To waive inspection or not?

[Joshua Van Every]

Hey guys,

Yesterday I put my first offer in on a beautifully remodeled flip. Everything from the electrical, plumbing, roof, interior and exterior was brand new. I’m in Milwaukee and it was located in West Milwaukee/Southside area. My initial plan was to invest into multi-family units. But after evaluation and getting numbers back on expenses vs income, I’d cash flow about $500 on 5 bdr 2 bath.

My realtor said the offer we put in was very strong and gave the option to waive the inspection saying he had previously seen this happen on a property that was fairly new as well. However, I wasn’t comfortable taking the risk of waiving the inspection contingency and out of the 12 offers, we lost. My realtor was confident we would’ve won if I would’ve waived it but understood my concern. Someone suggested having a “basement expert” come in for a small cost and give the green light or to hold off and we didn’t find one in time.

Is this something common to waive inspection on properties that are in bid wars? If so, is there something I can do to analyze better myself? It seems like a crap shoot. Any experience or advice would be helpful!

[Jonathan Greene]

No, you should never waive inspection, especially as a new investor. You can make your inspection contingency languate much more palatable however, by phrasing it like this:

Version 1 for new investors - Buyer agrees to limit their inspection repair requests to major electrical, plumbing, foundation, structural, and environmental issues.

Version 2 for savvy investors - Buyer agrees to limit their inspection repair requests to catastrophic electrical, plumbing, foundation, structural, and environmental issues.

Both versions give you leeway to define what is "major" or "catastrophic" so you always have an out, but it also shows the seller that you aren't going to tic-tack them with cosmetic repair requests.

No realtor should EVER suggest you waive inspection, even if it were a good idea. That creates a big liability on their end and their brokerage should something come up.