The inspection contingency allows the buyer to hire a licensed home inspector to evaluate the property's condition, including the structure, roof, plumbing, electrical, HVAC, and other systems. If the inspection reveals significant defects, the buyer can request that the seller make repairs, offer a credit, reduce the price, or the buyer can cancel the contract entirely. The seller is not obligated to agree to repair requests.
A buyer has a 10-day inspection contingency. The inspector discovers significant termite damage and an aging roof that needs replacement. The buyer submits a repair request asking the seller to treat the termites and credit $8,000 for the roof. The seller agrees to treat the termites but offers only a $5,000 credit.
Know that the inspection contingency protects the buyer, not the seller. Exam questions may test whether a buyer can cancel for any reason during the inspection period — in many contracts, the answer is yes. Also remember that inspectors are not appraisers; they evaluate condition, not value.
Related Terms
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Frequently Asked Questions
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