Should I Waive a Home Inspection in a Seller’s Market?

I am a licensed realtor in Virginia, so the subject matter presented here applies to Virginia only. It may or may not apply to your state, as contracts and addenda are state-specific. The opinions presented here are my own. Please consult your realtor for your specific situation.

Should I waive a home inspection in a seller’s market? Before we answer this question, let’s talk about the 4 different options you have for home inspection contingencies in Virginia:

Home inspection with option to negotiate repairs or void. This option is the least attractive to the seller and most favorable for the buyer. With this option, upon receiving the home inspection report, the buyer can ask the seller to make repairs. Of course, the seller can say no or the seller can negotiate to address only a portion of the repairs. If the buyer and seller can’t come to an agreement, the buyer has the option to void the contract. Even before any negotiations begin, if the buyer is dissatisfied with the condition of the home, the buyer can send the home inspection report to the seller with a Notice voiding Contract.

Home inspection with option to void only. This option is more attractive to the seller than the option above and less favorable to the buyer. With option to void only, there is a general understanding that the buyer will either take the house as-is or void the contract. However, the agents will usually have a conversation before letting the deal fall apart. If there are just a few issues, the seller may agree to address the issues to keep the deal alive. In a recent transaction where we had option to void only, I asked the seller to take care of one item that ended up costing over $4,000. They had accepted our offer well above list price, so they were nice enough to take care of an issue that was important to us. Again, in order to void the contract, the buyer has to deliver the home inspection to the seller with a Notice voiding Contract.

Home inspection for informational purposes. This option is very attractive to the seller and unfavorable to the buyer. What “informational purposes” means is that you are not including a home inspection contingency with your offer. Instead, you are asking the seller to allow you to conduct a home inspection with the understanding that you are taking the house without the right to ask for repairs AND without the right to void based on the home inspection report. However, if you are buying a property with a condo association or HOA in Virginia, you have three days after receipt of the HOA/condo docs (resale disclosure packet) to void the contract for any reason. Some agents may use this strategy (HI for informational purposes) to make their offer more attractive, then use the HOA/condo docs as a way to back out if the home inspection comes back much worse than expected. Keep in mind you will have to get a home inspector very quickly if you plan to try to back out with HOA/condo docs as many listing agents have the HOA/condo docs ready to be delivered upon ratification.

Waive the home inspection. This is the most attractive option for the seller and least favorable to the buyer. Some buyers opt to waive the home inspection completely. Sometimes the buyer really loves the house and wants to make the offer as attractive as possible. Sometimes the buyer is very handy and believes he or she can make any repairs necessary. Sometimes the property is almost new, and the buyer believes there isn’t much that can go wrong.

Now that we’ve discussed the four main options for home inspection contingencies in Virginia, I’ll share my opinions and my experiences. Keep in mind, every agent has different opinions and strategies.

As a selling agent (a.k.a. buyer’s agent), I have always had my buyer clients conduct a home inspection with at least option to void only. As of January 2021, I have not yet waived a home inspection contingency or conducted a home inspection for informational purposes only (UPDATE: I waived home inspection contingency for the first time in March 2021; I was able to get 2 other buyers under contract keeping the home inspection contingency intact in this crazy market). I try to provide as much protection for my clients as possible. In the strong seller’s market we are in now, I usually recommend home inspection with option to void only. In an extremely competitive situation, I may recommend waiving the HI contingency completely. In very competitive situations, sellers will usually take offers with option to negotiate repairs (and option to void only) off the table very quickly as they have plenty of offers with no contingencies.

On the flip side, as a listing agent, I have had many agents waive the home inspection. This makes my seller clients happy and obviates what I consider the most difficult negotiation in the real estate transaction (to me, negotiating home inspection items can be even more difficult than negotiating price). I have not seen a ratified contract with option to negotiate repairs in at least a few years. Most buyers choose option to void only or waive the home inspection altogether in multiple offer situations, which are very common these days.

Let’s get back to answering the question I posed as the title of this blog post. Should I waive a home inspection in a seller’s market? If you are a buyer, my answer would be no, if possible. Try to make the other parts of the offer (price, settlement speed, rent back if needed, down payment, etc.) more attractive and try to keep at least home inspection with option to void only. If you really love the house and know there are many offers on the table, only then would I consider waiving the home inspection completely. The downside of waiving the home inspection is that you may discover major issues with the house after you already own it. This can be very costly. So far, I haven’t had to waive the home inspection for any of my buyer clients, but my streak may not last, as I recently spoke to agents with 26 and 11 offers on their listings (UPDATE: waived HI contingency for the first time in March 2021). It looks like the 2021 spring market is starting early and is going to be extremely competitive for buyers.

ANOTHER UPDATE: The spring market of 2021 was a very strong seller’s market (10+ offers on many listings). I waived all contingencies including financing, appraisal, and home inspection for many buyers to win offers. Work with an agent that knows the current market as market conditions can change very quickly. As of August 2021, we are experiencing a bit of a slowdown in the northern Virginia real estate market compared to just 2-3 months ago.

If you have questions or comments, please comment below or contact me at realtordannylee@gmail.com.

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