How necessary is a home inspection when you’re looking to buy in a seller’s market?
First of all, what is a sellers market?
A seller’s market is when there is a low inventory of homes available to sell or more buyers than homes.
Whereas the opposite is true with a buyer’s market. There are more homes for sale than there are buyers wanting to buy.
When it’s a seller’s market every house you put an offer in on has to be your best offer with little to no conditions.
That means paying in cash, the mortgage is ready to go, no home inspection and buying a home, “as-is“.
If you fail to go over the asking price you’ll continue to be upset that you’re losing the real estate war.
That’s what happened to one CBB reader as she shares her story of purchasing a home battle for property ownership.
Right now it’s a buyers war in many places around Canada and homeowners are cashing in.
Why Buy A House In A Seller’s Market?
You might ask yourself why anyone would want to purchase a home when the inventory is low and prices are through the roof.
That’s a valid question since I have asked myself the same thing but the reason is, there are many.
- Relocating for employment purposes
- Moving closer to an employer
- Commute too long and highway driving is scary
- Breakdown of a relationship where a child or children are involved
- Just because
- The buyer has money and they want to spend it
- Moving closer to parents that are ill to help them
As mentioned there are so many reasons home buyers purchase a home when they know it will cost them far more than expected.
I’ve also read that homeowner’s are purposely keeping the selling price low so there will be a bidding war.
This in itself causes a ripple effect because it drives the market higher and higher.
Buying In A Seller’s Market Is Exhausting
Let’s look at a simple sellers market example:
If the neighbour just got $100,000 over asking the next seller will try the same tactic even though the house is far from worth it.
Then what happens is buyer conditions get dropped to make the deal lucrative for the seller.
For example, if a house is on the market for $500,000 and a buyer offers his/her best price at $600,000 with a home inspection. However, the next offer of $600,000 with no home inspection and no other conditions comes in.
Who do you think just bought themselves a house?
That’s right the buyer with no conditions.
So if the house is falling apart or has issues the no conditions buyer has to take it and sort it out themselves.
As we will learn below this can be pricey but at the same time if the need for a home is a must you take the good with the bad.
Unfortunately for one buyer she offered a high price with no inspection and keeps opening a can of worms every turn she takes.
We’ll talk with her below in a moment.
Buyers Come With A Mission
The thing is, there’s always going to be a buyer and no house will be perfect.
I know that everyone reading this today has seen a house perhaps while out on a walk and thought to themselves, why would anyone buy that house?
The truth is that for the reasons listed above not everyone gets what they want and personal preference.
What you like someone else might not, it’s as simple as that.
Not even the new homes that contractors are putting up faster than you can bake a batch of cookies have issues.
Cookie-cutter homes, estate homes or community homes that are new will all have something that needs fixing.
People skip corners and the person who is affected is the one dishing out the money.
Paid $100,000 Over Asking No Home Inspection
I was fortunate to speak with a CBB fan who recently purchased a home in March 2021.
There was this need for me to understand the mind of someone who would spend so much on a home.
Her reason was pretty straightforward as you’ll read so let’s get into the questions and answers.
She will remain anonymous for this interview as requested.
Why Did You Offer $100,000 Over Asking Price?
The reason I bought a house was that renting would have cost me even more than my mortgage.
I also have a great job with a defined benefits plan and wanted to live closer to lessen my commute time.
As well, since I’m almost 50 and a super CBB saver I was fortunate to put a large down-payment on the house.
(haha nice touch – CBB Super Saver.)
What has been your experience in a sellers market?
What I learned is that if you include a home inspection which is considered a condition of sale that you will be overlooked.
Conversely, if your offer amount is substantially more than other offers on the table but with no conditions, you’re in the running. Personally, it was better to keep it out and take the risk than to put it in and increase the offer.
In many cases, I didn’t have near the amount needed that buyers were offering over asking. So, it would need to be substantial.
Any conditions even financial conditions in this market are overlooked and reduce your chance of buying a home. It’s a sad reality but the buyer has no choice if they want a home the way things are going today,
A buyer needs to be savvy when inspecting a place before putting in an offer with no conditions. They should do as much as they can when going through the house.
For example, run faucets both inside and out, look in cabinets, appliances, check everything possible during a viewing.
How Much Does A Home Inspection In Your Area Cost?
The price fluctuates from $300 to $500 depending on who you call and the size of the home.
I had a home inspection done on my rental home before this craziness and problems still came up.
What buyers need to remember is that during a home inspection the inspector can’t see behind walls.
They see mostly what you see however you pay them to tell you that.
What Issues Came Up After Buying With No Home Inspection?
Basically, you become your own home inspector if there is no condition in the agreement.
If the seller decides to accept your offer that’s when I’d suggest getting tradesmen and women involved.
I’ve been so turned off by home inspectors from experience and put trust in the trades.
For example, would you want a mechanic to fix your car or a pilot?
Obviously a mechanic who is trained specifically for that role.
Who would you rather fly the plane, the mechanic or the pilot?
The jack of all trades handyman person that I don’t know makes me worried.
Major Issues The New Homeowner Is Dealing With
- Front Deck Concerns but I’m ripping it out next year
- Outdoor tap/faucet for hose leaks so much there is a separate shut-off valve for it in the ceiling. It is extra to the original shut-off and for some, both turn it off.
- Easily spotted the rear deck has newer boards on it but the frame is rotten.
- The rear deck isn’t supported properly or bolted to the side of the semi above-ground pool.
- Guttering not attached to the house
- Chimney leaks and missing mortar cap
- The main bathroom has an extractor fan installed but does not extract air at the side of the house
- The humidifier mounted on the furnace is not working
- Various electrical – all done badly
- Odd plumbing issues
- Rotten laundry hook-up
Risks Of No Home Inspection And The Costs
Were you surprised by anything that you could see?
No, just because it’s a dated and old home although I saw all that but had to overlook it to get in the housing market.
It’s the unseen that you or home inspectors can’t see that come knocking for cash.
A home owner can easily go into debt repairing a house that turns out to be a lemon.
Ditch The Home Inspection Or Keep It
Should you ditch a home inspection in a sellers market?
You will get a lot of opinions on the home inspection topic. In a seller’s market if I included a home inspection. I would lose the house If I didn’t take the risk
Sadly the buyer’s need to ensure they have funds to take on a home with no home inspection.
The idea is when they get in the house they fix or renovate the critical problems first.
Don’t buy if you have no contingency fund to prepare for lack of a home inspection.
Houses in my area are selling for $100,000 to $250,000 over asking price.
I was lucky to buy a home before it hit the real estate market. I had lost out on several homes even when I bid $100,000 over asking.
It’s crazy out there right now. One Toronto homeowner managed to sell their house in two days for $620,000 over the asking price.
The reason I bought a house was that renting would have cost me even more than my mortgage.
I also have a great job that I love with defined benefits.
Moving closer to my employer would lessen my commute time which was important to me.
Thankfully, I was fortunate to put a large down-payment on the house I finally bought.
Losing Out To Higher Bidders
Why did you lose out on several homes?
People bid over my price of $100,000 over asking and I had no conditions either.
That’s how lucrative it is for seller’s right now especially if they plan to downsize or move to a smaller town to retire.
My agent reached out to the owners to see if they would give me an opportunity to view before their home hit the market.
Luckily they did and they accepted my offer of $100,000 over asking.
Inspection can open a can of worms for seller’s and once the inspection issue is known it becomes public information.
Owners know the issue so it’s a known defect.
Not hidden anymore.
Also, because they know if the inspection condition is applied and the seller’s know there are lots of issues they will go with someone offering no conditions at $5,000 less.
Quick Tips If You Plan To Buy In A Seller’s Market
What tips would you give someone in a seller’s market from your experience?
First off, it’s extremely exhausting and risky in a seller’s market.
The I might be able to fix up myself mentality has to be reasonable.
I received a quote for $6,000 to redo the outdoor steps and path which I cannot do.
Always get a few quotes for any jobs or renovations to compare pricing.
This also opens the flood gates for negotiations.
No Home Inspection Contingency Fund Is A Must
Then again you need to ensure you have funds when you move in and not just a spending account.
Don’t move in just with thoughts of paying a mortgage, property taxes and bills.
I’d suggest having a non-inspection contingency fund as I like to call it for anyone who buys without a home inspection.
Even then you should still have one with a home inspection because there are lots of inspectors that screw up.
- Leaky roof repairs or new roof
- Unexpected mould issues
- Rodents living in the home
I would have at least $10,000 to $20,000 saved although it’s a personal comfort zone.
You should have enough to cover any major issues that you were not aware of as noted above and below.
Having the spare change with the risk isn’t so terrible knowing that you have a contingency fund.
Other stuff like kitchen remodelling and floors aren’t necessary unless there is a major issue.
Mechanicals in this house seems decent at the moment besides the electrical and I’ll need a new roof in 3-5 years.
The electrical is getting redone throughout the entire home.
When I viewed the house I knew immediately It needed a new kitchen.
Of course, I designed the kitchen the way I wanted it and it’s my biggest budget buster at $45,000.
You don’t need to install a kitchen as pricey but that was in my kitchen budget.
That total price includes kitchen cabinets, countertops, custom bench designs, lighting, paint, electrical, plumbing, beam removal, fixtures plus.
I’ve added a projected expense in my monthly budget since there are lots of repairs that I have to do myself and over time but that’s ok,
Rome wasn’t built in a day.
Laundry Room Disaster Zone
The dryer needed to be newly vented and the laundry sink was leaking. I had both of them replaced although that opened another can of worms.
However, the laundry sink looks like it had been leaking years.
The cabinet was ripped out by my contractor and he installed a new tub, faucet and water lines.
Buyer Without Home Inspection DIY Jobs
But a homeowner can do things themselves too without having to hire people.
For example, I cut out all the old disgusting bathroom caulking.
The previous owners didn’t use mould resistance caulking so it was mouldy in the bathroom.
Now I put in mould/water resistance caulking in by myself.
Can you tell how proud I am?
There are many YouTube videos by professionals that you can learn from as well.
Also, my master toilet is phantom flushing which is a plumbing term.
What happens is that the first time you flush nothing happens where the second time you get a perfect flush.
Pool Problems Cost Big Time Money
Do you have a pool?
Yes, it’s a semi-inground pool which was an attractive feature of the home as I love swimming.
The pool, I knew needed a new heater but a maintenance budget is always needed for pools.
Pool issues only came up once I had hired a pool company to look at it.
My idea was to have them show me how to open and close the pool so I could do it on my own the next season.
Of course I had to spend even more money for the pool which I half-expected.
The pool pump wouldn’t start which I had installed new and the winter cover cost me $1600.
Unfortunately, the previous owners didn’t have a proper one nor a pool heater so I bought a solar cover as well.
Other Problems Found Days Into Owning My Home
My outside hose tap was leaking bad 😞 as I described above.
There are so many things I would do differently if I ever bought a house again with no conditions.
The kitchen boasted a dirty stainless steel stove and dusty old painted cupboards.
Surprisingly, the refrigerator and the toilets looked decent apart from the flushing issue in the master bedroom.
The previous owners had pets and the house smelled like wet dog.
My advice is to be prepared for a major smell clean-up if the sellers smoked or had pets in the house.
Typically, you could negotiate for smoking in a home, mice infestations and pet damage.
But, since I was buying with no home inspection and zero conditions I had to suck it up.
Own Basic Tools For Minor Repairs
An important tip for sure is to have the necessary basic tools and a step ladder for simple repairs.
A quick trip to Canadian Tire and I found myself a tool kit and a ladder for a reasonable price.
I can also paint and change old electrical covers without an electrician. Proud moment again.
Personally, everyone who owns a home should understand some basics of repair and maintenance.
I will save 1% of the cost of my outstanding mortgage to cover these costs each year or to complete a renovation project.
Improving The Landscaping On Your Property
Yard cleaning can add appeal with little to no cost and besides landscaping keeps the neighbours from bugging me.
This helps to keep it clean and tidy while focusing on other issues. My front garden was a disaster but plan on putting in shrubs and a rock garden.
Barter with friends who are in the trades and/or handy.
I’ll make big pans of Lasagna and beer for my trades buddies who I trust helping me fix my home.
Overall Thoughts On Ditching A Home Inspection
First off, I want to thank the above CBB fan for sharing her story of buying a home without a home inspection or conditions.
Second, here’s my opinion on home inspection and whether it’s worth it to me.
Personally, I won’t be hiring a home inspector when we buy our next home.
I have enough friends who are in the trades and I’m confident I can see what the inspector will see.
Other people may laugh at me because I’m taking that risk and that’s fine.
What I believe is that everyone should do what makes them comfortable.
In our home inspection report for our current home the inspector missed so many obvious not hidden problems.
So, do what you want but for the majority a home inspection makes sense and for others not so much.
When buying a home in a seller’s market as described above everything becomes a risk when you buy a home, “as-is”.
Discussion: Share your comments or stories below about home inspection and whether you would use one or not. Have you any horror stories to share, comment below.
Recent CBB Posts That You May Have Missed Reading
Below is a recap of the blog posts I’ve published in the past week.
If you have a blog post idea for me or want to share a story by all means, contact me.
www.canadianbudgetbinder.com Subject: Blog Post Idea
- How To Reduce Stress When Buying A Home
- Ways We Stay Debt Free Without No Regrets
- Thick Apple Raisin Date Squares
- What To Consider When Borrowing Money
- How To Host A Successful Estate Sale
Join My CBB Friends List
Recently in my last CBB Newsletter, I asked my WordPress subscribers to please subscribe via the new blog subscription that is on the front page of this blog or you’ll see a pop-up on the screen.
So far, that hasn’t been happening so I can only assume you didn’t read the newsletter or have found the time to do it.
If you fail to re-subscribe via the blog again you will no longer be getting my blog posts or newsletters.
I’m transferring exclusively to Mailerlite and shutting down the WordPress subscribers.
You’ll see the Mailerlite subscription box at the end of this post or on the sidebar of any blog post.
It will say the following and both are to my Mailerlite subscription service.
Get CBB By Email!
Weekly Posts, Newsletter + Access to Free Financial Resources- Budgets- Budget Binder Printable Forms, Discount codes, Savings and more.
Get new posts by email!
Never miss an update and get access to lots more freebies from CBB!
Subscribe to CBB to add your email to get my weekly blog posts and access to my Free Budget Resources Library.
If you have a blog topic you’d like to submit email me at firstname.lastname@example.org
You may notice below that I’ve stopped the home and blog update. I’ve done this because it’s in my bi-weekly newsletter.
The bi-weekly newsletter comes straight to your email, but only for subscribers. You’ll find exclusive updates about the blog and CBB home life including photos and exclusive contests.
THOUGHTS CORNER BY MR.CBB
Recipe That Caught My Attention
The moment I noticed this photo of a Southwest Shrimp Salad with a Honey Lime Dressing I wanted to grab a fork.
I have never made a shrimp salad before but I’m going to be trying this recipe from Premeditated Leftovers blog.
As you can see from the ingredients the blogger used they are all budget-friendly. The most expensive ingredient would be the shrimp but you’ll find it on sale often during the spring and summer months. Stock up.
- 1 pound shrimp, peeled and deveined
- 6 – 8 cups mixed lettuce leaves
- 1 – 2 tablespoon taco seasoning
- 1 yellow pepper, deseeded and cut into strips
- ½ half cup red onion, diced
- 1 avocado, cut into bite-size pieces
- 2 jalapeno peppers, deseeded and cut into bite-size pieces
- 1 tablespoon olive oil
- 1-pint cherry tomatoes
- 1 cup of shredded cheese
SATURDAY SEARCH TERM GIGGLES
These are keywords that readers typed into their search engine and landed on this blog. I get quite a few of these every single day and pick some of the best to feature right here.
- Can you return meat if it makes you sick? – Are you able to prove it was the meat that caused your illness? All you can do is try but I’d call first.
- Grilled Chicken Powder – I dunno but it sounds disgusting
- Cremation Costs Rise In Canada – Hmm, I wonder why?
- What Do You Get Back When You Claim Medical Expenses? – Peanuts
That’s all for this week CBB Friends.
Join me next Friday for my bi-weekly newsletter.
In order to receive my newsletter via email, you must subscribe to the blog and verify your subscription.
Have a great week, Spring cleaning and gardening has commenced.