Inspection Contingency
Definition
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Example
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.
Exam Tip
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 Contracts Terms
Purchase Agreement / Sales Contract
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
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.
Counteroffer
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
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 Deposit
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.
Contingencies
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Frequently Asked Questions
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