Home Seller's Guide to the Inspection Contingency

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Wondering what an inspection contingency is, what it does, if you should counter it and how it impacts your home sale? Read this post to find out.

Home Seller's Guide to the Inspection Contingency image 1

An inspection contingency is a standard contingency for any buyer who is purchasing a home. It gives the buyer the right to cancel escrow without penalty if they discover aspects of the home are not to their liking during this period.

What Gets Inspected

As part of the process, the buyer may hire various inspection companies to review the condition of the property. Common inspections include the general home inspection and termite inspection. Less common inspections include chimney, sewer, pool/spa and roof inspections.

What Happens After Your Home Inspection

Once the buyer has had the property inspected and has reviewed the inspection reports, the buyer can either remove the contingency or they can submit a request for repair. If buyers request repairs, sellers have the opportunity to counter those repairs. In California, once both parties agree on an acceptable repair compromise and all the necessary documents are signed, the buyer typically removes the inspection contingency by submitting a contingency removal form.

Once all contingencies are removed, the buyer is effectively saying he or she understands the current condition of the property and is going to close escrow. The earnest money deposit becomes at risk, so any failure to close escrow may lead to the buyer forfeiting all or part of the deposit.

Is There Ever a Reason to Counter the Inspection Contingency?

Most buyers view this contingency as a must and will not proceed without it. For that reason, we generally don't recommend countering it. However, you do have the option of listing your home as an "as-is" sale, which implies up front that you're not intending to do any repairs to the property. You also have the option to request a shorter contingency period, thus lessening the number of days your buyer has to back out of the contract. The standard contingency period in California is seventeen days, but if you're working with a well-qualified buyer you may be able to negotiate it down to as few as ten days.

Have questions about the inspection contingency? Ask us.

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