What Happens When You Waive Inspection Contingency?

When multiple offers are expected on a home, real estate agents sometimes advise clients to waive the home inspection contingency. This has huge implications for both the buyer and seller, so it is vital to understand the implications of a contract with this waiver. While the waiver might get you the house of your dreams, it could soon become your worst nightmare.

Here’s how it works. Most of the time, when you offer to buy a house, you submit a contract offer with a clause giving you the opportunity to have the house inspected for potential problems that may not be obvious during a casual viewing. A home inspector can check everything from the roof to the basement, including plumbing, electric, and HVAC systems. Usually, the buyer has to arrange this inspection within two weeks, and after the inspection, the buyer receives a detailed report. The home inspection contingency clause in the contract will specify what the buyer’s rights are at that point. Often, the buyer has the right to cancel the contract or to negotiate with the seller for repairs or a reduced sale price to offset problems revealed in the inspection.

Without an inspection, the home sale can close much faster, which may seem like a great benefit for both buyer and seller. But all the other benefits accrue to the seller, so buyers need to think very carefully before foregoing the inspection.

When you waive the inspection contingency, you are essentially agreeing to buy the home “as is” regardless of the defects. Moreover, you may not have any idea what those defects are. Sellers are supposed to provide a list of “known” problems, but sellers have no incentive to look for defects. In fact, it is in their best interests to remain ignorant. If a seller knows of a problem and fails to disclose it, they can be held liable in some situations.

Waiving the inspection contingency may prove to be an acceptable risk, depending on the circumstances. Investors with substantial assets often assume the risk of closing deals quickly. They are usually experienced and know what they’re up against if they have to repair a foundation or replace all the ductwork. In new construction, there is often no need for an inspection because the home comes with warranties. But in most other situations, residential home buyers need to assess the risks very carefully before skipping the inspection. Can you afford to abate asbestos or mold? Do you have extra money set aside if you need to waterproof the basement?

A real estate attorney may be able to help you come up with an alternative that allows you to make an offer attractive to sellers without incurring the same risk. Or you might schedule a home inspection to learn the facts, and if the truth is too painful, forfeit your deposit and cancel the transaction. Sellers need to be aware that while they have a remedy if the buyer breaches the contract, they cannot force the sale to close. At Jordan & White, LLC, we focus our practice on safeguarding clients assets in estate planning and real estate, and we’d be happy to talk to you about ways to protect your interests in a real estate transaction. Just schedule a consultation at your convenience.