Home Inspection Contingency: A Guide for Buyers and Sellers

Read the fine print to understand this important condition of a purchase offer

A couple reviewing the inspection report
Photo: PeopleImages / iStock / Getty Images Plus / Getty Images
A couple reviewing the inspection report
Photo: PeopleImages / iStock / Getty Images Plus / Getty Images
Highlights
  • The sale of a home may be subject to a professional home inspection.

  • The inspection contingency period typically lasts about seven days.

  • Buyers may request repairs, ask for a price adjustment, or back out of the deal.

  • Home inspection contingencies are common for both new and older homes.

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An accepted offer isn’t the end of the story in a home sale! A home inspection contingency is a clause that buyers can include in their purchase agreements, and the final sale can hinge on this condition. The details of the contingency give buyers the chance to renegotiate or cancel a deal if certain conditions are not met. Learn how a home inspection contingency can affect the purchase or sale of your home. 

What Is an Inspection Contingency?

With a home inspection contingency, the buyer reserves the right to hire a professional to examine the property for possible issues. Quite literally, the purchase offer is contingent, or dependent on, the results of a home inspection. That’s what an inspection contingency is: a clause that buyers can include as part of their purchase offer and agreement. 

A home inspection contingency is also sometimes called a due diligence contingency or an inspection rider. To increase the appeal of their offer and remove the need to include this condition of sale, some buyers may ask to do a home inspection before signing the purchase contract. The buyer is almost always responsible for the cost of a home inspection.

Local and state laws vary on how they handle home inspection contingencies. Speak with your real estate professional and lender to clarify any questions you may have, whether as a buyer or a seller.

How Does an Inspection Contingency Work?

Even if a seller accepts an offer, the sale of the home isn’t final until all contingencies are lifted or removed. When an offer is contingent on inspection, the buyer has a specific window of time to hire a home inspector to take a look at the property. In some cases, lenders may not approve financing without a home inspection. 

The contingency clause should outline what can happen if the buyer raises concerns identified in the home inspection report. The report may include minor or major defects, safety issues, and recommended repairs or maintenance tasks. Depending on the specific details outlined in the purchase agreement, potential buyers may then have the option to: 

  • Get a specialized inspection to further investigate an issue

  • Renegotiate the deal

  • Withdraw their purchase offer altogether

If they cancel their offer, buyers may be able to recoup their earnest money, the deposit made to confirm the contract, if they included this in the inspection contingency clause. 

Home Inspection Contingency Timeline

The typical timeline for a home inspection contingency is around seven days, though buyers may ask for more time. During that period, potential buyers must: 

  1. Find a home inspector in their area 

  2. Book the home inspection

  3. Review the home inspection report

  4. Decide what to do with the results

Most home inspectors will deliver their report within 24 to 48 hours of their visit. This means that while buyers may have seven days in all, they need to schedule the home inspection in the first few days. If possible, buyers should be present for the inspection, which typically takes two to four hours. 

What’s Included in a Home Inspection?

A couple inspecting documents for a house
Photo: alvarez / E+ / Getty Images

It is important to know what a home inspection is in this context and what it isn’t. A standard home inspection before finalizing the sale of a home only looks at aspects of the property that are easily accessible. The inspector will look at major systems but often will not conduct any special diagnostic tests. They will look at:

  • Foundation

  • Roof

  • Electrical

  • Plumbing

  • HVAC

  • Exterior walls

  • Grading

  • Garage

  • Major appliances

  • Bathrooms

  • Ceilings

  • Flooring

Depending on the inspector’s notes, a buyer may choose to hire a specialist to investigate potential issues further. For example, they may notice the shower doesn’t get very hot, but they won’t necessarily test to figure out why this is the case. Similarly, they may see if the flooring is level but will not look under floors. Hiring experts to test for asbestos, radon, and lead-based paint is common as well.

With a typical seven-day contingency window, this doesn’t leave much time for buyers to get these additional inspections completed. Buyers may ask the sellers for an extension or negotiate for a different resolution.

How Sellers Can Prepare for a Buyer’s Home Inspection

Naturally, sellers want to see a positive outcome emerge from a buyer’s home inspection. To prepare for a home inspection, some steps they can take include:

  • Decluttering all visible living areas

  • Ensuring easy access to major systems, like HVAC and electrical

  • Looking for damage or day on exterior elements, like the roof and outdoor walls

  • Checking the hot water and water pressure on all taps

  • Checking electrical outlets, light switches, and light fixtures

  • Covering up signs of old water damage that have been fixed

Benefits of a Pre-Listing Home Inspection

A great option that sellers may consider is hiring a professional for a pre-listing home inspection. They can identify possible issues to repair or correct before putting the house up on the market. 

A pre-listing inspection shows the seller is motivated and has done their due diligence, which can make the property more enticing to buyers. Some buyers may waive a home inspection contingency if the seller has already completed a pre-listing home inspection, streamlining the purchase process.

What Happens After Receiving the Home Inspection Results?

As part of the home inspection contingency clause, buyers and sellers have options for how they want to handle the results of a home inspection. 

No Issues of Concern

In an ideal world, the home inspection report comes back with zero issues or concerns, and the house is perfect in every way. A more realistic outcome is that the report only reveals minor issues, and the buyer is willing to overlook or fix these concerns themselves. In either case, the sale of the property can proceed unimpeded. 

Fixable Issues

The home inspector may point out a few issues that should be addressed. The buyer can then consider a few possible options:

  • Overlook the concerns and proceed with the sale

  • Ask the seller to fix the noted problems

  • Request a reduction in the purchase price

  • Ask the seller to offer a cash credit at closing to cover the cost of repairs

Often, this can lead to some negotiation between the buyer and seller. A typical inspection contingency clause defines how long a seller has to respond to a buyer’s request and make appropriate concessions. If they are able to come to a mutually acceptable resolution, the transaction can continue. If not, the buyer may exercise their option to cancel the deal.

Significant Issues

If the home inspector only finds minor issues that should be fixed, buyers might choose to continue with the purchase even if the seller doesn’t make any concessions. This decision may be more difficult with more significant issues that fail a home inspection.

"The biggest red flags are structural and foundation issues since they are the most costly and difficult to remediate. Pay attention to the age and condition of big-ticket items like the roof, HVAC, plumbing, and electrical systems. Having to repair or replace any of those items can be very costly."

— Robert Washington, Founder at Savvy Buyers Realty

For instance, the home may need to have its electrical system completely overhauled and upgraded. Or, there may be a major leak from the roof that has led to significant water damage and mold on the top floor. These could be deal-breakers unless the seller is willing to make a large concession to compensate the buyer.

The Risks of Waiving an Inspection Contingency

A hot seller’s market can be very competitive, tempting buyers into waiving an inspection contingency. An offer that isn’t contingent on inspection is more enticing to sellers than a contingent offer. Sellers value that feeling of certainty. But, with such a big purchase on the line, skipping the home inspection can be a costly mistake. 

Buyers may need to pay for major repairs or upgrades on their own if they discover serious problems later on. Find home inspection companies near you who give you the confidence to make a well-informed decision. The peace of mind it can provide is well worth the small investment in a home inspection, often in the $300 to $500 range. Rest easy knowing you’ve done your due diligence as you sign on the dotted line to finalize the sale.

Frequently Asked Questions

After the contingency period, the buyer can no longer use the inspection results to negotiate with the seller. While the buyer can still break the contract for other reasons, they will lose their deposit after the contingency period.

Yes. If a home inspection reveals that the property has major issues or is unsafe, the buyer can back out of the purchase.

Yes. If the seller includes a kick-out clause in the contract, they can accept another offer while contingent.

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