With home inspection contingencies, a buyer can cancel a purchase agreement<\/a> with their earnest money intact\u2026 as long as they follow the rules.<\/i><\/p>\n We\u2019ll cover exactly what those rules are, along with when and why you may, or may not, want a home inspection contingency clause.<\/p>\n Home inspections tell you the good, bad, and ugly details you need to know about a house. Professional home inspectors examine and determine the condition of the house from top to bottom, and then provide a detailed report of their findings and recommendations.<\/p>\n Standard home inspections include an analysis of major parts and systems of the house<\/a>, such as the HVAC, plumbing and electrical, roof, and structural condition, along with doors, windows, walls, and ceilings.<\/p>\n Inspections are an important part of purchasing a home as they provide prospective buyers with a comprehensive overview of any issues with a house. They can uncover costly repairs, risks, or other red flags, and buyers can use findings from inspection reports to determine if the repairs are worth it (and within budget) \u2014 or, in the case of a home inspection contingency clause, use the needed repairs as a negotiating chip with the seller.<\/p>\n A home inspection contingency clause is a stipulation in the purchase agreement that says the buyer can inspect the home, top to bottom, and then<\/i> decide whether to move forward with the purchase.<\/p>\n This clause can be added to a real estate sale agreement contract between the buyer and seller, and it grants buyers the right to a home inspection (within a designated time frame) and then the opportunity to negotiate price, repairs, or back out of the contract entirely.<\/p>\n “In Minnesota, the inspection contingency is embedded in the actual purchase agreement document,” explains Raghuveer, stating that it’s usually a four- or five-paragraph area within the purchase agreement.<\/p>\n “It outlines the number of days that the buyer will have to inspect the home, deliberate on the home, and negotiate a settlement on any issues they see with the property.”<\/p>\n Let\u2019s say you receive the home inspection report and there are one too many troublesome issues for your comfort. You’re ready to pull the plug on the deal and continue your home search.<\/p>\n Could it be as simple as that? What happens to the earnest money you put down? And when is it too late to pull out of the contract?<\/p>\n Let\u2019s take a further look into these important considerations.<\/p>\n Good news! If the inspection revealed issues and you\u2019d like to back out of the contract<\/a>, as long as you completed the inspection within the deadline, you\u2019ll get your earnest money<\/a> back. Just make sure you have this condition clearly laid out in the contract ahead of time.<\/p>\n If a buyer proposes repairs to the seller as a negotiating point, but the buyer and seller cannot come to an agreement, as long as the reason for canceling the deal is included in the purchase contract, the buyer can withdraw from the contract and receive their earnest money deposit back.<\/p>\n A contingency deadline is an agreed-upon timeframe between the buyer and seller, starting from the contract date, in which the buyer can still back out of the purchase and keep their deposit. This period can range anywhere between two weeks and two months, and during this time, the homebuyer is in charge of scheduling and paying for inspections to examine the health of the home.<\/p>\n It\u2019s important to note these dates for several reasons. Not only does this keep you from losing out on your deposit by something as unfortunate as missing a deadline, but the date also outlines the timeframe for when you can submit repair requests<\/a> or propose negotiations on price to the seller based on findings from the home inspection.<\/p>\n Local state and area requirements for backing out of a contract due to an inspection contingency can vary. Some locations may request you send a copy of the official inspection report, a dated official written statement explaining your reasoning (the contingency) for canceling the contract, along with proof from the inspector that there is an issue.<\/p>\n For guidance, talk with your agent<\/a> about what to do. Your agent can help walk you through creating a cancellation document and crossing any other required t\u2019s and dotting all the necessary i\u2019s.<\/p>\n To protect yourself and your money, there are a few things as a buyer you’ll want to include in your home inspection contingency clause. The first? A clear-cut exit plan.<\/p>\n Having a plan in writing to get out of a contract \u2014 in the event that the home inspection report turns up some big-ticket issues (foundation troubles or a roof far past its prime, for example) \u2014 can protect you from becoming a financial scapegoat for those issues.<\/p>\n Give yourself some wiggle room, both to track down a trustworthy inspector, get an initial walk-through completed, and schedule any follow-up inspections if need be.<\/p>\n Chase Williamson, owner and inspector for West River Inspections<\/a>, a five-star rated home inspection company serving the black hills region out of Spearfish, South Dakota, says most of the time clients he works with need an inspection completed within 10 business days.<\/p>\n \u201cOn average, the process takes about five days \u2014 just days<\/i> in general \u2014 for me to get the phone call, get the inspection in, and go out and do the process,\u201d explains Williamson.<\/p>\n Following the inspection, Williamson says it\u2019s typically a three-day turnaround to get the client the full inspection report.<\/p>\n In your contingency clause, clearly state that you want full access to inspect every square inch of the house. That means all the nooks, crannies, basements, and attics.<\/p>\n Though these areas may be lesser-traveled, they can be just the place mildew, mold, or moisture damage are hiding.<\/p>\n \u201cAttic spaces. Absolutely. That\u2019s where I find most of the issues,\u201d says Williamson.<\/p>\n Many times, a home inspection contingency allows the buyer to hire further experts of their choosing beyond the initial home inspector. These experts may be recommended by the inspector based on initial findings, and they can perform more specialized home inspections<\/a> around common problem areas, such as the foundation, roof, or chimney, or check for termites or mold.<\/p>\n Another thing Williamson suggests is that clients consider having a radon test conducted<\/a>.<\/p>\n Williamson explains that radon is an invisible gas caused by the breakdown of rocks and soil, and though we can\u2019t see or smell it, it\u2019s around us all the time. But the true danger in this gas lies in how concentrated<\/i> it is.<\/p>\n \u201cIt can be equivalent to smoking cigarettes,\u201d explains Williamson.<\/p>\n Highly concentrated levels of radon (which are commonly found in basements and crawl spaces) is dangerous, with long-term exposure being linked to lung cancer.\u00a0 Williamson says that radon is something lenders are more aware of now, and that some banks are starting to require radon tests on homes while many contractors are using radon mitigation systems.<\/a><\/p>\n If a radon test does show high levels in a house, buyers can use this as a negotiation point and request a seller have a mitigation system installed to bring the radon levels below 4 pCi\/L, which is considered safe.<\/p>\n To make an offer more competitive on a house, a buyer can choose to waive a home inspection contingency clause.<\/p>\n \u201cOut of necessity, inspections have become waived by buyers just because of the competitive nature of the marketplace. So, if you went in with an inspection, you could almost lose<\/i> the transaction,\u201d says Raghuveer.<\/p>\n Raghuveer believes there are three categories that houses fall into.<\/p>\n The first category is houses that definitely<\/i> need an inspection. Often, from Raghuveer’s experience, these are houses he feels may have hidden issues and it would be beneficial to have a contractor or inspector’s expertise.<\/p>\n These could include homes that have experienced extreme weather in recent years, like flooding or a severe hail storm that\u2019s notoriously damaged houses in the area. Older homes<\/a>, where the electrical, plumbing or other vital systems may now be outdated, should probably also be inspected.<\/p>\n The second category includes homes that a buyer is determined to get \u2014 even if they know it probably needs repairs. Having an inspection done is a way to inform the buyer how much<\/i> those repairs are going to cost rather than inform the buyer whether they want the house at all.<\/p>\n In that situation, your agent or a licensed contractor can walk you through the estimated cost of repairs, and help you understand roughly how much you\u2019ll be on the hook for after closing.<\/p>\n That way, explains Raghuveer, the buyer can use the inspection for informational purposes to decide if the estimated repair costs in a worst-case scenario are reasonable. After all, a few hundred dollars for minor cosmetic repairs are a whole different ball game than $25,000 for a new roof.<\/p>\n The third category is when the property is so “clean\u201d that the buyer feels comfortable moving forward without an inspection. This could be a home that\u2019s built by a reputable builder, is less than a year old, and is under warranty.<\/p>\n Waving a contingency can give a buyer a more favorable edge with a seller who has multiple bids on the table. But keep in mind this strategy comes with its own set of drawbacks.<\/p>\n For one, in doing so, the full weight and responsibilities of any needed repairs fall on the buyer’s shoulders. If that buyer is already planning to gut the place and they\u2019ve got a stack of cash to spend, this may not be a big deal. But if not, those dollar signs can start adding up quickly \u2014 especially when it\u2019s not just one or two fixes but several expensive home repairs<\/a>.<\/p>\n Because of this, even if choosing to waive a contingency, it\u2019s a good precautionary measure to have a home inspection completed before<\/i> officially signing a sales agreement. This will at least give you a ballpark estimate of future expenses.<\/p>\n Also, waiving a home inspection contingency clause doesn\u2019t mean you can\u2019t inspect the house at all; it just means you can\u2019t leverage any findings from the inspection report for negotiating, and you likely can\u2019t walk away from the deal with your earnest money if the report finds something you don\u2019t like.<\/p>\n![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/11\/inspection-contingency-clause-666x381.png\")
<\/a>What is a home inspection?<\/h2>\n
What is a home inspection contingency clause?<\/h2>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/11\/inspection-contingency-clause-1-666x381.png\")
<\/a>Buyer considerations<\/h2>\n
Earnest money<\/h3>\n
Home inspection contingency deadlines<\/h3>\n
Get it in writing<\/h3>\n
![\"Two](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/11\/inspection-contingency-clause-2-666x381.png\")
<\/a>Buyers: what to include in a home inspection contingency<\/h2>\n
An easy (and quick) way out<\/h3>\n
A time frame you can work with<\/h3>\n
Choose your wording carefully<\/h3>\n
Consider including a radon test<\/h3>\n
Should you waive an inspection contingency clause?<\/h2>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/11\/inspection-contingency-clause-3-666x381.png\")
<\/a>Why you might waive an inspection contingency clause<\/h2>\n