By Barry Stone
Dear Barry,
You often stress the importance of a home inspection with every real estate purchase. But when the market is hot, an inspection can be a disadvantage. Buyers are competing for homes the day they hit the market. Sellers are looking for the highest offers with the least contingencies. Sometimes, the only way to get an acceptance is to bypass the inspection. How do you view this situation? --Mac
Dear Mac,
Waiving the right to a home inspection in an overheated market gives a buyer a decidedly competitive edge in the rush to escrow. It can help to score big points in the first quarter of the transaction but can cost you the game by the final play. Real estate investments involve major capital outlays with large long-term consequences. Therefore, a long-term game plan at the outset can determine whether the final score is positive or negative-whether you truly win or lose at the end of the season.
Hot markets, the kinds that entice buyers to make rush-to-judgment offers, have often been described as "feeding frenzies." These are emotionally driven business environments in which the rush to buy (condition be dammed) can be an invitation to financial disaster and years of regret. In short, it is gambling rather than investing, because attainment of the property precedes a true knowledge of what is being purchased.
There is no limit to the numbers and kinds of problems that can be discovered in the course of an accurate and competent home inspection. Therefore, the unseen problems you might acquire, just to meet the demands of a sellers'' market, could saddle you with major repair costs not anticipated or budgeted at the time of your no-contingency offer. Worse still, there could be unknown safety problems of a significant nature, ranging from electrical hazards to a faulty fireplace, from substandard gas piping to a furnace that leaks carbon monoxide.
So how do we satisfy two conflicting needs-obtaining an accepted offer in a hot real estate market while acquiring essential disclosure information? How do we make a no-contingency offer, without committing to a blind purchase? One approach is to make an offer that includes your right to have a home inspection for information purposes only, but without hinging the deal on the inspector''s findings. In a sense, there is still a degree of risk, but now it becomes a fully informed risk, taken with eyes wide open. In the event that the home inspection reveals problems so major as to eclipse the desirability of the property, you can still walk away from the deal. You might not recover your purchase deposit, but in some cases that would be a minor loss compared to the ache of a regretted acquisition.
It is possible to engage a frenetic real estate market without giving up the consumer protection provided by a home inspection. When big stakes are involved, it is seldom wise to charge in without taking a hard, critical look. Regardless of the market, the best advice is to "know what you''re buying, before you buy it."
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