July 17, 2018

A Winning Home Offer Need Not Waive the Inspection

signing450by250With the market heating up and multiple offers increasing, many home buyers may be tempted to waive important contract contingencies, such as the inspection contingency, to make their offers more attractive. Don’t do it. No matter how much you love a house, any investment that substantial demands the due diligence of a home inspection. And I’d be wary of any seller who asks a buyer to waive an inspection.

Fortunately, there are other things buyers can do to sweeten the pot, such as:

Be first. Many times, agents on the other side will honor first-in-line offers, giving those buyers the opportunity to meet the highest subsequent offer. Accordingly, get a lender approval letter before you look for properties, be prepared to write an earnest money check (usually about 1 percent of the asking price) once you find it, and make yourself available to sign the documents either in person or electronically as soon as your agent has them ready. The quicker you move, the quicker your agent can secure your spot in line.

Make a big down payment. If you can mange it, a large down payment at closing shows the seller you have the ability to get the deal done—even if the house does not appraise at the agreed upon price. If the appraisal comes in below your offer price, you still have the opportunity to renegotiate the price.

Don’t low ball. Low-ball offers are fine and warranted if the property is in low demand, has been on the market a long time, or is vastly over priced. But if the market is tight and competitive, offer something close to market price based on comparable properties provided by your agent. Otherwise, you basically exclude yourself from any serious negotiation.

Add an escalation clause. Ask your agent to call the seller agent to see if there are multiple offers on the table or on the way.  If so, you may want to employ an escalation clause that will incrementally increase your offer up to your maximum amount, out bidding your competition.  You can retain your right to an appraisal contingency (and you lender will require it) with the escalation clause.  If you prevail with an escalation, have your agent ask to see the competing offer to confirm it really exists.

Offer to buy “as-is”: Rather than give away your right to an inspection, you can offer to buy “as-is” along with the inspection contingency. Basically, all this says is that you won’t bother the seller with a long list of requested repairs after the inspection, but you may decide to walk away from the deal if there is anything major. In fact, you can get out of the contract for any unspecified reason using an inspection contingency as long as you provide the inspection report to the seller within a time frame specified in the contract.

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