Sound Off: Should I waive my inspection contingency?
Updated 5:16 pm, Friday, May 3, 2013
Q: Should I waive my inspection contingency in order to prevail in a multiple-offer scenario?
A: Those of us who live in the world of residential real estate know well how fast-moving and stressful a hot market can be. Our current sellers' market pressures buyers who are competing for the "prize" (the home they want to buy) to often push well beyond their "comfort zone."
The price they offer is apt to be higher than they wanted to pay. In addition, they are frequently confronted with the question of which of the three major contingencies, (inspection, appraisal and loan) if not all, they feel they can waive in order to make their offer more attractive to the seller.
The majority of lawsuits that arise from home sales involve a failure on the seller's part to disclose a "material fact" (one that may have caused the buyer to take a different action had they known of it).
In California, the seller is required by law to complete a set of Disclosure Documents in which they answer, in detail, all questions asked regarding their personal knowledge of the condition of their property, past and present.
It is imperative, seemingly now more than ever, for sellers to understand just what that fiduciary duty entails.
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Sellers must disclose everything that they personally know about their property, whether they feel that the problem has been taken care of or not. A past repair does not mean that an issue has been fixed permanently.
Full disclosure requires an explanation of the nature and scope of the specific situation, and the remedial work done to stop it at the time. It is not sufficient for a seller, when asked about the condition of their roof, for example, to answer by referring the buyer to an invoice showing which roofer repaired a past leak and when.
A seller must describe the nature and extent of past leaks as well as the corrective measures taken.
It is equally important for buyers to thoroughly review and understand the information set forth in seller's disclosures. Any red flags that are raised can be addressed by questions asked of the seller prior to making an offer, or before removal of an inspection contingency in the contract.
When buyers consider waiving their right to inspect a home during the course of their escrow period in order to be competitive, they are presented with a "risk versus reward" situation. To make the decision that is right for them, they must be able to answer with a resounding "yes" the question: Is the reward worth the potential risk?
The answer to that important question will be different for every buyer and will depend, to a great extent, upon the conditions particular to the home they are wanting to buy.