Don't Make This Huge Home-Buying Mistake

It could be one of your most costly mistakes.

For many homeowners, the current real estate market is very frustrating. While mortgage rates remain low by historical standards -- even if they've climbed from recent record lows -- housing prices are still high in many locations across the U.S. Making matters worse, low inventory has contributed to more competition for the limited number of available properties on the market.

If you're trying to purchase a home, this can all be quite stressful -- especially if you've made several offers and they haven't been accepted. Multiple rejections may tempt you to find ways to make your offer more competitive. And if you're already at the top of your budget, this option may include waiving inspection on homes you're interested in.

While it may seem like a good idea, not making your offer contingent on a satisfactory home inspection could be a major regret later on. Here's why.

Giving up a home inspection could cost you in the end

Waiving a home inspection can make your offer more attractive to sellers because there's less of a chance of the deal falling apart. Sellers are often afraid that buyers will use inspections to try to negotiate the price down by nitpicking over minor problems that professional inspectors discover.

The problem is, without a professional inspection, it's really difficult to know what a home's actual condition is. While sellers in most parts of the country are required to disclose serious known defects, they don't always do that -- or they may not be aware of major problems.

Often, the most costly and expensive issues to fix (such as problems with the roof, electrical wiring, or plumbing) may not be apparent to the naked eye, leaving sellers unaware of them. Without a professional inspection, buyers may find themselves with a money pit that costs a fortune to fix.

What should you do instead of waiving the inspection?

If you want to make your offer more attractive by reducing the risk to sellers that you'll use the inspection as leverage to drop the price, there's another option you could try that still protects you.

You could make an offer contingent on the inspection, but indicate in your offer that the inspection is for informational purposes only, unless a major problem shows up. You'll typically need to put a dollar amount on what you consider a major issue. For example, you may specify that the inspection will be informational, and you'd only ask for repairs or a price drop on the home if the inspection reveals problems that would cost more than $20,000 to repair.

By taking this approach, your offer will still stand out among the crowd, but you won't put yourself at risk of incurring huge costs for a home or perhaps even buying a house that can't be fixed at all.

Ultimately, you should talk to your realtor about the best way to make your offer competitive, but this can be a good middle ground that's a win-win for both you and the seller by protecting both of your interests during the sale process.