Highest and best – waiving all contingencies vs escalation clause

[Kristie Giles]

Hi, I live in a hot (or at least warm) market and have been trying to buy my second home/first investment property for about a year and a half (off the MLS). I originally was looking for the mythical 'structurally sound but killer deal because it has some broken windows and hasn't been remodeled since the 1940s' type of place, but I've since lowered my standards to include properties with major foundation issues and the like. I've gotten bids from piering companies for other properties in the area and feel like I have a reasonable understanding of what average and worst case scenario costs look like, etc. I'm planning to buy and hold, and my boyfriend and I can do most of the work ourselves. I've been doing cash (via HELOC), 10-day close offers with no contingencies besides an inspection contingency (per my agent's recommendation). I've made some not-much-over-asking-price offers on a couple "multiple offers received, highest and best due by ___" properties but never won any.

I found a "highest and best due by tomorrow" home I'm really excited about listed for about $100K less than the going rate for the neighborhood, accepting only cash offers, presumably because of the sagging roof, foundation issues, fact that it was built in the 1900s and pretty much never updated, etc. My real estate agent thinks it will go for well over asking price and suggested I do an escalation clause to beat any competing offers by $1000 up to a given cap. I have read mixed opinions about that strategy. It sounds fine to me, but I don't know how I would pick a cap. 

I suggested nixing the inspection contingency since I already know it needs foundation work, roof work, new windows, new wiring, basically "new everything"...I already know there's asbestos tape on the HVAC, radon is common in the area, etc. My insurance company probably won't be willing to insure it right away because of the tree branch dragging on the roof, etc. I've been through quite a few home inspections, and I'm not sure what else they could tell me that would really matter. I don't really care whether the back right burner of the stove doesn't work or there's some water damage on some joists somewhere. My agent thinks getting rid of the inspections contingency is a terrible idea, but I feel like if I was selling a house with all those issues, I'd be willing to accept quite a bit less if I knew it was a done deal. 

Does anyone have thoughts or good/bad experiences relating to either of those strategies? My goal is to get this property for as little as possible, not just to make sure I get it. Thanks so much for reading this!