Money Talks, So Should You

What to do when the seller says 'no inspection'

Buy a home without an inspection and it could wind up costing you -- lots. Maybe there's a middle path.

Jeff Brown
by Jeff Brown, MainStreet contributor

NEW YORK (MainStreet) — Buying a home typically follows a familiar pattern: Settle on a neighborhood, find a nice home and negotiate terms, have a pro inspect the property, apply for a mortgage, close the deal and move.

But now, growing numbers of buyers are skipping two steps: the mortgage and inspection. In reporting the trend, The New York Times says some formerly depressed markets are now so hot that sellers spurn offers from buyers who don’t come bearing cash and waive their right to an inspection meant to uncover problems with the property.

READ: How to get ready for your first home closing

The marketplace rules, and if sellers want to hang tough on these terms, there’s not much the buyer can do about it. The rise of cash deals is driven largely by investors who pick up properties cheap and turn them into rentals in hopes of selling for big profits later.

Where demand is high enough, sellers can reject offers that require the traditional inspection, which can uncover problems that would allow the buyer to get out of the deal. Sellers would rather avoid snags.

But buying without an inspection involves big risks. The furnace or central air conditioning system may be on its last legs. The roof might need replacing sooner than you think. There could be termite damage or violations of building or zoning codes that would be costly to correct, or could make it harder for you to resell the property later.

A buyer faced with an adamant seller may simply have to look elsewhere. But before giving up, the buyer can try to make the inspection more palatable to the seller.

At a minimum, engage a “buyer’s agent,” a real estate agent who works for you, not the seller. Agents are not inspectors, but most have a better eye for problems than the average buyer does.

READ: What couples should consider before buying a house

You also could take an inspector through the home on a final tour before making your offer. If the home looks good, you could present a contract that does not require an official inspection. You could probably find a professional inspector willing to work on this basis, probably for a fee of several hundred dollars. Or you could take along a friend more knowledgeable about homes than you are. This approach probably won’t be as thorough as a real inspection, but it may well uncover any serious problems.

Another approach is to offer a contract contingent on the home passing inspection but setting a tough standard for canceling the deal. For example, the deal could be scotched only if the inspector found problems that would cost more than $5,000 to fix, rather than $1,000. You might also agree upfront to exclude certain issues from this calculation, such as the roof that you think will have to be replaced soon.

Another sweetener: Offer to use an inspector approved by the seller.

READ: I'm moving in two weeks but I own my home. What do I do?

Finally, if you feel you must have an inspection, you could look for other ways to improve your offer. Maybe you don’t really need all the appliances to come with the home. Perhaps you can reassure the seller by presenting a loan pre-approval, indicating you are likely to get a mortgage. Or perhaps you can be especially accommodating on the closing date.

Of course, it’s important not to be overeager. A seller who insists there be no inspection may simply be in a hurry, but also could be trying to conceal real problems. Professional real estate investors who pay cash can probably live without official inspections because they know enough to assess properties on their own. The ordinary homebuyer should be more cautious, especially with an older home or one that’s been vacant.

 

For the past 20 of his nearly 40 years in journalism, Jeff Brown has written about personal finance, economics and the financial markets. He has been a staff writer at The Philadelphia Inquirer and other papers, and in his six-year freelance career has been a columnist for TheStreet.com and the Nightly Business Report on PBS and blogged for The New York Times, MSNBC.com and other Internet sites.