In today’s seller-friendly housing market where competing with multiple offers is commonplace, homebuyers may feel compelled to pull out all the stops to win a bidding war.
However, the 2021 Zillow Consumer Housing Trends Report suggests that waiving inspection is not an effective way to win a bidding war. Despite increased competition over record-low inventory, 88% of successful buyers in 2021 said they got an inspection before closing their home.
That’s good news for homebuyers, since waiving home inspection to win a bidding war can be a risky move.
Professional home inspections are a buyer’s chance to discover issues that aren’t apparent to the untrained eye, such as foundation or roof damage. Left unchecked, these issues can eventually become major unexpected expenses. That’s especially devastating for homebuyers who went over budget to win the bidding war.
Home inspections increased with bidding wars
With demand far outpacing supply, bidding wars became the status quo in 2021. According to Redfin, the monthly share of home offers that faced competition has bee above 50% since May 2020.
At the bidding war peak in April 2021, nearly 75% of home offers submitted by Redfin agents faced at least one competing bid. As of August, that share had fallen to 58.8%.
Waiving home inspection is one strategy – albeit a risky one – that homebuyers use to make their offer more attractive to sellers. Skipping this step can speed up the closing process since it all but eliminates the prospect of negotiating over home repairs.
But this strategy seemed to have little appeal to buyers or sellers in 2021. In fact, the number of inspections increased with the number of offers.
Despite the competitive market, sellers reported more buyer-completed home inspections in 2021 than the previous three years. Just 16% of sellers reported that zero inspections were completed by potential buyers in 2021, compared to 21% in 2019.Share of sellers that reported: 2018 2019 2020 2021 0 inspections completed by buyer19%21%19%16%1-3 inspections73%71%72%73%4 or more inspections8%8%9%12%
While 65% percent of sellers received at least one offer that waived inspection, 88% of successful buyers completed an inspection before finalizing their purchase. According to the Zillow report, this discrepancy is meaningful.
“The discrepancy between offers that waive inspections and the share of buyers that complete one suggests that waiving inspection contingencies is not a surefire way to win against other offers. Much like competing with cash, buyers that insist on an inspection can still generally win if their offer is adequately appealing to a seller’s desire for profit and undelayed timeline.”
With bidding wars on the decline, homebuyers can feel more confident in closing on a home without taking the risk of waiving inspection.
Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.