Your heart is beating fast. You just submitted an offer to buy the home of your dreams. You sign the offer, and your agent submits it. Now the waiting game begins and your emotions are entering “rollercoaster mode”.
Your agent calls you back 2 hours later with some bad news. The property you made an offer on has 12 other registered offers and it is an all-out bidding war. The seller agreed to review offers on Sunday night and will choose the best one.
While one of the tactics to “sweeten up” your offer is to raise the amount of money you’re offering, it may also be tempting to waive certain (or sometimes all) conditions in order to provide the seller with more certainty. If you haven’t negotiated for a home before, conditions are clauses that are inserted into an offer of purchase and sale that make the transaction conditional on certain terms or obligations that are to be fulfilled by either parties.
Conditions on an Offer
Some examples of most common conditions are financing (or the buyer’s ability to secure a mortgage), a home inspection or a lawyer’s review of the agreement. There are dozens of other conditions that may be inserted into an agreement and in theory, you can make your purchase contingent on anything you can imagine, however, the more conditions you have, the less likely the seller will have certainty that you are serious and will see the transaction through.
This is especially true if a seller is reviewing multiple offers. An offer with less (or without) conditions, will likely be seen as more attractive by a seller. As tempting as it may sound to go “all in” and waive all conditions when you’re competing to buy a property in a hot market, it can turn out to be a really bad idea.
One key example is an inspection condition. It is common to have a condition in the agreement of purchase and sale that allows the buyer to have the home or condo inspected by a professional home inspector within a few days of the seller accepting their offer. Depending on the inspector’s findings and report, buyers can identify potential issues with the home or at the very least, be made aware of existing and future issues.
Waiving, or not including the home inspection condition essentially puts the risk on the buyer. If the home has any issues after closing, the recourse against the seller may be very limited.
Do I Really Need an Inspection?
While it may be tempting to skip the inspection in order to make your offer more competitive, keep in mind that no matter the property’s age and appearance, there may be underlying issues that were not visible during showings.
There have been situations where hundreds of thousands of dollars of repairs were needed in a property. From remediating mold caused by previous leaks, all the way down to structural issues that needed serious repairs. As a buyer, skipping on an inspection or not hiring a reputable home inspector, means taking a chance that can add up to huge liabilities down the road and turn your dream home into a nightmare.
Keep in mind that pre-existing issues will likely not be covered by your home insurance or title insurance and proving that the seller knowingly hid defects or damages may be tough to explain in court given that you’ve knowingly waived the opportunity to have the property inspected.
Do Home Inspections Need To Be Done By Professionals?
As tempting as it may be to waive an inspection condition to have your offer accepted, it can turn into a very expensive gamble. Just as important is hiring a qualified home inspector perform a detailed inspection and provide you with a comprehensive report of their findings.
While you may have an uncle who is a plumber, or maybe you consider yourself pretty handy, a professional home inspector will go through a very detailed checklist of all the structural, finishes and systems of a home. An inspection can cost $250 - $1000 depending on the property and area. It may be an additional expense, but it is a worthwhile investment.
In addition to having an inspection condition and conducting the inspection, there may be a few weeks from the time you complete the inspection until you close and move in. During that time period, appliances can break, and other damages may be caused while the seller still occupies the home.
One way to reduce such risks is to request a reasonable amount of re-visits to the property prior to closing as one of your conditions. Use your last allotted visit to the property to perform your own visual inspection a few days prior to closing, or if you choose, you may bring an inspector or professional with you to the final visit prior to closing.
Have a quick look for damages that you may not have noticed before inside and outside the home. Ask the seller if it is possible to turn on all the appliances (if they are included in the sale) to ensure they are in good working order. Turn on taps, showers and lights and note any issues.
If anything is amiss on your final walk-through, document it and contact your lawyer as soon as possible.