The Inspection Contingency Clause in a Real Estate Purchase Contract

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The right to inspect a property is an important right for any prospective home buyer. Why? Buying a home is potentially the largest investment a person will make in a lifetime, so as a buyer, you should know what you are buying BEFORE you finalize a sale.

The inspection contingency clause was implemented in most real estate purchase contracts to give the buyer a chance to inspect the property within a certain time-frame. The time-frame can range anywhere from 5 days to 21 days and can be defined as calendar days or business days. This time-frame can be negotiated between the buyer and seller. In a seller's market, the seller generally gives the buyer less time to perform inspections. In a buyer's market, the buyer can demand more time to perform their inspections. In these scenarios, we find the seller wants the buyer to commit to the sale early on, whereas the buyer wants to have time to make sure they have all the information and are satisfied with the results.

Whatever is negotiated, the time-frame starts from the date of acceptance. Acceptance is when the buyer and seller have signed the contract or if there are counter offers, from the date the last counter offer was signed.

Once there is acceptance, the clock is ticking for the buyer to schedule their inspection. Most buyers opt to hire a professional, which is generally referred to as a licensed Home Inspector. Some buyers inspect the home themselves, but this is not recommended.

Once the home inspection has been completed, a report is generated. A good home inspector will red flag the health and hazardous issues, as well as recommending further inspections by specialized inspectors. Here are some examples of potential inspections performed:

  • Fireplace Inspection
  • Heating and Air Conditioning Inspection
  • Roof Inspection
  • Mold Inspection
  • Electrical inspection
  • Lead-based paint inspection
  • Termite inspection
  • Plumbing inspection
  • Radon inspection
  • Structural inspection

At the end of the buyer's inspections, the buyer can either cancel the contract, request the seller repair all or certain items, or accept all the inspections as is and remove their inspection contingency. If the buyer cancels the contract, within this contingency time-frame, they can request their deposit/earnest monies back and proceed on to find another property. If the buyer requests the seller to repair any items, these items are negotiated between the buyer and seller. If the buyer does not like the seller's response, they can cancel the contract within the contingency time-frame. If they agree with the seller's response, they can remove their inspection contingency. Please note, that once a buyer has removed their inspection contingency, they cannot cancel the contract for inspection reasons without potentially losing their deposit/earnest monies.

Inspection contingencies are built into real estate purchase contracts for a reason, to protect the buyer and allow the buyer the opportunity to be knowledgeable about their future home.

 
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