How Home Inspection Can Help: Inspection Contingencies
A home purchase is a big step involving major financial decisions. And purchasing a property without assessing its actual worth is equivalent to a blind investment. So it is crucial for a home buyer to thoroughly inspect a house before making a purchase decision.
A home inspection is defined as “a limited, non-invasive examination of the condition of a home, conducted by a home inspector who has the training and certifications to perform such inspections.” The home inspector does an expert evaluation and prepares a thorough written report about the condition of the dwelling, the physical structure and various systems within it, and delivers it to the home buyer. The home buyer then uses this report to gain knowledge and make informed decisions about the home purchase. While the inspection report contains a detailed description of the condition of the house at the time of inspection, it does not guarantee future condition, efficiency, or life expectancy of systems or components in the house.
A home buyer reserves the right to inspect a house before purchase. Similarly, they also enjoy the legal benefit of adding an inspection contingency clause to the home purchase contract.
An inspection contingency is an addendum to a purchase contract that gives home buyers the right to inspect a property within a limited time period after the purchase agreement has been signed and the earnest money deposit has been made. Inspection contingencies can be classified in two broad categories:
- Contingencies which allow the home buyer to get the earnest money deposit back and walk away from the deal, if the house inspected has a serious problem;
- Contingencies where the home buyer gives the seller a time period within which to fix defects, to proceed with the purchase.
However, the decision to accept or reject the home buyer’s request rests with the seller. If the seller does not agree to make repairs or refurbishments, the home buyer can opt out of the contract without any liabilities. And if the seller is willing to make improvements, the specifics are also included in the purchase agreement as additional home buying contingencies. In this case, the seller has the responsibility to complete all repairs and improvements as included in the agreement before closing. The buyer is also entitled to a walk-through of the property just before the closing to make sure that all home buying contingencies have been met.
Inspection contingencies can help ensure that defects or potential problems are fixed before the purchase is made. While the law does not necessitate it, a home inspection can be useful for home buyers in making the right decision and prevents them from investing in properties with serious structural problems or material defects.
Likewise home buyers considering REO properties can also benefit from a home inspection. An REO, or foreclosed property, is usually very appealing because of its low market price. However, since such a property is likely to be sold in as-is condition, home buyers may wish to bring in a professional home inspector to get a clear picture of the repairs and improvements needed.
While inspection contingencies are meant to protect home buyers, they should not be misused as a means to cancel a deal for any reason. Home buyers should understand that all properties, including newly constructed ones, may have minor issues. So, it may be worthwhile to give the seller a chance to fix these issues before closing the deal.
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