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In the fast-paced real estate market of recent years, a striking trend emerged: buyers waiving home inspection negotiations to make their offers more attractive in highly competitive bidding wars. This bold move was often necessary to secure a home in a market characterized by low inventory and high demand. However, as the market dynamics shift and the frenzy continues to cool, inspection negotiations are making a comeback, reintroducing a critical element to the home buying process.
How Did We Get Here?
During the height of the real estate boom, some buyers – after having lost out time and again in competitive situations – waived inspection contingencies to gain an edge in multiple-offer situations. This tactic, while risky, was seen as a way to stand out in an overly crowded market. Waiving inspection negotiations eliminated a potential delay in closing and insinuated to sellers that the buyer was committed and unlikely to back out of the deal due to minor issues. However, waiving inspection contingencies did not mean that a property did not have issues; rather, it signaled that a buyer would take on any defects – no matter the severity – and correct them after the closing.
The Return of Inspection Negotiations
With the recent shifts in the real estate market due to rising interest rates and increasing inventory, buyers now have leverage they didn’t have before, and they are once again prioritizing inspection negotiations. Buyers recognize the importance of this contractually-stipulated right and welcome the chance to benefit from the cost-savings, peace of mind and transparency that comes from a successful inspection negotiation.
For many sellers, however, this shift has proven challenging. For the sellers who were those buyers waiving inspection contingencies just a few short years ago, their selling experience is vastly different from what they may have expected. They now find themselves addressing buyers’ inspection requests via repairs, price adjustments and/or concessions; if they do not entertain these requests, they risk the buyer walking away, and subsequently face renegotiations with a second buyer that could negatively impact the sale or the time line.
Pre-Inspection: A Strategic Move for Sellers
To navigate this evolving landscape, sellers are increasingly turning to pre-inspections as a proactive strategy. A tactic not widely-used since well before Covid, a pre-inspection involves the seller hiring a professional inspector to evaluate the property before listing it on the market. This approach offers several advantages:
- Transparency and Trust: A pre-inspection report can be shared with potential buyers, demonstrating the seller’s commitment to transparency and honesty. This can build trust and reduce buyer anxiety.
- Identifying and Addressing Issues: By uncovering any potential problems early, sellers have the opportunity to make necessary repairs or adjustments before listing. This can eliminate last-minute surprises that could derail a closing and minimize the severity of the inspection negotiation altogether.
- Accurate Pricing: Understanding the true condition of the property allows sellers to set a realistic asking price, reflecting any repairs or upgrades that have been made. This can attract more serious buyers and reduce the likelihood of price renegotiations later.
- Smoother Negotiations: With a pre-inspection report in hand, both buyers and sellers enter negotiations with a clear understanding of the property’s condition. This can streamline the negotiation process, reducing the chances of disputes over inspection findings.
As the real estate market transitions from the frenzy of recent years to a more balanced state, the reemergence of inspection negotiations marks the return of a crucial aspect of home buying and selling. For sellers, embracing strategies like pre-inspections can provide a significant advantage, ensuring transparency, building trust, and facilitating smoother transactions. In this new normal, both buyers and sellers can benefit from the clarity and confidence that thorough inspections bring to the table, paving the way for successful and less stressful real estate transactions.
