Inspection Contingency
An inspection contingency gives the buyer the right to get the home inspected and negotiate further if there are repair issues. The inspection usually happens 5 – 7 business days after mutual acceptance. If the seller and buyer are unable to come to an agreement about repair issues, the buyer has the right to back out of the purchase and reclaim his earnest money.
Once the buyer and seller reach mutual agreement, the buyer must contact an inspector to perform an inspection on the seller's home. Usually, the buyer has about 5-7 business days to have the inspection performed.
The inspector will examine the exterior and interior of the home, checking the condition of electrical, plumbing, ventilation, structural, and finish elements throughout, as well as the condition of appliances that will be transferred to the buyer at the time of purchase. An inspection generally takes a few hours, and at the end of the process, the inspector will provide the buyer with a report of all the issues discovered during the inspection.
Once the buyer has reviewed the report, she can:
- Approve the report: This moves the deal forward.
- Disapprove the report: In most cases, this will kill the deal, and the buyer can back out and reclaim her earnest money.
- Request time for additional inspections: Sometimes, the inspection will uncover an issue that needs a second opinion from an expert. For instance, the inspector may recommend that you bring in a structural engineer to check a section of the foundation, or that you hire a sewer line inspector to check the condition of the home's plumbing waste line. You can usually request a short extension (3 - 7 days) for these follow-up inspections.
- Request repairs or concessions: This puts the ball back in the seller's court. The buyer can ask that certain items be repaired, or can ask the seller to cover the buyer's cost for repairing them. Either way, the seller has a few days (usually 3 - 7) to consider the buyer's request. If the buyer and seller are unable to come to an agreement, the deal will be killed, and the buyer will reclaim her earnest money.
Tip!
For most buyers, waiving the inspection contingency is a big mistake. It can leave you wide open to buying a home that needs significant repairs, or that is completely uninhabitable due to problems with toxic mold, structural issues, pests, or other issues. You might feel pressured to waive your inspection contingency when you're competing with other buyers for the same home. But before you do, ask yourself if you could really afford tens or even hundreds of thousands of dollars in repairs after buying the home. If the answer is no, keep that contingency firmly in place.
First, make sure you clearly understand the terms of your contract. Do you have an inspection contingency in place? If so, how many days do you have to get the inspection completed, review the report, and submit your terms to the seller? If you're not sure, ask your agent or attorney.
Your agent or attorney will be able to tell you how to back out of the purchase. Usually, you'll complete a short form that indicates that you've read the report and that you disapprove of the home's condition. You may or may not be required to cite specific issues with the home, and you may or may not be required to give the seller a chance to address them.
Note that if you do cite specific issues, and the seller addresses them, you may be required to proceed with the purchase, or risk losing your earnest money deposit.