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Real Estate Quarterly

A Quarterly Newsletter for Real Estate Professionals

April – June 2023

Waiving Home Inspections: A Risky Proposition for Buyers

About a year ago, our Newsletter discussed some of the strategies buyers use to make their purchase offers more attractive to sellers. Waiving the right to a home inspection is one of those strategies that we see commonly used. As attorneys, we have hoped that the market would rebound enough to make the waiver a distant memory, but that’s not the case. Most of the contracts that we see still contain an inspection waiver. Because waiving the right to a home inspection carries a significant risk, it’s worth discussing it in more detail. 

New York State is still a “buyer beware” state. Home buyers have a responsibility to learn everything they can about the condition of the property. Courts continue to place the burden on buyers to make reasonable inquiries and conduct reasonable inspections. If information can be had about a property, a buyer should obtain it and negotiate the purchase based on that information. Once the closing takes place, a new owner’s recourse against the seller is very limited under the law. That’s why it’s so important to make the contract contingent on a home inspection.

Courts also find blame with sellers who intentionally prevent a buyer from conducting reasonable inquiries and inspections. Standing between buyers and their right to inspect, or intentionally concealing a defect, is dangerous and can have legal consequences for a seller.

While a Property Condition Disclosure Statement (PCDS) is present for most residential transactions, buyers cannot rely on it as the sole source of information about a property. The PCDS specifically states that it does not create a warranty of any kind, nor does it take the place of a home inspection: “On the contrary, the disclosure statement strongly urges buyers to have a home inspection performed as well as other professional and environmental tests.” See the approved PCDS Form FAQS. The Disclosure states that it “is not a substitute for any inspections or tests.” Prior to issuing an attorney approval letter, we remind our clients of this and that the statements in the PCDS are made based on the seller’s actual knowledge of the property conditions – not what we think the seller should know, but what the seller actually knows about the property. 

There are conditions that a seller will not be aware of and might only be revealed during an inspection, such as: structural damage, inadequate insulation, plumbing issues, dangerous electrical/faulty wiring, HVAC concerns, damaged roof, poor drainage, septic issues, rodent/insect infestations, dangerous levels of radon, or the presence of mold.

A few ideas have been circulating to help persuade buyers that it’s “safe” to waive their right to inspections: Conducting “information only” inspections before closing, purchasing a home warranty plan, and/or conducting home inspections post-closing. Unfortunately, none is sufficient to take the place of a home inspection.

Conducting an “information only” inspection allows the buyer to obtain information about the property prior to closing without giving the buyer legal grounds for terminating the contract. The contract is not contingent on the results of the inspection. The inspection report is intended to be used only to give the buyer insight into conditions that require remediation or repair post-closing; however, if a serious condition is revealed in the report, a buyer might be inclined to breach the contract and forfeit the deposit rather than purchase the property. The legal and financial consequences can be substantial. 

Home warranty plans have been used before the onset of the current market conditions, but have become more popular to give buyers some peace of mind should an issue arise that requires a repair. Buyers need to review the warranty terms because there are limits to coverage, and there are typically service call fees and deductibles.  

Post-closing home inspections can give the new owner valuable information that allows the new owner to be proactive about issues and address them before repairs become more expensive and complicated; however, they don’t provide any comfort to a buyer before closing, and damages for claims against a seller for conditions discovered post-closing are very limited.

We understand that it has become almost standard practice in our community to waive inspections as a negotiating tool, but attorneys cringe when we see it. Waiving this right does carry significant risk to the buyer. We will continue to counsel our clients about the risks so that they can decide how best to move their transaction forward.  

– Jacqueline A. Carosa, Esq.

Relin Goldstein and Crane - Waiving Home Inspections