Should You Write a “Love Letter” to a Home Seller?
Dan S | Apr 26, 2022
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By Dan S on Apr 22, 2022
Buying a home can be overwhelming, especially if you’re doing it for the first time. Even after your offer is accepted (hooray!) you're dealing with paperwork, deadlines, negotiations, and a seemingly endless list of things that have to be done before the sale is actually finalized. You might be tempted to skip or shortchange parts of the process to get to closing faster (and we don’t blame you!), but there's one step every home buyer should take seriously: the home inspection.
If you’re in the middle of the homebuying process, you may have already heard of the inspection contingency (and if not, you will). But what is it, exactly?
A real estate contingency is a clause in your home offer that lets you back out of the contract if something goes wrong or specific requirements aren't met (in other words, the sale is contingent on meeting the terms of the clause).
More specifically, a home inspection contingency clause makes the sale dependent on the results of a home inspection. If the inspection reveals a problem with the home (such as plumbing, electrical, or structural problems), you can walk away from the contract, or try to negotiate repairs with the seller.
A home inspection contingency is just one of several types of real estate contingencies that can be included in a home offer.
So how does the inspection process work? Don’t fret — we’ll walk you through it.
After your house offer is accepted, you are responsible for hiring, booking, and paying for a home inspector to come to the home and look for defects. The timeframe for this inspection will be included in the purchase agreement — usually ten days after the offer is accepted. (If you don’t know where to look for a home inspector, the American Society of Home Inspectors is a great resource to get you started.) You’ll make an appointment with the inspector, with the understanding that the seller will have the house prepared and available for inspection.
Now for the not-so-great news. A typical home inspection usually costs somewhere between $300 and $500, and as the buyer, you’ll probably be the one paying for it. There’s a chance the seller might offer a seller-paid home warranty as an extra incentive to buyers — some companies will give a discount on home warranties for sellers, and it can save them money on repairs if some are needed before a sale closes — but don't expect them to offer one. One estimate says only about 25% of existing homes sold last year in the U.S. had home warranties purchased by either the buyer or the seller.
During the inspection, the inspector takes photos and makes notes, indicating any areas where repairs are needed (or have recently been made).
The inspector will then provide you with a detailed summary of any issues they found. Some also include an estimated cost of any needed repairs — although these are not legally binding (inspectors are not contractors). It's common for inspectors to advise a buyer to consult other professionals, like electricians or plumbers, about specific problems they find.
Once the inspector has presented their findings, you have a set number of days (probably laid out in the purchase agreement) to either move forward with the sale, ask the seller for repairs, or back out entirely.
You can also ask for more time to further consult with professionals about the repairs, or ask the seller to lower the sale price based on the likely repair costs. This negotiation usually takes place between your agent and the listing agent, not you and the seller directly.
The seller may ask for a copy of the inspection report in order to evaluate the time needed for any repairs. They might decide whether to perform the repairs or negotiate some more.
If you’re not satisfied with the results of the inspection or the seller's response, you may choose to terminate the contract and receive your earnest money back, so long as the termination takes place within any deadline given in the sales agreement.
When going through the home buying process, it's also important to know what a home inspection will not cover. A typical home inspection is a visual examination of the property, which means some things often don't get looked at or dealt with during an inspection.
Things that generally aren’t included in a home inspection:
Any areas that aren't readily accessible (for instance, blocked by snow or vegetation).
Any areas that are dangerous to enter, such as areas with exposed wiring.
Any systems (such as HVAC units) that aren't working and need to be taken apart to be inspected.
Inspectors may also refrain from operating shut-off valves, taking off outlet covers to look at wiring, or doing anything else that might cause further damage.
During a typical inspection, the home inspector will look at the following aspects of the home:
Electrical, heating and cooling, mechanical, plumbing, roofing, structural, and ventilation problems
The house's attic, interior, fireplaces, and outbuildings
Lead based paints, pests, mold, radon, and proper permits
While potential problems could arise in any of these areas, some of the most common problems found during a home inspection include:
Faulty wiring, open junction boxes, or poor wiring jobs
Cracks or leaks in the foundation
Bent or clogged rain gutters
Mold, mildew, water stains, or other water damage
Roof issues, such as broken flashings or curled shingles
Flaws in the foundation causing sloping floors or sticking doors
Faulty plumbing, such as problems with water pressure or slow drains
Ventilation or heating problems
Poor upkeep (such as peeling paint, worn carpets, or minor structural damage).
Technically speaking, you can't really fail a home inspection, because home inspectors don't deliver a "grade" on an inspection — they simply report on any problems they find. But it's certainly possible for a home inspection to reveal problems that you would consider to be deal breakers.
Although most home inspections will reveal some issues (no house is perfect), it's fairly uncommon for an inspection to make a buyer walk away — only about 4% of home contracts fall through because of things like a bad inspection.
So should you waive the home inspection contingency or not?
Let’s face it: in a fiercely competitive home market, it can be hard enough to find your dream home, and even harder to win a bidding war. Many buyers are looking for any advantage they can get over other interested buyers. One way buyers can gain an edge is to waive contingencies in the sales agreement to make the entire process faster and less complicated for everyone — and that can potentially include waiving the home inspection contingency.
But is it a good idea?
The short answer is: almost never. Waiving a home inspection contingency can be very risky. Without a home inspection, serious problems might go undiscovered until after the sale is complete — a crack in the foundation, a deteriorating roof, or the dreaded mold problems. All that could lead to thousands of dollars in repair costs, which will be entirely the buyer's responsibility to bear. In other words, it’s a recipe for regret.
Granted, waiving a home inspection contingency can greatly increase the appeal of an offer to the seller, since it reduces their risk and potentially saves them time and money negotiating and paying for repairs. But in turn, you'd be shouldering much more risk. If the buyer has the finances and means to accept that much risk, then waiving the home inspection contingency is certainly an option — but it's generally not recommended.
Even if money is tight, you should especially avoid waiving the inspection contingency to save money on the inspection fee — the cost of an inspection is very small compared to the potential financial risk. Ask your real estate agent for their advice on waiving the inspection contingency, and they're likely to tell you the same thing.
Let’s imagine your home inspection has turned up some major problems. When should you walk away and get your deposit back?
The short answer is, "it depends." Unfortunately, there's no hard and fast rule for when to make use of that home inspection contingency and back out of a contract.
Here are the main factors to consider when deciding whether or not to walk:
How badly do you want the home?
Is the seller being reasonable about repair negotiations?
Can you afford any repairs that you'll be responsible for?
During the home-buying process, you should weigh these questions carefully, preferably working with an experienced real estate agent before deciding on the best move.
Losing your dream home due to the results of a bad home inspection, or because the seller went with an offer with no such contingency, is not nearly as heartbreaking as learning your dream home is actually a nightmare of a money pit after already moving in.
At the same time, you should have realistic expectations about what you can reasonably fix (and whether you can afford it). If you can’t, then be prepared to walk away.
And while we don't recommend waiving the inspection contingency, we do recommend writing the most compelling bid possible by making an all-cash offer that does not include a financing or appraisal contingency. Want to learn how a cash offer, with no financing contingencies and no additional costs, can increase your likelihood of making a winning offer by 4X? Apply to get Cash Approved™ today!
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