand – resulting in an alarming uptick in waived inspections.

While most home offers involve an inspection before the transaction goes through, the April 2022 Realtors Confidence Index Survey by the National Association of Realtors (NAR) found that 25% of buyers opted out of the inspection contingency.

Inspection contingencies are contract clauses that enable a buyer to walk away from a deal or negotiate repairs and price reductions with the seller. Essentially, the inspection lets buyers know if they’re making a good home investment decision.

With the stark competition to outbid other buyers, many prospective homeowners choose to make a non-refundable down payment or even the total purchase price without checking for undisclosed facts and damage. Ultimately, doing so puts you at risk for costly repairs and potentially dangerous situations.

4 Reasons Why Waiving the Home Inspection Is Dangerous

The impending housing market crash may have buyers forgoing an inspection to move into a new home quicker, but these four reasons will hopefully convince you otherwise.

1.  Costly Undisclosed Defects

Licensed home inspectors identify concerns with a home’s condition before you sign on the dotted line. For example, an inspector might discover a broken HVAC system or water heater.

An HVAC system is a costly replacement ranging between $5,000 and $10,000. A home inspection would enable interested buyers to request that the seller covers the cost of replacing the HVAC unit or they may negotiate the listing price lower.

Likewise, an old roof or broken shingles presents problems with leaks and mold. Sometimes, buyers may agree to pay for a couple of shingle repairs. However, since the average roof replacement costs $20,000, you may walk away from the contract if the seller refuses to pay for the repair or replacement.

Another item of concern may be undisclosed and unpermitted renovations the seller may have done to the home. If this is the case, you’ll be responsible for paying to undo or correct the renovation – this time with permits – if you choose to sell the house again.

2.  Property May Not Be Insurable

Purchasing a homeowners insurance policy is critical to protect you and your home from inclement weather, floods, and fires. These instances are often dangerous, with damage costing thousands of dollars to fix.

You may not need homeowners insurance to own your house legally, but lenders might require it for taking out a mortgage. However, obtaining an insurance policy may be more challenging if you waive a home inspection.

Each homeowners insurance company and mortgage company has its own rules, but the following circumstances may necessitate a home inspection:

  • Home construction was over 25 years ago.
  • It hasn’t undergone a recent inspection or appraisal.
  • The property sits within a flood zone.
  • The area is prone to extreme weather or natural disasters.
  • The home was rebuilt after a fire.

Continuing with the home inspection right away before the home transaction will save you money and time when you decide to purchase a homeowners insurance policy or file a mortgage claim.

3.  Risk for Infestations or Asbestos

Buyers may walk through a house and not realize serious trouble lurks within the walls. For example, home inspections usually reveal asbestos in walls, floorboards, tiles, and roofing in homes built before the 1980s.

Asbestos is a toxic mineral that causes breathing issues, inflammation, and lung scarring. Several studies have also shown that asbestos exposure leads to most mesotheliomas, including lung, ovarian, and larynx cancers.

More than half of today’s U.S. homes contain asbestos. Cleveland leads with the most contaminated pre-1940 homes in the country at 52%, followed by Boston at 48.2%.

In addition to harmful substances like asbestos, signs of pest infestations may not be visible to the naked eye right away. A professional exterminator will know what to look for when inspecting your future home for unwanted guests, including mice, squirrels, and termites.

Termites feed on wood and can easily find their way into a house through cracks and openings in chimneys and pipes. Upon inspection, exterminators can detect termite mud tubes in construction joints – such as where a porch meets the foundation – or if there are wood supports and old siding with significant damage.

4.    Inability to Walk Away With Refund or Negotiate

When you choose to waive the entire inspection or the inspection contingency, you essentially waive the right to walk away from a deal without a refund or negotiate repairs, credit, and a lower asking price. Worse, you could very well end up with a money pit at the end of the transaction.

Of course, sellers prefer buyers who opt out of either the inspection contingency or an inspection altogether, as the risk of getting less than the listing price or having to pay for costly repairs no longer becomes their responsibility.

In the skyrocketing real estate market, many buyers have opted to waive the inspection contingency clauses and continue with a home inspection for their own knowledge. Any problems with the house are then left to the buyer to handle on their own.

Of course, if you bring in an inspector but waive the contingency, you can still choose to walk away from a contract – just don’t expect to get your earnest money back. An earnest money offer ensures both parties are serious about the sale and won’t back out of a deal at the last minute without penalty.

Earnest money is usually between 1-5% of the asking price. For example, a $250,000 home would request an earnest deposit of $2,500 to $12,500.

Even if forgoing an inspection gives buyers a competitive advantage in the housing market, it’s better to include as many contingencies as possible to protect yourself and your wallet. Other necessary contingencies in addition to the home inspection might include financing, appraisal, title, and the buyer’s home sale – in case you’re unable to sell your home before making a new purchase.

Better to Be a Safer Homebuyer Than Sorry Later On

Where there’s one seemingly perfect home, there’s another someplace else that’s better, safer, and listed at a fair price. You may not always win a bid when requesting a home inspection in a hot real estate market, but you can rest assured that you won’t have to deal with the dangers of damage and costly repairs after moving in.

Rose Morrison is the managing editor of Renovated.com, and has over 5 years of writing experience. Her work has been featured on The National Association of Realtors, the American Society of Home Inspectors, and other reputable publications. For more from Rose, you can follow her on Twitter.