Buyer Pre-Inspections: Seattle Home Buyers Paying For Inspections Before Writing Offers

The Seattle real estate market is Hot, Hot, Hot - home inventory is scarce, and buyers are plenty.  Home sellers will likely find they're in the catbird seat. Unlike in years past, sellers have more options at their disposal - and one of the most common strategies, is encouraging all buyers to perform (and pay for) a "Pre-Inspection" before they place an offer to purchase your home.

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The primary advantage of a buyer-performed pre-inspection is that it allows the seller to keep the home "Active" and on the market for other potential buyers to also consider placing offers. In an exceptionally tight market where multiple offers can be expected, this will likely allow the seller to review offers which have waived an inspection contingency. Once an offer is accepted, this means it's likely the only remaining roadblock to closing is financing, unless it's an all-cash purchase.

A Call To End Pre-Inspections

Earlier this week, I read a blog post by another successful Coldwell Banker agent here in Seattle, in which they propose an end to buyers performing pre-inspections. In the post, the author cited a recent sale where the seller attracted multiple offers and a higher price by allowing the traditional Pending Inspection period after going under contract. The sale apparently closed successfully, and everyone was happy - which is perfect of course. But, this left me wondering, "what if" the buyers had walked? (I elaborate more on this below.)

I'm in 100% agreement with the call to "take a deep breath" in this too-often crazy real estate market - and not get carried away. However, I respectfully disagree with the suggestion that pre-inspections are a disservice to the seller.

Without a doubt, "yes" - a home in the current seller's market will likely attract more offers without encouraging buyers to perform pre-offer inspections. I mean - I'm not usually as "blunt," but let's cut to the chase... one would expect nothing less when buyers have no actual "skin in the game" when placing the offer, beyond their signatures that is (which these days, is often done with a few mouse clicks or screen taps). Moreover, it's a sad fact in this type of market, that too many poorly written offers are submitted just in hopes that "something sticks." That's a waste of everyone's time, on all sides.

When inventory is effectively almost "zero" in some neighborhoods, it's a given that there will be ample interest for new listings in the most sought-after price ranges. In such cases, a seller would be smart to "limit the pool" of potential buyers by strategically attracting home buyers who are willing to perform & pay for a pre-inspection, and then submit their highest & best offer after inspection - which includes waiving any home inspection contingency.

What About the "Win-Win" Scenario?

Of course, I represent buyers too - and I fully understand that a hectic seller's market can be extremely frustrating to navigate... I certainly don't "enjoy" the situation either. Moving beyond emotional concerns however, the fact remains that sellers hold a very enviable position these days - it's simply the current reality. During such times, it behooves a seller to maintain their advantage in the market throughout the selling process. The seller should not be "overly concerned" with the buyer's best interests or desires. This is when I believe the so-called "win-win scenario" is being taken a bit too literally.

This is not to say that buyers & sellers - or their agents - should take an "adversarial" position. Absolutely not! Digging-in one's heels unjustly, or acting arrogant can derail a transaction - regardless of market conditions. With that said, there's positively nothing wrong with buyers or sellers fully-leveraging the market to be in their favor - and we owe it to our clients to suggest they take advantage of the nuances in every type of real estate market. For sellers, depending on the circumstances of course, this may mean encouraging buyers to perform home inspections prior placing an offer.

"Pending Inspection" - The Buyer is in Control

In the "typical" scenario, a home goes goes under contract "Pending Inspection." The buyer hires an inspector and discovers several issues - not necessarily anything "major." According to the inspection contingency as written, the buyer is in control at this point, and has absolutely nothing to lose by asking the seller for repairs, or to otherwise amend the monetary aspects of the contract.

When the seller receives the buyer's inspection response, at this point the seller has two choices - they can either make repairs and/or financially amend the contract, or they'll decide not to negotiate further, at which point the buyer may choose to terminate or proceed with the purchase. If buyer decides to terminate, the home goes back on the market.

The Seller's Inspection Conundrum

Despite a "hot" market, this scenario presents a conundrum for the seller. Even if the seller has an offer accepted in back-up position, they must disclose any issues discovered in the inspection which they were made aware of. Each and every inspection item - regardless of severity - is a potential point of negotiation between the buyer & seller, placing the seller at a disadvantage. Savvy buyers will be advised, that sellers would rather avoid placing the home back on the market with an "inspection stain" on the listing, and instead would prefer to work with buyers who are already in contract, and more committed to a deal.

Of course, some sellers may refuse to budge on inspection items - but regardless, it's definitely not an "ideal" position for the seller to be in. Having been in that position myself numerous times as a seller, I can assure you the inspection period (also known as the "Option Period" in Texas) can make you a nervous wreck, as future plans remain in limbo for what feels like an eternity. Would I personally take advantage of the opportunity to skip an inspection contingency completely? Absolutely - yes - without a doubt!

Other Inspection Contingency Hazards

Buyers Have Moved On:  Meanwhile, while the inspection contingency clock is ticking, other interested buyers have moved on to new opportunities. Buyers have absolutely no time to waste in a hectic seller's market - it's less likely in these times that motivated buyers are going to "hang around" on the sidelines, because in doing so, they may miss other options. Sure... new buyers will definitely come along if inventory is severely limited. But the issue remains, that if the contract terminates due to the inspection, "doubt" will be raised by the buyer, and the seller & their agent must disclose the inspection items which have not been repaired. Disclosing isn't an option - it's the law.

All Returns Accepted - No Questions Asked!:  The typical inspection contingency in the Seattle market is entirely subjective... no evidence what-so-ever is required in order to terminate. When a home falls out of contract during the inspection period, it's not necessarily an indication there are any issues with the home - but buyers & agents will think otherwise.

Shopping the Options: Termination could indicate the buyer found another home - a very real hazard in a tight market when a buyer may do most anything to "lock-up" a home using an inspection contingency, while contemplating their options. (Extreme example... but we recently became aware of a situation where a buyer had locked up 3 homes Pending Inspection, using 3 different agents, and 3 different names - personal and corporate entities.)

The fact is, that an Inspection Contingency allows the the buyer the opportunity to "kick the tires" for an agreed-upon duration - during which time they can change their mind for any reason. Of course no one would argue against a buyer's legitimate desire to fully inspect the property - before or after contract. The question is, why would a seller want to risk a contract being terminated due to inspection issues, when/if it can be avoided?

What Should You Do?

Of course, our job when listing a home for sale is not to "instruct" the seller as to their direction. Rather, we provide guidance and options - and just as in this blog post... discuss the pros and cons of all potential contractual issues, including the Inspection Contingency.

No matter the current market conditions, rarely are there any "easy answers." Ask a lot of questions of your agent! Being fully informed prior to listing your home for sale will better protect your interests, and pave a winning path towards closing.

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