Skipping a home inspection? Consider these 6 factors

Real estate investing is a risky enough proposition on its own. Purchasing a property without first doing a home inspection, however, is the equivalent of swimming with sharks.

Still, that hasn’t stopped many motivated homebuyers from waiving the inspection contingency with their offers in the hopes of enticing sellers, who very much have the upper hand in a market with limited inventory.

Matthew Atwood, broker/owner of Century 21 Atwood in Mankato, Minnesota, notes that waiving the contingency of an inspection is one thing if you want to sweeten the deal. But you should still have a house inspected at some point—preferably before you move in.

“I'm always a big proponent of the inspection, even if you're not making it contingent upon the sale,” he says. His recommendation is to get an inspection immediately upon purchasing the home, even if you can no longer hold any found issues against the seller as leverage.

He likens moving into a home without an inspection to never going to the doctor for a health check-up. “That’s a pretty hefty insurance policy you’re taking out on yourself,” he says.

If you are thinking of making an offer on a home without first doing a home inspection, here are six ways to protect your own bottom line.

1. Look for property red flags

Unless you are a home improvement professional yourself, you won’t know what to look for beyond cosmetic fixes. If you’re cutting the home inspector out of the mix, plan to work with a seasoned real estate agent who has done enough walk-throughs of homes to recognize the warning signs.

Kristina Morales of Kristina Morales Real Estate, who works with clients in Ohio, Texas, and California, recommends keeping an eye out for these red flags when purchasing a home:

• Water stains on the ceiling, walls, or floor that can indicate previous flooding
• Missing roof shingles or other signs of wear and tear
• Drafty windows that don’t open/close properly
• Leaks or water stains around the furnace
• Age and operating status of HVAC systems and hot water tanks
• Cracks in the foundation or walls—they might be the house simply settling or something worse
• Leaky kitchen/bathroom sinks
• Large trees with extensive root systems—they could cause problems with foundations and even sewer lines

“I always discourage clients from waiving inspections,” Morales says. “The rare circumstance that I would feel comfortable is on new construction with a reputable builder.” She notes that new builds are usually a safer bet because the warranties are still in place for everything. But even then, it’s not always smooth sailing.

“Even in brand-new construction, items are still found during an inspection,” Morales says. “However, they are typically punch list items [a list of minor repairs and issues] that the builder would quickly resolve.”

2. Confirm the age of appliances and home systems

If you’ve been raised to think it’s rude to inquire about someone’s age, know the same etiquette does not apply to asking how old an appliance or home system is. In fact, you’re doing yourself a disservice if you don’t make this inquiry when buying a home.

But don’t depend on the seller to give the right answer, says Mike Leggett, Strategic Real Estate Advisor at Real Estate Bees and the owner of The BrickKicker, an inspection services company in Athens, Ga.

“Sellers are often guessing when they estimate the age or major systems like a roof or an HVAC system,” Leggett says.

He notes that while they might not be intentionally misleading buyers, they might instead be remembering the last time the appliance or system was serviced or the estimated date on the disclosure when they first purchased the home.

Repairs can certainly help prolong the life of an appliance or system, but Leggett says don’t put too much faith into what the seller says. Often, sellers have resorted to cheap repairs on expensive systems and appliances that really needed to be replaced instead.

“We frequently find heat pumps that have interior and exterior components that do not have the same age or efficiency,” Legett says. “These systems will fail.”

3. Reserve part of your budget for renovations

It’s all too easy for home buyers to find themselves at the very top of their budget when making an offer on a property, especially when homes are routinely selling for above their asking prices.

But Leggett reminds buyers that when they waive an inspection, they could soon be faced with major expenses that they can no longer afford now that their cushion for renovations has all but disappeared with a higher offer.

Atwood says that in a market where houses routinely sell for above asking price, you’ll need to factor up to an additional 10% of the purchase price for necessary fixes. He recommends asking yourself this question when purchasing a home: “What's the maximum liability I can take on a house that I'm not doing an inspection on?” and consider that when making an offer on a home

4. Request the seller’s disclosure

If a buyer does decide to waive the home inspection contingency, they must get a seller’s disclosure, says Walter Kunstmann of ASC Home Inspections in Colorado Springs, Colo., who is also a Strategic Real Estate Advisor at Real Estate Bees. “To waive an inspection is to waive all negotiating power for any cost of repairs,” he says.

For all conditions that are disclosed, there must be receipts or other evidence of servicing as part of the terms of purchase.

It’s important to know that even with a disclosure, buyers aren’t guaranteed everything is perfect; more often than not, there’s something that needs to be fixed.

“We refer to a Seller's Disclosure as "The Book of Lies" because they are so frequently incorrect,” says Leggett.

5. Purchase a home warranty

Aside from a home insurance policy, Leggett recommends that homeowners purchase a warranty that covers—with limitations and exclusions—their home systems and appliances. “It may not cover replacement of systems that are beyond their life expectancy or improperly installed,” Leggett mentions as an example. Still, it’s a good move, especially for first-timers.

“First-time home buyers may not understand how to operate their home and can miss important information that inspectors provide on known safety issues and life expectancies,” Leggett says.

6. Remember the purpose of the home inspection

Purchasing a property is a huge decision, and the home inspection is meant to make it easier for the buyer. Removing it as a contingency sets the buyer up for an even harder decision, especially when buyer’s remorse is very much a possibility—and far worse with a home than it is with a car or some other hefty purchase.

“Home inspections should not be used just to beat up a seller on price or to renegotiate a contract,” Leggett says. “They are best used to understand the current condition of the home, to find major defects and safety issues, and to forecast the cost of ownership.”

Especially in a market where the seller stands to benefit far more than the buyer, there is one person who is on the side of the buyer. “Let's also not forget the home inspector is the only person that truly works for the buyer,” he says.

Atwood continues to recommend that his clients keep the inspection contingency as part of their offer. He’s seeing contingencies come back into play for buyers as the real estate market starts to cool. Should the seller decline a good offer with an inspection contingency, Atwood says,“It's probably for good reason that they don't want you to have an inspection.”