Whether you’ve stumbled upon your dream new-construction build in Phoenix, AZ, or the perfect place to settle down in Middletown, CT, it’s crucial to ensure everything is in order before moving in. This is where a home inspection contingency plays a vital role. Whether you’re a seasoned investor or a first-time homebuyer, this Redfin Real Estate article covers all the essentials of an inspection contingency to ensure a smooth real estate transaction.
Key points to remember:
- A home inspection contingency safeguards the buyer from purchasing a property with significant issues.
- While providing peace of mind and negotiation leverage, this contingency may make the offer less attractive and lead to closing delays.
- You may choose to waive an inspection contingency in a competitive market, after a pre-inspection, or opt for alternative protection, but it’s generally advisable to retain it.
Understanding the inspection contingency:
An inspection contingency is a clause added to a real estate purchase agreement that allows the buyer to withdraw or renegotiate the deal based on the results of a professional home inspection. This clause protects the buyer from purchasing a property that falls short of expectations due to issues like major repairs, structural damage, or other concerns.
Pros of having a home inspection contingency:
- Protection from unexpected issues
- Negotiation leverage for repairs or price adjustments
- Peace of mind regarding the property’s condition
Cons of having a home inspection contingency:
- Possibly a less attractive offer to sellers
- Potential closing delays due to the inspection process
- Cost of the inspection (usually between $300-$600)
How does the inspection contingency work?
- The buyer includes an inspection contingency in the offer.
- Upon acceptance by the seller, the buyer typically has 7-10 days to hire a licensed inspector, review the report, and make decisions.
- If the home passes inspection, the transaction proceeds. If issues are identified, the buyer can choose to proceed as-is, cancel the deal, renegotiate, or request repairs.
- In case of necessary repairs, the buyer can submit requests, which the seller can agree to, propose alternatives, or decline.
- Based on the buyer’s decisions, an agreement is reached, and the deal moves towards closing.
Should I waive the home inspection contingency?
Although it’s generally recommended to retain an inspection contingency, there are instances where you might consider waiving it:
- You’ve had a pre-inspection or access to a reliable report: If the property has recently been inspected, another inspection may be unnecessary.
- It’s a seller’s market: In competitive markets, sellers may prefer offers with fewer contingencies.
- It’s a newly constructed home: Newly built homes typically have fewer issues and come with warranties, making an inspection less critical.
- You’re capable of assessing the property yourself: If you have expertise in construction or trust your judgment, you may bypass a professional inspection to save time and money.
Alternatives to waiving an inspection contingency:
- A pre-inspection: If permitted by the seller, this ensures the property meets your standards before making an offer.
- A shortened contingency period: For a faster turnaround on the inspection, making your offer more appealing to the seller.
- An “information only” clause: Allows for an inspection without the option to negotiate or cancel the offer, potentially making it more attractive to the seller.
Frequently Asked Questions about home inspection contingencies:
For answers to common questions about inspection contingencies, refer to the following FAQs:
Why should I have a home inspection contingency?
A home inspection contingency ensures you don’t end up with a property full of surprises.
How long is the inspection period?
Typically, buyers have 7-10 days to schedule and review the inspection.
Is a home inspection mandatory for a mortgage?
No, a home inspection is optional for the buyer and is not required for a mortgage. However, lenders usually require an appraisal for mortgage approval.
What does a home inspection cover?
Home inspections typically include assessments of both interior and exterior components such as structural elements, roofing, plumbing, and electrical systems. For a detailed list, check out this article from Rocket Mortgage.