Buying with no Inspection Contengency?

Question

Hi BP?

I made my first Offer on a SFH in a market out of state through my RE Agent with the goal to hold for cash flow. I made a cash offer with a 14 day close, and a 7 day inspection contingency window. My agent said wrote up and sent and offer in the morning, and the offer was to expire at 9pm the same day. The seller is a wholesaler and they didn’t get back to us until 4pm the following day by email. The seller apologized that they didn’t get back to us until after the offer expired. They said that if I still wanted the property they wouldn’t agree to an inspection contingency , but I could have someone come look at it at 9am the following morning of the email. I ultimately decided to retract my offer because I would feel uncomfortable with such a short window to perform any inspections. There was no formal counter offer sent, just a loosely worded email. Did I make the right call? And secondly, is this normal- should I expect this in the future? Thanks in advance.

Frank Wong · Answer

It all depends on the area and the particular property.  In my area, you most likely will not get your offer accepted by keeping your contingencies.  The properties usually come with a home and termite inspection from the seller so that does take a portion of the risk of the unknown out of it.

As for your investment purchase.  Most likely you won't have any reports from wholesalers or from MLS listings in those type of houses.  This is where your skill level of assessing the deal prior to making an offer comes into play.  The better you are able to value the property the more confident you will feel about putting a non-contingent offer.

If you are cash a 14-day close 7-day inspection is too long.  If I were to keep the contingency it would be a 9-day close 3-day inspection.   The investments I buy I pay cash and this is what it looks like for me. 7 day close noncontingent.  I know my risk before I put the offer in and not worried about the property.  I know 2 things when I do this.  I know what my cost would be for the rehab and I know there is enough meat on the bone to make up for anything unforeseen that I didn't expect.

If you are buying from a wholesaler.  You better know how to analyze a deal from top to bottom on your own. You should not buy based on their numbers. This is the biggest mistake made by new investors.

Russell Brazil · Answer

Depends on the market. In DC you would be unlikely to every be able to buy a property with in inspection contingency, so we do it all the time.

Jason Foster · Answer

I don't know where you're investing, so take this with a grain of salt, but at least in the markets I'm active in, "clean" offers (meaning most/all contingencies waived) are pretty common if you're buying investor grade properties and competing with all cash offers.  I lost four deals in a row this winter because of financing & inspection contingencies.  On the fifth I waived both, and ended up securing the deal despite having a lower priced offer than at least one of the other investors bidding for the property.  There's no right/wrong call, and other deals will come, so I wouldn't stress about losing this one.

Caleb Heimsoth · Answer

@Nick Wilson I would never give non refundable EMD or no inspection on your first deal out of state with a wholesaler.

That’s a great way to get ripped off.  Have you been following the Morris invest debacle? Most of those issues are avoided if they did an inspection (which they didn’t)

Lien Vuong · Answer

This is a very common practice in a competitive market such as Boston or CA, you can protect yourself by saying "subject to an agreeable purchase and sale agreement' and that would protect you and allow you to walk away with or without inspection also.

Keep in mind that if you waive inspection contingency you are still able to perform one, you have the right to, it's just not a contingency where you can walk away from the deal if you found something that you didnt like.

Hope that helps.

Frank Geiger · Answer

It is common for wholesalers to market a property with a non-refundable deposit and no inspection contingency. However, you can still inspect the property all you want after the offer is accepted. The non-refundable deposit is usually a bit higher (5-10k) working with wholesalers. There are tons of contingencies but they will most likely be voided. Your deposit covers their money holding the property plus their time for finding the property/starting the closing process. It's an incentive to close so that they get paid.

For MLS properties, it's just a stronger offer because you are accepting the property "as is". There is a risk you lose your deposit using this tactic.

Buying with no Inspection Contengency?

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