Antsy homebuyers forgo inspections to seal the deal in competitive market
Jun. 5—D eborah Jackson finally bought a townhouse in Hooksett after a year of looking at hundreds of properties across New England.
The purchase wasn't easy: She had to put in an offer almost $100,000 above the asking price and waive inspection contingencies, accepting the property "as is."
Despite the financial and safety risk, many desperate homebuyers have done the same to get a home in what remains a tight real estate market.
The Massachusetts woman worked with Realtor Brad Bosse to make sure all the "big ticket" items were in working order. An "informational only" inspection found small things like pet damage, a broken downspout and rotted floor boards, with extras left behind for replacement.
She admits waiving the contingencies was risky, but she had to do it to edge out the competition.
"It is a very dangerous undertaking and practice to get into, but this is where we are," Jackson said. "I think what is also detrimental to buyers is the need to pay cash for real estate where you might not be really able to afford it, but if you need a home that is what you have to do."
Waiving home inspections altogether can pose both financial and safety risks, said Joseph Griffin, chairman of the state Board of Home Inspectors, which regulates the industry.
As an inspector, he's seen it all: termite-ravaged joists, deteriorated chimney crowns, failing roofs, unsafe wiring, significant water damage and outdated furnaces, which can pose carbon monoxide hazards.
"There is no inventory, and people are just over-bidding and bringing cash to closing and just overpaying for houses," he said. "They are stretching themselves very thin."
Inspection contingencies allow the buyer time to negotiate repairs or the price of the home or pull out of the sale if serious problems arise.
Real estate agents and home inspectors say waiving inspections can turn the home-buying experience into a nightmare. A failed septic system could run between $10,000 and $12,000 or more, according to Griffin.
Griffin, who operates Tri-State Home Inspections, says many families are endangering their health without testing a home's drinking water and air quality. The two greatest threats are arsenic and radon, mitigation for which can run thousands of dollars, he said.
The dangers
Houses built before 1978 can have potential lead paint hazards.
"They're leaving themselves exposed," Griffin said. "I worry about the children, not so much the adults. It's the adults who are making the decision, but they are moving their families into potentially unsafe homes."
Inspectors can spend hours looking for potential hazards in homes, including asbestos, mold and out-of-code electrical systems. Other things Griffin checks for are screens on windows, pool gate locks, rot in railings and the structural integrity of decks.
"There are a million different things that can go wrong with a house — even new construction — but especially something that is 10, 20, 30, 40 years old," Griffin said. "That is generally what first-time homebuyers are purchasing."
Bosse, who works with Moe Marketing Realty Group in Bedford, always recommends inspections, but he knows waiving them is the only way many are getting their offers accepted.
"They've lost offers because they did put an inspection in," he said, so they forgo the inspection to raise their chances of success with a future offer.
Bosse recently worked with a couple from Washington state.
"We put in a few offers and they wanted inspections. They were just really leery of not having an inspection," he said. Their last offer was accepted after they decided to waive an inspection. The couple did their homework and considered other factors in making their decision.
Sometimes, Bosse hires an inspector to go to open houses to at least get a glance at the condition of the property.
"It is rare for an offer of mine to be accepted without waiving the inspection," he said. "If you put in for an inspection you are just praying to the gods it gets accepted right now."
During one recent inspection, Griffin ran all the water in a newly remodeled bathroom, and the piping burst, causing water to flood the floor below.
"(The buyers) immediately left the purchase and sales agreement within minutes," Griffin said. "They were gone."
Griffin wants buyers to be aware.
"It is amazing to me that people are willing to really risk their lives just to get into this housing market," Griffin said.
Tight market
In New Hampshire, the number of closed sales in April was down 20.8% from last year, but the median sales price is up 14.7% for single-family homes ($440,000), according to the New Hampshire Association of Realtors. A recent surge in interest rates has limited the number of eligible buyers and has caused mortgage applications to drop, according to the Realtors.
"I would describe it as still hot," said Adam Gaudet, president of the association and broker/founder of 603 Birch Realty in Concord. "It's still a seller's market."
The number of offers and exorbitant offers above asking price is starting to decline, but the competition remains, he said.
Gaudet said some inspections are being done for informational purposes only, with the buyer agreeing not to ask for any credits or repairs but reserving the right to back out if any major defect is discovered, such as a failing septic system or cracks in the foundation.
"In some cases they will put a dollar amount saying, 'As long as there are no repairs that cost over $10,000, then I won't back out,'" he said.
Financial risks
Some home buyers could be on the hook for major home repairs if they don't get an inspection, said Griffin, who has been doing home inspections for about 25 years. Many have already drained their savings accounts or dipped into retirement savings to win a bidding war, he said.
"They might not be able to afford it," he said. "They are extending themselves all the way. They are overpaying for their house, so they are stretching their finances thin as it is."
Griffin said sellers are "hitting home runs all across the state" by taking advantage of the market. He said he hasn't seen anything like it.
Just a few weeks ago, one home had 38 offers.
In waiving inspection, new owners could be on the hook for the costs down the road when they try to resell, Griffin said.
If buyers waive an inspection before closing, Griffin recommends they hire an inspector afterward to make sure the home is safe.
Griffin doesn't see the phenomenon going away anytime soon.
"I don't see it slowing down at all only because we are so short on housing inventory across the state and across the entire country," he said.
Bosse recommends home buyers do their homework if they choose to forgo an inspection — maybe bring a friend who knows about home repairs.
"Use your best instinct," he said. "If something doesn't look right, put it in for an inspection just to be safe."
