Do NOT Waive the Appraisal Contingency
Historically low inventory and record buyer competition have prompted buyers to make many concessions in order to win out over multiple competing offers. Multiple offers are common and some listings in this market get over 20 offers within a couple of days.
The following are some strategies used to win:
- Offering above asking price.
- Not requesting any seller contributions to buyer’s closing costs.
- Closing on the date preferred by sellers.
- Allowing sellers to lease-back their home for a few weeks.
- Short inspection periods.
- Not requesting repairs.
- Offering additional funds in case of an appraisal gap
These are all sound strategies for getting the winning bid to buy your home. As long as the numbers make enough sense, then these strategies are both helpful and logical. Read that again!
Buying a home is an emotional process, but it’s important that you make sound, logical decisions. While you can’t expect to get “a bargain” buying in this market, the cost of buying v. waiting and the logistics of your options should make sense. Do not allow the frenzy to entice you to make bad decisions – one way or the other.
A new trend has emerged of waiving inspection contingencies and that is a TERRIBLE idea! I find it disturbing that some Realtors are actually encouraging this!
How do inspection contingencies work in Florida?
The most commonly used contract for residential sales in Florida is the FR/BAR As-Is Contract. It allows the buyer to cancel a contract for any reason during the inspection contingency period. Full stop. There is no requirement that a dollar amount of repairs are found, or that any reason is given at all. Buyers can cancel for any reason at all during this period and get their deposit refunded.
During the inspection period, buyers should get inspections, procure insurance quotes and complete any required due diligence before moving forward toward closing. You’ll need to make the inspection period as short as possible (5-6 days), but do not waive the inspection period!
Don’t expect repairs.
In a highly competitive market, there’s a strong chance that sellers will NOT offer any repairs. However, as the buyer, it is imperative that you understand the condition of the home to be sure that it works for your needs and your budget. You may decide that the repairs required still fit within your budget and you’re ready to move forward, even if there’s more than you expected.
On the other hand, you may find that the condition of the home does NOT meet your standards or work within your budget. In that case, the inspection contingency will allow you to cancel the contract and get your deposit refunded. That is invaluable information when making such an important decision.
It’s already backfiring.
In the Realtor groups I frequent, I’m starting to see posts by agents who’ve recommended buyers waive the inspections and now those buyers have moved into homes with black mold, HVACs requiring immediate replacement, septic tanks that need to be condemned and any number of costly issues that cannot be ignored and for which the buyers were totally unprepared. Talk about buyer’s remorse!
Put your best foot forward, but be cautious.
As I’ve mentioned, the competition in this market does require that buyers put their best foot forward on offers. There are many buyers for which the purchase price and significant repairs still make financial sense. That is fine. But don’t become a buyer who finds yourself in an unexpected situation from which it will be difficult or impossible to recover. If the only way to get that house is to give up your right to inspect and cancel if needed, then skip on that house. It’s not worth the risk.
Investors are an exception to this rule as most of them have their construction managers inspect the property before making an offer. In that case, they do already know the condition before submitting an offer. That is not the case for resident buyers.
I have never, would never recommend a resident buyer to waive the inspection period. While compromise is important, especially in a competitive market, waiving the inspection contingency is a terrible idea that could result in steep consequences. Don’t do it!
Waiving inspections is risky for sellers, too.
Sellers should also be leery of going under contract with resident buyers waiving inspections. Florida requires full discosure of home condition by sellers, so a significant issue with the home could potentially translate to a lawsuit after closing if there was not an inspection period. Inspections are important for everyone in the transaction.
Each buyer, seller and property is unique. Contact me today for honest, straightfoward education, advocacy and representation in the purchase or sale of your home.