Author Topic: Frenzied housing market leading to inspection waive  (Read 8942 times)

muckabout

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Frenzied housing market leading to inspection waive
« on: February 27, 2015, 10:41:03 AM »
We're searching for houses in the Seattle market which seems to have hit an irrational frenzy. An agent we spoke to said nearly all houses are now receiving multiple bids and in nearly every case a bidder waives inspection to get an advantage (this causes a cascade effect for the other bidders).

As a first time home buyer it seems insane to me that anyone would do this. Anyone have insight into this? We're not looking for an opulent house, but we are planning on staying here long enough -- and rent prices are on the rise -- that buying seems attractive.

waltworks

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Re: Frenzied housing market leading to inspection waive
« Reply #1 on: February 27, 2015, 10:43:48 AM »
You have a tough decision to make, then. I personally would not play that game no matter what but if you're dead set on buying a house, have your agent put that in your offer as well. It sounds like otherwise you won't have a chance.

I have seen plenty of appraisal waiver clauses in the last few years but inspection waivers? Wow.

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Nate R

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Re: Frenzied housing market leading to inspection waive
« Reply #2 on: February 27, 2015, 11:12:14 AM »
I agree, seems insane. I'd be ready for a market to start cooling off soon if it was THAT hot!

ShoulderThingThatGoesUp

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Re: Frenzied housing market leading to inspection waive
« Reply #3 on: February 27, 2015, 11:18:47 AM »
Sounds like renting is the wise move.

Numbers Man

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Re: Frenzied housing market leading to inspection waive
« Reply #4 on: February 27, 2015, 11:23:46 AM »
I have purchased three houses and all inspectors came up with minimal problems. Look at how the house is kept up and ask direct questions like does the roof leak. My state has a form signed by the seller stating whether or not there are any problems with the house. So the lack of inspector may not be such a big deal. A little common sense goes a long way.

GuitarStv

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Re: Frenzied housing market leading to inspection waive
« Reply #5 on: February 27, 2015, 11:42:37 AM »
We were in a similar situation when buying our house several years ago.  If you're seriously considering a place and want an inspection, ask the seller to allow you to do an inspection before you make your offer.  Usually they're cool with this as if the inspection doesn't go well they're not on the hook for anything.  Yes, you'll be out of pocket for the money paid to the inspector . . . but you'll know about problems and can offer with greater confidence.
« Last Edit: February 27, 2015, 11:45:05 AM by GuitarStv »

strongmag

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Re: Frenzied housing market leading to inspection waive
« Reply #6 on: February 27, 2015, 11:43:47 AM »
As someone who has both bought and sold in another hot market, I hear ya.

What we did on the purchase was require an inspection but put in a high aggregate (amount under which we would not expect the homeowner to pay for any repairs, etc.) so that we could walk away if there were major issues but the seller could be assured that we wouldn't "nickel and dime" them on small issues. This was what our realtor recommended and our offer was selected in a multiple bid situation.

Perhaps you could discuss the "high aggregate" inspection contingency option with your realtor and see how it might work in your market.

Mr. Frugalwoods

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Re: Frenzied housing market leading to inspection waive
« Reply #7 on: February 28, 2015, 01:56:36 PM »
The high aggregate strategy is also common here in Cambridge, MA.  We have the double whammy of a frenzied market AND 150 year old housing stock.

Friends tell me that the common aggregate around here is $5k-$7.5k.  Basically buyers saying they'll take it as long as it doesn't have catastrophic structural problems.

clarkfan1979

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Re: Frenzied housing market leading to inspection waive
« Reply #8 on: February 28, 2015, 05:38:46 PM »
We're searching for houses in the Seattle market which seems to have hit an irrational frenzy. An agent we spoke to said nearly all houses are now receiving multiple bids and in nearly every case a bidder waives inspection to get an advantage (this causes a cascade effect for the other bidders).

As a first time home buyer it seems insane to me that anyone would do this. Anyone have insight into this? We're not looking for an opulent house, but we are planning on staying here long enough -- and rent prices are on the rise -- that buying seems attractive.
[/quote
We're searching for houses in the Seattle market which seems to have hit an irrational frenzy. An agent we spoke to said nearly all houses are now receiving multiple bids and in nearly every case a bidder waives inspection to get an advantage (this causes a cascade effect for the other bidders).

As a first time home buyer it seems insane to me that anyone would do this. Anyone have insight into this? We're not looking for an opulent house, but we are planning on staying here long enough -- and rent prices are on the rise -- that buying seems attractive.

First of all, I love the fact that you were able to insert the word "cascade" into your problem in Seattle. Has anyone made a bid in this situation and have it work out? I typically wouldn't feel comfortable outbidding people. I typically look for the house that nobody else wants and can negotiate a lower price.

Waiving the inspection is a personal decision. My dad's side of the family have a construction background and do their own inspection. They pay very little attention to the official inspection.

arebelspy

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Re: Frenzied housing market leading to inspection waive
« Reply #9 on: February 28, 2015, 06:11:41 PM »

Waiving the inspection is a personal decision. My dad's side of the family have a construction background and do their own inspection. They pay very little attention to the official inspection.

Irrelevant. If you're waiving the inspection contingency, you're giving up the right to back out based on any inspection made, yours included. In other words, you're on the hook for the EMD regardless of if you find an issue or a home inspector does.

In the case of your dad's family, they may not get an official inspection, and that's fine, but if they waive their inspection contingency they can't inspect themselves and back out because of that either.

In OPs case, I'd be patient. As first time home buyers, you'll want an inspection. Keep looking, and putting in offers. You'll get one.
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clarkfan1979

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Re: Frenzied housing market leading to inspection waive
« Reply #10 on: March 03, 2015, 06:04:07 AM »

Waiving the inspection is a personal decision. My dad's side of the family have a construction background and do their own inspection. They pay very little attention to the official inspection.

Irrelevant. If you're waiving the inspection contingency, you're giving up the right to back out based on any inspection made, yours included. In other words, you're on the hook for the EMD regardless of if you find an issue or a home inspector does.

In the case of your dad's family, they may not get an official inspection, and that's fine, but if they waive their inspection contingency they can't inspect themselves and back out because of that either.

In OPs case, I'd be patient. As first time home buyers, you'll want an inspection. Keep looking, and putting in offers. You'll get one.

I don't think my family has ever waived their right to do an inspection. However, when someone comes over to look at the house, how are you banned from doing your own inspection? Are you not allowed to go in the attic or on the roof?

If you are not allowed to do your own inspection wouldn't it be fair to assume that the selling is hiding something.

Guizmo

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Re: Frenzied housing market leading to inspection waive
« Reply #11 on: March 03, 2015, 07:28:44 AM »

Waiving the inspection is a personal decision. My dad's side of the family have a construction background and do their own inspection. They pay very little attention to the official inspection.

Irrelevant. If you're waiving the inspection contingency, you're giving up the right to back out based on any inspection made, yours included. In other words, you're on the hook for the EMD regardless of if you find an issue or a home inspector does.

In the case of your dad's family, they may not get an official inspection, and that's fine, but if they waive their inspection contingency they can't inspect themselves and back out because of that either.

In OPs case, I'd be patient. As first time home buyers, you'll want an inspection. Keep looking, and putting in offers. You'll get one.

I don't think my family has ever waived their right to do an inspection. However, when someone comes over to look at the house, how are you banned from doing your own inspection? Are you not allowed to go in the attic or on the roof?

If you are not allowed to do your own inspection wouldn't it be fair to assume that the selling is hiding something.

ARebelSpy is saying that if the offer was accepted but you waived the inspection contingency, you can't back out because you found out there was an expensive structural issue.

I don't think it's uncommon for people to go in the attic and crawlspace to take a look. I do it to look for visible problems, look at the plumbing, hvac, etc. If I think something is off, then I'll call an inspection.

arebelspy

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Re: Frenzied housing market leading to inspection waive
« Reply #12 on: March 03, 2015, 08:00:46 AM »

Waiving the inspection is a personal decision. My dad's side of the family have a construction background and do their own inspection. They pay very little attention to the official inspection.

Irrelevant. If you're waiving the inspection contingency, you're giving up the right to back out based on any inspection made, yours included. In other words, you're on the hook for the EMD regardless of if you find an issue or a home inspector does.

In the case of your dad's family, they may not get an official inspection, and that's fine, but if they waive their inspection contingency they can't inspect themselves and back out because of that either.

In OPs case, I'd be patient. As first time home buyers, you'll want an inspection. Keep looking, and putting in offers. You'll get one.

I don't think my family has ever waived their right to do an inspection.

Well that's what we were talking about in this thread - the housing market being so frenzied that buyers are waiving that right.  I was assuming you were posting on topic, and pointing out that even if you have the capability to inspect yourself, when you waive that right you aren't just waiving the right to have a traditional "home inspection" but you're waiving the right to back out due to any inspection, your own included.

In fact, you can still have a home inspection when you waive the right, you'll just lose the EMD, even if you find something.

However, when someone comes over to look at the house, how are you banned from doing your own inspection? Are you not allowed to go in the attic or on the roof? If you are not allowed to do your own inspection wouldn't it be fair to assume that the selling is hiding something.

You can take a look, sure.  But if you find a problem (say, mold, or whatever), tough.  You waived the inspection contingency, so you either buy it anyways, or the seller has recourse (typically keeping the EMD when you back out, though it depends on the contract).

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clarkfan1979

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Re: Frenzied housing market leading to inspection waive
« Reply #13 on: March 03, 2015, 08:15:53 AM »
I'm talking about doing an inspection the first time you look at the house. This would be done before an offer is made.

arebelspy

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Re: Frenzied housing market leading to inspection waive
« Reply #14 on: March 03, 2015, 08:20:07 AM »
I'm talking about doing an inspection the first time you look at the house. This would be done before an offer is made.

Sure, you'll probably get to look around some, but you won't get the two hours or so you need to do a thorough inspection, get to test the different systems, etc.

By waiving the inspection contingency, you're basically taking a cursory look for major problems before making the offer and then are willing to accept it as-is, and deal with any problems that exist.

It's a good indication of a strong seller's market.
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clarkfan1979

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Re: Frenzied housing market leading to inspection waive
« Reply #15 on: March 03, 2015, 08:46:20 AM »
I agree that in a frenzied market it would be difficult to get the time necessary to do a full inspection. It's not impossible, but less likely.

DoubleDown

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Re: Frenzied housing market leading to inspection waive
« Reply #16 on: March 04, 2015, 10:26:27 AM »
As a first-time home buyer, there is no way you should waive the inspection contingency. If that's the only way to have a bid accepted on a house, then you just have to keep renting and wait for a more rational market. While the probability of discovering a significant problem is somewhat low, the consequences could be disastrous. It's not worth it. Besides, the fact that it's a frenzied market is probably another good indication that it might make sense to wait until things are more normal.

The only way I'd ever consider waiving an inspection is if I knew I was buying a total dump that I planned to level anyway, or wouldn't be surprised if that was the outcome of the inspection.

clifp

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Re: Frenzied housing market leading to inspection waive
« Reply #17 on: March 04, 2015, 02:06:39 PM »
Hot markets are pain in the ass to deal with.  Although I will say even in Vegas where both ARebelspy and I were typically competing with 20 other offers for the properties we were trying to buy I don't remember having to waive home inspections (although properties were generally sold As Is)  As a first time home owner you definitely want to have a home inspector, I have been home/property owner 25 years and about every other year, I learn some new and expensive way that home can break.   A good home inspector won't catch all of them but will catch many.


So regardless of waiving the home inspection or not I think it is money well spent to actually hire one and now days they generally can do an inspection and give you a report in a week to 10 days.

The property buying process generally provides the buyer (and rarely the seller) several opportunities (contingencies) to back out of the deal and get your earnest money depost (EMD) back.
As a home buyer you want to have at least one contingency that lets you back out of the deal. I try to make sure their is at least one thing that is likely to fail to give me an opportunity to back out. In a hot market with prices rising rapidly, generally appraisals will lag behind the actual value.  An appraisal contingency is common because most people struggle to come up with the down payment.  So my advice if for competitive reasons you have to waive the home inspection than make sure you have an appraisal contingency that way if the home inspectors finds some serious problems you can back out of the deal because the house failed to appraise at the full price.

KiloRomeo

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Re: Frenzied housing market leading to inspection waive
« Reply #18 on: March 04, 2015, 02:41:44 PM »
Markets are hot here in FL too. Every house we've tried to buy goes for over asking price and a lot of them are all cash offers.

GuitarStv

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Re: Frenzied housing market leading to inspection waive
« Reply #19 on: March 05, 2015, 09:26:51 AM »
I'm talking about doing an inspection the first time you look at the house. This would be done before an offer is made.

Sure, you'll probably get to look around some, but you won't get the two hours or so you need to do a thorough inspection, get to test the different systems, etc.

By waiving the inspection contingency, you're basically taking a cursory look for major problems before making the offer and then are willing to accept it as-is, and deal with any problems that exist.

It's a good indication of a strong seller's market.

We arranged for a full three hour inspection of the house we eventually bough and got a full report before placing our offer.  You eat the cost of the inspection, but it allows you to safely place an offer in a hot market.

CommonCents

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Re: Frenzied housing market leading to inspection waive
« Reply #20 on: March 05, 2015, 10:03:59 AM »
As someone who has both bought and sold in another hot market, I hear ya.

What we did on the purchase was require an inspection but put in a high aggregate (amount under which we would not expect the homeowner to pay for any repairs, etc.) so that we could walk away if there were major issues but the seller could be assured that we wouldn't "nickel and dime" them on small issues. This was what our realtor recommended and our offer was selected in a multiple bid situation.

Perhaps you could discuss the "high aggregate" inspection contingency option with your realtor and see how it might work in your market.

I recommend this.  We have friends that did (though with a low amount).  I have found significant issues with an inspection on a newly renovated house, so you can't assume the house won't have any problems, but this shows you are serious and will only walk away for a big issue.

You can ask them to allow you to do an inspection before putting in an offer.  Risks - not winning the bid and being out the fee.  They may also refuse not wanting to allow you that time or for other reasons.  (Our inspections have taken 4-5 hrs.)

We received 10 offers on our condo.  Our highest had no inspection and an escalation clause.  We declined it and took the next highest after that buyer removed the inspection clause and the realtor lowered the realtor fee (it was the same agency as our realtor as they had walked in unrepresented.  We had negotiated a lower fee for this situation in advance, but this lowered it further to make them generally equivalent.)  If the market is hot, it may take a while to get back to a point where people aren't waiving it.

dragoncar

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Re: Frenzied housing market leading to inspection waive
« Reply #21 on: March 05, 2015, 01:48:19 PM »
Coworker just mentioned he's been waiving inspection.  I would not do this, but mostly because I don't want to be bidding in a hyper-competitive market.  Too much chance for overbidding.  However, I don't think he's crazy.  If you're looking at a condo, the inspector isn't evaluating the entire building anyways.  If you're looking at a house, major problems will probably sink financing.  Around here, the high prices make minor problems immaterial -- people pay over a million for a tear-down, so the majority of what you are buying is land.  Who cares if the faucet leaks?

My experience with inspectors has been that they can't really catch that much anyways due to enclosed spaces.  I can peek into the attic and crawlspace myself, it's not like the inspector has x-ray vision.

redbirdfan

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Re: Frenzied housing market leading to inspection waive
« Reply #22 on: March 28, 2015, 03:52:47 PM »
The Seattle housing market is absolutely crazy right now.  I feel your pain.  I've been looking for any property where the numbers would work for a few years.  After crunching the numbers staying in my apartment and maxing investments has won so far.  Plus traffic has gotten so bad here that the idea of moving outside of my walk/bike range is now off the table.  Do NOT waive any inspections in Seattle unless you have extra money to burn.  Old housing stock, recent flips and a damp climate are a recipe for unexpected surprises.  Doing a pre-inspection and losing a few hundred dollars is better than losing your EM deposit or getting stuck with costly repairs that could have been discovered and factored into the purchase price.  All the sellers were panicking in 2009-2012.  We're just on the other side of the pendulum swing.  Try to use the current frenzy as an opportunity to save more money for the house that will eventually be yours.  I know it's no fun watching "the one" come and go on Redfin, but it will be worth it when you do get your place.  Hang in there.         

lhamo

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Re: Frenzied housing market leading to inspection waive
« Reply #23 on: March 28, 2015, 04:37:34 PM »
Welcome to the spring rush in Seattle...

I have been tracking the property market in NE and NW Seattle (from Lake Washington over to Golden Gardens, and the Ship Canal up to about 145th) since last fall.  The number of listings started to drop dramatically in October/November, but stuff was also staying on the market for quite a long time.  Unless you have a good reason to do so, I wouldn't jump into the current feeding frenzy.  Has all the makings of a second bubble, if you ask me. 

I personally wouldn't waive an inspection in Seattle, for the reasons cited by the poster above. 

That being said, if you see a nice 3br Craftsman in Wedgwood/Ravenna going for under $600k, be prepared to make an offer quickly and have an inspector already lined up.  Something like that is going to fly off the shelves in this market.  The three properties we looked at a couple of weeks ago are already gone.

Not sure what your price point is, but here are a few listings in NE Seattle that have been on the market for quite awhile -- a couple have had offers pulled after inspection:

https://www.redfin.com/WA/Seattle/3857-NE-89th-St-98115/home/314917   (66 days, $755k)
https://www.redfin.com/WA/Seattle/5618-8th-Ave-NE-98105/home/311720 (241 days, $845k, multi-unit rental)
https://www.redfin.com/WA/Seattle/8915-20th-Ave-NE-98115/home/107218 (58 days, $900k)
https://www.redfin.com/WA/Seattle/11555-35th-Ave-NE-98125/home/111714 (78 days, $400k, one offer pulled after inspection in Feb.)
https://www.redfin.com/WA/Seattle/13323-23rd-Pl-NE-98125/home/115491 (118 days, $450k, "As is" (and is is a little weird), one offer pulled after inspection in Feb.)
https://www.redfin.com/WA/Seattle/3025-NE-140th-St-98125/home/2063531 (68 days, $560, multi-unit rental (4x2br)

Market in NW Seattle looks even tighter -- only listing I see that I recognize from before is a townhouse near 85th that first listed the week of March 9.

Still, I wouldn't buy without an inspection unless you have a larger cash reserve and are prepared to pay to have any potential issues addressed.  And plan to hang on to the property a long time.  Because I don't think values can keep going up like this and any wobble in the overall economy and we may see things coming down again.



Axecleaver

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Re: Frenzied housing market leading to inspection waive
« Reply #24 on: March 30, 2015, 07:59:25 AM »
I saw this in Northern Virginia (Fairfax County) in 2000, where the Internet bubble was driving prices. After losing a half dozen other houses, we were fortunate to be the first family in to see a property we liked. We put in an offer on the spot for list price, waived inspection, and added (get this!) an "escalation clause" for our realtor that, if a higher competing offer was received, would raise our offer up to a certain amount.

This was for a relatively new home (5 years old) with very few problems. If you waive the inspection, you want to make sure you have other "out" clauses in the contract.


MishMash

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Re: Frenzied housing market leading to inspection waive
« Reply #25 on: March 30, 2015, 09:44:54 AM »
I saw this in Northern Virginia (Fairfax County) in 2000, where the Internet bubble was driving prices. After losing a half dozen other houses, we were fortunate to be the first family in to see a property we liked. We put in an offer on the spot for list price, waived inspection, and added (get this!) an "escalation clause" for our realtor that, if a higher competing offer was received, would raise our offer up to a certain amount.

This was for a relatively new home (5 years old) with very few problems. If you waive the inspection, you want to make sure you have other "out" clauses in the contract.

It's happening again in Fairfax.  When we bought last year we put in 13 offers before one got accepted and we had to waive inspection, we did have an inspector come in and do one to confirm there were no issues but we had a contingency that we had 48 hours after the offer to back out if something massive was found.  Everything he found was trivial (missing railing in the basement, one outlet that didn't work) so it worked out...made us nervous as hell though but we were LITERALLY going to be homeless 2 months later since my husband had to be in VA and we lived in CO at the time and with 4 pets no one rents to us.

RunningWithScissors

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Re: Frenzied housing market leading to inspection waive
« Reply #26 on: March 31, 2015, 11:48:11 AM »
I personally wouldn't buy a house without an inspection, but I can understand the pressure to do so in a hot market.  Unfortunately, most inspections aren't worth the paper they're written on, and most inspection companies don't seem to have any accountability in the case of missing major defects.

Hubby and I bought our last house after having a thorough 4 hour long inspection by someone I knew was extremely experienced and qualified in addition to three of our own visits/reviews.   However, once we bought and started a major renovation, there were about $15,000 in extra costs for roof and window replacement that were triggered by a 100-year rainstorm.  We were a bit stressed about the costs, but decided to mentally reframe it as 'the house is telling us what we need to do'.  That, plus having a healthy contingency in our budget and having 'vultched' the house for $150,000 less than appraised value meant that we accepted these costs.

In short, it's a risk management exercise.  You have to decide what level of risk you're comfortable with, keeping in mind your experience with construction/building codes/local issues, and act accordingly. 

I'm a red panda

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Re: Frenzied housing market leading to inspection waive
« Reply #27 on: March 31, 2015, 12:03:40 PM »
Quote
Unfortunately, most inspections aren't worth the paper they're written on, and most inspection companies don't seem to have any accountability in the case of missing major defects.
This is why I'd probably consider waiving it.

Having bought 2 houses our inspectors didn't really come up with anything we didn't see on our own.  And one missed a major issue that haunted us for the next 7 years of home ownership.

I guess it would depend on the condition the house looked to be in whether I would waive it.

Bob W

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Re: Frenzied housing market leading to inspection waive
« Reply #28 on: March 31, 2015, 12:18:16 PM »
I just gotta say I'm blown away by the home prices quoted for the Seattle area.   

PawPrint3520

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Re: Frenzied housing market leading to inspection waive
« Reply #29 on: March 31, 2015, 07:10:13 PM »
I just gotta say I'm blown away by the home prices quoted for the Seattle area.

Me, too. I live in a sought after neighborhood in Seattle in an area with a walkability score of 97. There are 3 condos for sale across the street from our apartment building. One is 850 s.f. on the garden level with an HOA monthly fee of $400. The asking price is $350k. Seems insane to me.

Jack

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Re: Frenzied housing market leading to inspection waive
« Reply #30 on: March 31, 2015, 08:06:24 PM »
I suggest doing a lot of reading and binge-watching a whole bunch of HGTV (especially "Holmes Inspection") and/or This Old House (especially if you don't have cable, as you shouldn't), so that you become competent to inspect the houses yourself. Then do your inspection before making an offer in the first place.

If you're looking at a condo, the inspector isn't evaluating the entire building anyways.

For a condo, I'd honestly be more worried about hiring a lawyer (or somebody appropriate) to evaluate the HOA and the building's finances than I would be about hiring an inspector to check what few systems an individual unit owner is responsible for. Of course, I'm also somewhat handy and suspicious of others, so that might factor into it a little...