5 ms·

Most home buyers waive inspection contingencies. The market is one big fomo frenzy for the past decade when fed artificially suppressed interest rates below inf

by mcfly1985 6y ago

Most home buyers waive inspection contingencies. The market is one big fomo frenzy for the past decade when fed artificially suppressed interest rates below inflation. I bet home buyers would happily ignore reading any pamphlet explaining their risks related to natural disasters.

russell_h 6y ago
Outside of the Bay Area, and maybe a few other especially hot real estate markets, I’m sure that isn’t true. I’m in the process of buying a home in Washington and my agent says she’s never had a client waive the inspection contingency unless they’re buying a cheap fixer-upper to flip.
- wrs 6y ago
  I’ve participated (as a bystander, thank goodness) in some recent home offers in Washington where all contingencies (including inspection and financing) were expected to be waived if you wanted to win the bid. These were neither cheap nor fixer-uppers, but they were in central Seattle. Edit: Also, the expectation was auto-escalating offers, eBay style. The owner set a date to take offers and picked the best one.
  - i_haz_rabies 6y ago
    This is also the case in rural Ontario.
    - cmrdporcupine 6y ago
      There is no way I'd buy anything rural without extensive inspection of well and septic, foundation, property, etc. In the last 15 years I've purchased in both Toronto and in rural Ontario with the full set of conditions; financing, inspection, etc. As a buyer I simply won't do it otherwise. We have a 6 acre hobby farm near Hamilton. But I also just don't bother to go look at properties with language in the text like "Accepting offers on...". We won't play the multiple offers game. In Toronto maybe this is the only way to get a home, but we were able to avoid it there back in 2005 by just hunting in areas that weren't "cool." My experience is there's always almost other places that come up, where the seller has more scruples. We might sell our hobby farm soon. I would fully expect any potential buyer to demand inspection.
  - ISL 6y ago
    This was definitely the case a few years ago in Seattle. The understanding was that homes would be on the market for a week and any inspections prior to waived-contingency bids would happen during that week. Everyone knew the offers were all as-is. Aside from the stress of weekly rushes to view, inspect, bid, and bid-up, the process primarily compressed the entire process into a short period of time. The biggest inefficiency was that essentially all buyers were forced to become journeyman experts at the compressed-time process.
    - poulsbohemian 6y ago
      It is a frustrating experience. My market is starting to develop into this, in large part because of Seattle buyers flooding inland. That said, it is better than some of the alternatives. There are other highly-competitive markets where houses just never come on the market - instead they get sold in pocket listings and the only way to buy a house is to canvas a neighborhood or be in tight with an agent who is farming neighborhoods. It's ideal if houses actually come to market, the market can decide the value, and it's supply / demand that is making it possible for houses to be sold on such a short time-table. It's a better dynamic all around though than having houses sit, potentially vacant, for months and months and/or increasing the challenges where buyers want to move and may even have a house under offer but can't get their current house sold. Liquidity in the housing market is ultimately a good thing for buyers and sellers.
      - ISL 6y ago
        Agreed. Liquidity is good. The pocket listings may not be optimizing price for the seller, though they may minimize hassle. It seems like it is healthiest for homes to be on the market for about two weeks. Part of the trouble with short-duration listings is that it is a high-stakes version of the optimal-stopping problem. I think a little more holistic visibility into the market's offerings might yield better matches between buyers and homes. Choosing an abode for the next few decades amidst weekly auto-escalation bidding wars just doesn't seem healthy for the future dwellers.
  - ericbarrett 6y ago
    Buying in a developed city in the U.S. has historically been a different set of concerns than buying rural. One could generally assume that the environment is managed by the city and state, so that floods would not reach your home and wildfires would be stopped at the city limits; insurance was for accidents and freak events (hailstorms, quakes, electrical fires). Due to both developmental sprawl and the decay of state and federal infrastructure, one can no longer assume a home is in such a controlled environment so, buyers (and insurers!) have some lessons to learn. A good example of the kind of change I’m talking about is development in 100-year flood plains in Houston[0]. 30 years ago, a naive home buyer would not have had to worry about it, because flood plains were off limits. What changed? Greedy developers? Ignorant planners? More population? Perhaps all of it. But now you have to be educated to make the right call. [0] https://www.houstonchronicle.com/news/houston-texas/houston/article/Even-after-Harvey-Houston-keeps-adding-new-homes-13285865.php https://www.houstonchronicle.com/news/houston-texas/houston/...
    - flurben 6y ago
      30 years ago, building in flood plains had been an established routine for decades in Texas, and all over the United States. Using Houston as an example, 50 to 100 years ago it was the norm to bring in fill dirt from other regions, flatten and grade a piece of land, and construct a gridded residential neighborhood with total disregard for natural drainage. Flooding was dealt with by artificially channelizing bayous and streams, which is why Houston's urban waterways look so unnatural. Many of these older neighborhoods along the gulf coast were unsustainable and are not being rebuilt after hurricanes. Starting around 30 years ago, local, state and federal policymakers started to get a clue. Neighborhoods were more commonly build to accomodate the drainage patterns -- this is why developments from the 1990's, 2000's tend to have large retention ponds, (example: https://www.google.com/maps/@29.5517845,-95.4295706,3a,75y,211.08h,70.78t/data=!3m6!1e1!3m4!1suWGiKiZ_Huf7YgcJCtcN1g!2e0!7i16384!8i8192 https://www.google.com/maps/@29.5517845,-95.4295706,3a,75y,2... ) while neighborhoods from the 1950's-60's do not.
- deleted 6y ago
  [deleted]
- poulsbohemian 6y ago
  Real estate agent here, can confirm inspection contingencies are very much so a market and individual house decision. I'd also say it depends a lot on the buyer. For example - first time buyer, I'd always encourage them to do an inspection as they are going to learn a lot about being a homeowner from the experience. Someone who has a number of investment properties and knows houses inside and out? They might be able to get all the info they need with just a walk-through. As I understand it, in competitive urban markets it has become common for sellers to do a pre-inspection and then sell / provide that info for interested parties. This potentially makes for a faster sale and may create a more competitive situation if more potential buyers see less risk in the condition of the house and are willing to make an offer. But, at least in my state, anything a seller learns about the condition of their home must be disclosed so this could also backfire. Any time you can remove a contingency in a competitive situation it will be a potential advantage, but caveat emptor all day long - sellers seldom have a complete understanding of their home and property so it is to the buyer's best interest to do everything they can to inform themselves before completing the purchase.
- cafard 6y ago
  We lost a bid on at least one house in Washington, DC, back about 2004 because we had an inspection contingency and another party didn't. Maybe we'd have lost it on an escalation clause the way things were back then.
throwaway0a5e 6y ago
>Most home buyers waive inspection contingencies Most inspections are "pay us <stupid_number> to point out the obvious and we don't include <list of anything that requires more than just walking around the house eyeballing things to determine> and our liability limited to <price of inspection>". It's no surprise people wave them.
- mcfly1985 6y ago
  Maybe that's your experience if you go with your Realtor's "suggested" inspector. Again, most home buyers probably just go this route since no one really cares about quality any more. I researched my own inspector and chose a very technical retired engineer. He identified significant issues with the home that resulted in the price being reduced by 15%. You're an idiot if you waive inspections.
  - throwaway0a5e 6y ago
    Home inspections are a well known "easy money and no risk" side gig for general contractors in my area. They're all crap but I guess if you need someone to point out what's gonna need work in the next 2-20yr it's better than nothing.
    - mcfly1985 6y ago
      Try finding an inspector who actually enjoys the job. They do great work.
      - throwaway0a5e 6y ago
        I don't need a home inspector. Short of catastrophic fire or flood there's nothing about a home I wouldn't just fix myself. The problem is the people who need someone to inspect the home for them don't know how to find a good inspector.
- c22 6y ago
  The home inspector I use gives me a booklet that is often hundreds of pages long and includes photos and detailed descriptions of every problem found as well as recommended remedies and ongoing maintenance requirements. I've never needed to call anyone else so I just assumed they were all like this.
sharadov 6y ago
My neighbors bought a house with no contingencies - the house had no earthing. WTF! Yes, it is a 1300 sqft mansion for 1.5 million.
williamstein 6y ago
Overall most home buyers do not waive inspection contingencies. Here is an article with precise recent data about exactly this: https://www.nationalmortgagenews.com/news/housing-markets-buyers-waive-appraisal-inspection-contingencies#:~:text=A%2020.6%25%20share%20of%20successful,%25%20month-over-month https://www.nationalmortgagenews.com/news/housing-markets-bu.... The article says waiving of inspection is out of control and going up, but nowhere near "most". Of course your local market is probably completely different than the entire US overall.
JamesBarney 6y ago
Artificially suppressed interest rates? Economists define the natural interest rate as "the interest rate that supports the economy at full employment/maximum output while keeping inflation constant"[wikipedia] For the last decade we've seen very little time at full employment and absolutely no accelerating inflation by any standard measure. So by any textbook definition of a natural interest rate we've been keeping interest rates too high.
- mcfly1985 6y ago
  You're an idiot if you haven't realized the relationship between QE and US treasury interest rates across the curve. You're an even bigger idiot if you don't understand the relationship between UST interest rates and every other interest rate.
  - neffy 6y ago
    I think the issue is a little more interesting than the popular diatribe. Agreed interest rates are at an all time low. At the same time, the supply of loans is at an all time high, thanks to new (old) mechanisms like loan securitization being thoroughly commoditized. Discuss - why shouldn't the price of loans (interest rates) be subject to the laws of supply and demand just like everything else?
    - mcfly1985 6y ago
      > why shouldn't the price of loans (interest rates) be subject to the laws of supply and demand just like everything else? They should be. It doesn't work though when the Fed comes along and buys the lion's share of loans.
      - neffy 6y ago
        that would presumably increase interest rates...
        JamesBarney 6y ago
jartelt 6y ago
In the hot markets (e.g. bay area), homes already have an inspection done and all potential buyers are able to look at the inspection report. In that case waiving inspection contingencies is not as wild/crazy as it sounds.

russell_h 6y ago

Outside of the Bay Area, and maybe a few other especially hot real estate markets, I’m sure that isn’t true. I’m in the process of buying a home in Washington and my agent says she’s never had a client waive the inspection contingency unless they’re buying a cheap fixer-upper to flip.

wrs 6y ago
I’ve participated (as a bystander, thank goodness) in some recent home offers in Washington where all contingencies (including inspection and financing) were expected to be waived if you wanted to win the bid. These were neither cheap nor fixer-uppers, but they were in central Seattle. Edit: Also, the expectation was auto-escalating offers, eBay style. The owner set a date to take offers and picked the best one.
- i_haz_rabies 6y ago
  This is also the case in rural Ontario.
  - cmrdporcupine 6y ago
    There is no way I'd buy anything rural without extensive inspection of well and septic, foundation, property, etc. In the last 15 years I've purchased in both Toronto and in rural Ontario with the full set of conditions; financing, inspection, etc. As a buyer I simply won't do it otherwise. We have a 6 acre hobby farm near Hamilton. But I also just don't bother to go look at properties with language in the text like "Accepting offers on...". We won't play the multiple offers game. In Toronto maybe this is the only way to get a home, but we were able to avoid it there back in 2005 by just hunting in areas that weren't "cool." My experience is there's always almost other places that come up, where the seller has more scruples. We might sell our hobby farm soon. I would fully expect any potential buyer to demand inspection.
- ISL 6y ago
  This was definitely the case a few years ago in Seattle. The understanding was that homes would be on the market for a week and any inspections prior to waived-contingency bids would happen during that week. Everyone knew the offers were all as-is. Aside from the stress of weekly rushes to view, inspect, bid, and bid-up, the process primarily compressed the entire process into a short period of time. The biggest inefficiency was that essentially all buyers were forced to become journeyman experts at the compressed-time process.
  - poulsbohemian 6y ago
    It is a frustrating experience. My market is starting to develop into this, in large part because of Seattle buyers flooding inland. That said, it is better than some of the alternatives. There are other highly-competitive markets where houses just never come on the market - instead they get sold in pocket listings and the only way to buy a house is to canvas a neighborhood or be in tight with an agent who is farming neighborhoods. It's ideal if houses actually come to market, the market can decide the value, and it's supply / demand that is making it possible for houses to be sold on such a short time-table. It's a better dynamic all around though than having houses sit, potentially vacant, for months and months and/or increasing the challenges where buyers want to move and may even have a house under offer but can't get their current house sold. Liquidity in the housing market is ultimately a good thing for buyers and sellers.
    - ISL 6y ago
      Agreed. Liquidity is good. The pocket listings may not be optimizing price for the seller, though they may minimize hassle. It seems like it is healthiest for homes to be on the market for about two weeks. Part of the trouble with short-duration listings is that it is a high-stakes version of the optimal-stopping problem. I think a little more holistic visibility into the market's offerings might yield better matches between buyers and homes. Choosing an abode for the next few decades amidst weekly auto-escalation bidding wars just doesn't seem healthy for the future dwellers.
- ericbarrett 6y ago
  Buying in a developed city in the U.S. has historically been a different set of concerns than buying rural. One could generally assume that the environment is managed by the city and state, so that floods would not reach your home and wildfires would be stopped at the city limits; insurance was for accidents and freak events (hailstorms, quakes, electrical fires). Due to both developmental sprawl and the decay of state and federal infrastructure, one can no longer assume a home is in such a controlled environment so, buyers (and insurers!) have some lessons to learn. A good example of the kind of change I’m talking about is development in 100-year flood plains in Houston[0]. 30 years ago, a naive home buyer would not have had to worry about it, because flood plains were off limits. What changed? Greedy developers? Ignorant planners? More population? Perhaps all of it. But now you have to be educated to make the right call. [0] https://www.houstonchronicle.com/news/houston-texas/houston/article/Even-after-Harvey-Houston-keeps-adding-new-homes-13285865.php https://www.houstonchronicle.com/news/houston-texas/houston/...
  - flurben 6y ago
    30 years ago, building in flood plains had been an established routine for decades in Texas, and all over the United States. Using Houston as an example, 50 to 100 years ago it was the norm to bring in fill dirt from other regions, flatten and grade a piece of land, and construct a gridded residential neighborhood with total disregard for natural drainage. Flooding was dealt with by artificially channelizing bayous and streams, which is why Houston's urban waterways look so unnatural. Many of these older neighborhoods along the gulf coast were unsustainable and are not being rebuilt after hurricanes. Starting around 30 years ago, local, state and federal policymakers started to get a clue. Neighborhoods were more commonly build to accomodate the drainage patterns -- this is why developments from the 1990's, 2000's tend to have large retention ponds, (example: https://www.google.com/maps/@29.5517845,-95.4295706,3a,75y,211.08h,70.78t/data=!3m6!1e1!3m4!1suWGiKiZ_Huf7YgcJCtcN1g!2e0!7i16384!8i8192 https://www.google.com/maps/@29.5517845,-95.4295706,3a,75y,2... ) while neighborhoods from the 1950's-60's do not.
deleted 6y ago
[deleted]
poulsbohemian 6y ago
Real estate agent here, can confirm inspection contingencies are very much so a market and individual house decision. I'd also say it depends a lot on the buyer. For example - first time buyer, I'd always encourage them to do an inspection as they are going to learn a lot about being a homeowner from the experience. Someone who has a number of investment properties and knows houses inside and out? They might be able to get all the info they need with just a walk-through. As I understand it, in competitive urban markets it has become common for sellers to do a pre-inspection and then sell / provide that info for interested parties. This potentially makes for a faster sale and may create a more competitive situation if more potential buyers see less risk in the condition of the house and are willing to make an offer. But, at least in my state, anything a seller learns about the condition of their home must be disclosed so this could also backfire. Any time you can remove a contingency in a competitive situation it will be a potential advantage, but caveat emptor all day long - sellers seldom have a complete understanding of their home and property so it is to the buyer's best interest to do everything they can to inform themselves before completing the purchase.
cafard 6y ago
We lost a bid on at least one house in Washington, DC, back about 2004 because we had an inspection contingency and another party didn't. Maybe we'd have lost it on an escalation clause the way things were back then.

throwaway0a5e 6y ago

>Most home buyers waive inspection contingencies Most inspections are "pay us <stupid_number> to point out the obvious and we don't include <list of anything that requires more than just walking around the house eyeballing things to determine> and our liability limited to <price of inspection>". It's no surprise people wave them.

mcfly1985 6y ago
Maybe that's your experience if you go with your Realtor's "suggested" inspector. Again, most home buyers probably just go this route since no one really cares about quality any more. I researched my own inspector and chose a very technical retired engineer. He identified significant issues with the home that resulted in the price being reduced by 15%. You're an idiot if you waive inspections.
- throwaway0a5e 6y ago
  Home inspections are a well known "easy money and no risk" side gig for general contractors in my area. They're all crap but I guess if you need someone to point out what's gonna need work in the next 2-20yr it's better than nothing.
  - mcfly1985 6y ago
    Try finding an inspector who actually enjoys the job. They do great work.
    - throwaway0a5e 6y ago
      I don't need a home inspector. Short of catastrophic fire or flood there's nothing about a home I wouldn't just fix myself. The problem is the people who need someone to inspect the home for them don't know how to find a good inspector.
c22 6y ago
The home inspector I use gives me a booklet that is often hundreds of pages long and includes photos and detailed descriptions of every problem found as well as recommended remedies and ongoing maintenance requirements. I've never needed to call anyone else so I just assumed they were all like this.

sharadov 6y ago

My neighbors bought a house with no contingencies - the house had no earthing. WTF! Yes, it is a 1300 sqft mansion for 1.5 million.

williamstein 6y ago

Overall most home buyers do not waive inspection contingencies. Here is an article with precise recent data about exactly this: https://www.nationalmortgagenews.com/news/housing-markets-buyers-waive-appraisal-inspection-contingencies#:~:text=A%2020.6%25%20share%20of%20successful,%25%20month-over-month https://www.nationalmortgagenews.com/news/housing-markets-bu.... The article says waiving of inspection is out of control and going up, but nowhere near "most". Of course your local market is probably completely different than the entire US overall.

JamesBarney 6y ago

Artificially suppressed interest rates? Economists define the natural interest rate as "the interest rate that supports the economy at full employment/maximum output while keeping inflation constant"[wikipedia] For the last decade we've seen very little time at full employment and absolutely no accelerating inflation by any standard measure. So by any textbook definition of a natural interest rate we've been keeping interest rates too high.

mcfly1985 6y ago
You're an idiot if you haven't realized the relationship between QE and US treasury interest rates across the curve. You're an even bigger idiot if you don't understand the relationship between UST interest rates and every other interest rate.
- neffy 6y ago
  I think the issue is a little more interesting than the popular diatribe. Agreed interest rates are at an all time low. At the same time, the supply of loans is at an all time high, thanks to new (old) mechanisms like loan securitization being thoroughly commoditized. Discuss - why shouldn't the price of loans (interest rates) be subject to the laws of supply and demand just like everything else?
  - mcfly1985 6y ago
    > why shouldn't the price of loans (interest rates) be subject to the laws of supply and demand just like everything else? They should be. It doesn't work though when the Fed comes along and buys the lion's share of loans.
    - neffy 6y ago
      that would presumably increase interest rates...
      - JamesBarney 6y ago

jartelt 6y ago

In the hot markets (e.g. bay area), homes already have an inspection done and all potential buyers are able to look at the inspection report. In that case waiving inspection contingencies is not as wild/crazy as it sounds.