Dear Monty: We are beginning to look at homes again. It is very different from before the pandemic. As an example, yesterday, we had a real estate agent suggest several tactics to increase our odds of winning a bid on a home we like. One of the suggestions was to waive the home inspection. We like the house and want to make an offer, but the thought of waiving the home inspection is scary. Is this a good idea?

Monty's Answer: The waiving the home inspection phenomenon is happening. With a limited inventory and artificially low interest rates, some homebuyers are going to extraordinary means to secure a home. While most of the reports of waiving the inspection are anecdotal, it isn't easy to know how prevalent it is.

It is unclear if the idea originated with a desperate homebuyer or a real estate agent, but it seems to have gained traction. Waiving a home inspection to make your offer appear superior to other offers is a bad idea for the buyer. It is also a bad idea for the seller.

A Bad Idea for a Homebuyer

The primary reason home inspections became an industry is because homebuyers were buying homes with significant undisclosed defects. Several factors contributed to these losses: home sellers were unaware of defects, home sellers were not disclosing or hiding known defects and complicit real estate agents. While these factors are still present today, home inspections make them more challenging to escape observation. Homebuyers want an inspection to minimize the chance of buying a home with an expensive hidden defect.

The Pros for a Homebuyer

No. 1: The waiver may get them the house, and there is no defect.

The Cons for a Homebuyer

No. 1: It is a significant risk for the buyer who may inherit a defect.

No. 2: In Wisconsin, the agent must now do an inspection, but they are not required to possess inspection skills.

No. 3: The buyer has no way of knowing the condition of the property.

A Bad idea for the Home Seller

On the surface, the idea of a homebuyer waiving a home inspection may sound like a good idea. After all, everyone has heard stories of home inspections causing the buyer to walk. Avoiding that possibility is attractive.

The Pros for the Home Seller

No. 1: A homebuyer with no inspection contingency is successful, and no defects are discovered.

The Cons for the Home Seller

No. 1: The buyer discovers a defect after the closing.

No. 2: The seller may not have completed a condition report.

No. 3: The seller may not think an issue rises to the level of a defect.

No. 4: The seller may not be aware of the defect.

No. 5: Seller may "forget" or not disclose the defect.

No. 6: State law in the location of the home determines what recourse a buyer may pursue. The potential of a lawsuit could be high.

To Conclude

Including a home inspection may not be the contingency that causes the seller to accept another offer. Many sellers will opt for third-party verification to ensure their home is defect free. The range of the costs to repair defects is extensive. A low-end defect could be just a few thousand dollars while a significant defect could be fifty thousand dollars or more. If your agent suggested waiving the inspection contingency without adequately explaining the risks, consider that they have a substantial conflict of interest in the form of earning a commission.

Richard Montgomery is the author of "House Money: An Insider's Secrets to Saving Thousands When You Buy or Sell a Home." He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty or at DearMonty.com. Email him at [email protected].

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