An Offer Without Inspection Contingency.. This can't be normal!

75 Replies

I'm in a fairly hot Multifamily market in Northern California. My agent and i just made really strong offer, over asking price with a 30 day close. We were beat out by the same offer, without a inspection contingency. I'm just curios has anyone ever made an offer like this in the past, or currently using this strategy? Id imagine this strategy will vary based on experience, REI knowledge, resources and potential ROI , but this is a high risk strategy in my opinion. I would love to get everyone's thoughts on how they used it and why.

Savvy sellers know that an inspection contingency is often a tactic used by buyers to lock up a property and really begin negotiating the price after the property is off the market. An offer with a no inspection contingency tells me that the buyer is strong, capable and will close at the contract price. All my offers have been made without inspection contingencies.

If I feel strongly about a property, the price and what I’ve seen in my drive-by, I’ll remove my inspection contingency.

It’s done everyday.

@Don Gouge with this being the strategy you use all the time , are a high percentage of your offers being accepted? Also has there ever been a situation where this has come back and drastically hurt your expected cash flow, ROI, etc.

Hi @Jason James . I have done it. Similar situation (hot market), wanted my offer to be competitive, so I removed all contingencies (including inspection) and offered all cash with a 10 day close and a $40k EMD to let them know all they had to do was accept and it was a done deal as there was no way I could/would back out.

Originally posted by @Jason James :

I'm in a fairly hot Multifamily market in Northern California. My agent and i just made really strong offer, over asking price with a 30 day close. We were beat out by the same offer, without a inspection contingency. I'm just curios has anyone ever made an offer like this in the past, or currently using this strategy? Id imagine this strategy will vary based on experience, REI knowledge, resources and potential ROI , but this is a high risk strategy in my opinion. I would love to get everyone's thoughts on how they used it and why.

Sounds like you're up against Bay Area tech money. That other buyer was primed to waive at least one contingency from when they bought their primary residence in Oakland / San Jose / San Francisco a year ago. Now that they've taken that risk on their $800k or $1.5m house that they live in (with a 3% EMD), taking a similar risk on a $250k Stockton triplex isn't a big deal to them. 3% of $1.5m is a lot more than 3% of $250k. They may have even suggested it to their Stockton Realtor; back when they bought their primary residence their Berkeley Realtor was who suggested it.

Speaking of which, a ratified contract in Stockton hit my inbox last night, maybe it was my client you lost out to. :)

@David Avetisyan do you focus on areas or properties that are newer and have less risk for major expenditures?

@Jason James I have not really had any bad experiences. I always do my due diligence before I make my offer. I have been a contractor for 25 years so I feel pretty safe in evaluating what I see. I always base my offer on some hidden expenses because they will always be there. Being a cash buyer with no contingencies and a large earnest money deposit, proof of funds and a quick closing always puts you at the top of the list.

@Chris Mason  - is right.

@Jason James - I can also personally vouch for the fact that some offers I have made and clients have made over the past few years have been without contingencies in the Bay Area.

@Jason James I’ve done it once. I owned a couple units down the street built at the same time by the same builder. I knew exactly what issues to look for when I toured the house and made the no contingency offer. Good luck to you!

In a hot market, people will put in offers with no inspections or any contingencies...is that a good move, probably not.

@Jason James

I do exactly what @Don Gouge does because I'm in a similar situation. I focus on older, higher-risk properties with obvious signs of deferred maintenance because that's where the technical advantage I'm exploiting makes me the most money. I also tend to put in these all-cash, no-contingency offers in late October, November, and early December that can be expected to close before Christmas. I'd say 75% of my offers are accepted and I've never hit something, some critical hidden issue, that significantly affected my expected bottom line.

Lastly, I do this for custom-built duplexes and single-family -- I don't have the technical expertise to try this on something like a 40-unit complex. I would also never do this for something like an aging McMansion, or a small condo or development tract house built in the 1970s or later in my area. The level of crazy-cheap that the builders of these places sink to make the risks skyrocket.

If you are in a competitive market you will need to go non-contingent to make your offer stand out and in many cases to level the playing field.  As a buyer competing with other buyers on a hot property.  You have to ask yourself.  If I was the seller what offer do I want?  

Focus on that and you will have a better shot of getting your offer accepted.  You also need to understand your risk and the risk of the property waiving your contingencies.  To give you an idea on how I structure my own offer. If I find a property I want I go All-Cash 7 day close non-contingent.  I go for the kill.  

Originally posted by @Kyle J. :

Hi @Jason James. I have done it. Similar situation (hot market), wanted my offer to be competitive, so I removed all contingencies (including inspection) and offered all cash with a 10 day close and a $40k EMD to let them know all they had to do was accept and it was a done deal as there was no way I could/would back out.

I guess this makes sense in the bigger picture and this market. I thought it was weird because the property hit MLS Wednesday morning, we had offer in by noon. Then found out at 2 pm they accepted the other offer . No one had access to property as there are tenants living in it, and would require 24 hour notice before viewing. The only pictures available were of the exterior. For the property you purchased were you able to complete a walk through or at least see interior pictures ?

Originally posted by @Chris Mason :
Originally posted by @Jason James:

I'm in a fairly hot Multifamily market in Northern California. My agent and i just made really strong offer, over asking price with a 30 day close. We were beat out by the same offer, without a inspection contingency. I'm just curios has anyone ever made an offer like this in the past, or currently using this strategy? Id imagine this strategy will vary based on experience, REI knowledge, resources and potential ROI , but this is a high risk strategy in my opinion. I would love to get everyone's thoughts on how they used it and why.

Sounds like you're up against Bay Area tech money. That other buyer was primed to waive at least one contingency from when they bought their primary residence in Oakland / San Jose / San Francisco a year ago. Now that they've taken that risk on their $800k or $1.5m house that they live in (with a 3% EMD), taking a similar risk on a $250k Stockton triplex isn't a big deal to them. 3% of $1.5m is a lot more than 3% of $250k. They may have even suggested it to their Stockton Realtor; back when they bought their primary residence their Berkeley Realtor was who suggested it.

Speaking of which, a ratified contract in Stockton hit my inbox last night, maybe it was my client you lost out to. :)

Chris, id imagine there's a ton of truth to that statement ( Bay Area Investors) because as of late many of better multifamily properties in Stockton are not making it more than a day on MLS before entering into contract. It's definitely more competitive then it has been.

How old a building?

I’ve never had an inspection contingency on a Vegas property. They’re all less than 20 years old, stucco siding tile roof, no basement, solid dirt under them. I’ve walked through most of them before making an offer the same day, but not all.

A hot water thermo coupler and a leaking toilet have been my worst finds. Maybe an irrigation leak. 

If you can’t imagine a “problem” that would cost more than 1% of your offer and you’d be happy with a worst case 1% higher, eliminate the inspection. 

Now if you’re looking at 80 year old houses with leaky/cracked basements to shifting soil, I can’t help you there. 

Originally posted by @Jason James :
Originally posted by @Kyle J.:

Hi @Jason James. I have done it. Similar situation (hot market), wanted my offer to be competitive, so I removed all contingencies (including inspection) and offered all cash with a 10 day close and a $40k EMD to let them know all they had to do was accept and it was a done deal as there was no way I could/would back out.

I guess this makes sense in the bigger picture and this market. I thought it was weird because the property hit MLS Wednesday morning, we had offer in by noon. Then found out at 2 pm they accepted the other offer . No one had access to property as there are tenants living in it, and would require 24 hour notice before viewing. The only pictures available were of the exterior. For the property you purchased were you able to complete a walk through or at least see interior pictures ?

It was similar to yours in that the seller wasn’t showing prior to offers because it was tenant occupied. However, there were a bunch of interior photos available. 

No inspection contingency knocks out other buyers.

If you feel confident in your own evaluation, and if you're in a competitive situation then a no inspection offer can be the deciding factor of whether your offer is the chosen one.   I do it all the time, but I use it to get a better price on the property as well as competing with other offers.  However,  I don't eliminate the option period.  In effect, I do my own inspection on the initial viewing after my offer is accepted.  I buy duplexes, which are fairly simple and for $10k-12k per side I can transform it to like new status if need be.  I just bought a duplex through an online auction and had to pay for the property before I could even look at the property.  I knew the area, the street and the market.  No problem, it turned out to be a great buy, even with one side trashed.  Cheers.

@Jason James

All of our offers are made with no inspection. We have a pretty strong construction background. However, I will not offer on a property without walking it and looking at everything.

I look at everything when walking the property, then make the offer. I have never used an inspector or inspection contingency but I know what I’m looking at.

@Jason James I bought at least five or six properties with no inspection contingency and at asking price. When you know the property is fairly prices and has room to make repairs, you can and should do it. You must inspect it yourself though. I have also bought properties sight unseen with no inspection because the price was right.

I offered and bought a Brick duplex with fire damage for $1100.00 sight unseen out of town in 2010. It all depends on the property.

SAA

String market required a strong offer.  You can always negotiate after the fact.  

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