If you’re in the market to buy a home, you might be wondering what a home inspection contingency is. If the housing market is particularly competitive, you might also be thinking about skipping the home inspection altogether to sweeten your offer as a buyer.
But your inspection contingency exists to protect you, and a house inspection is a crucial part of the home buying process—even if it raises your costs.
In this article, you will learn:
- What a home inspection contingency is
- How an inspection contingency works
- What your home inspection covers
- How to use your home inspection results
- And the answers to other FAQs on inspection contingencies
Let’s dive in.
What Is the Home Inspection Contingency?
The home inspection contingency is a clause in the real estate contract you generate when making a home offer. The inspection contingency allows the buyer to have a home inspection done and gives them the right to back out of the contract before closing on the home if they find anything they don’t like during the inspection.
In other words, the home offer is contingent on inspection results. As long as you stick to the rules defined in the home inspection contingency, you will get to keep your earnest money deposit if you back out.
Inspection contingencies are incredibly valuable because they allow buyers to make a fully informed decision, and they protect your ability to renegotiate or back out when new information presents itself.
How Does an Inspection Contingency Work?
When you include an inspection contingency in your home offer, the contingency will detail when the home inspection should occur, how much time you and the seller have to negotiate based on inspection results, and what negotiations are possible.
If you don’t back out of the offer after the inspection, negotiations you can use include:
- Lowering the sale price of the home.
- Asking the seller to fix problems found.
- Asking the seller to give you credit to fix the problems yourself.
In action, the inspection contingency works like so:
- The buyer has the home inspected within the inspection period.
- After the inspection, the buyer has a specified amount of time to agree to the initial offer, provide their new negotiation, or back out.
- The seller has a specified amount of time to respond to the buyer’s request by rejecting, accepting, or negotiating with the updated offer.
- If a buyer decides to back out, they must do it within the inspection contingency period to get their deposit back. There is no penalty to backing out within the timeframe.
As a buyer, always pay close attention to your home offer contract and its contingency deadlines. Exact law varies by state and local regions, but any real estate professional should be up-to-date on these matters. You can also discuss your buying strategy with your real estate agent or lender.
What Do Home Inspectors Look For?
Home inspections cover a house’s interior and exterior parts and assess its structure, major appliances, and the systems that keep it running. It will include all aspects of the home, including crawlspaces and attics.
After the inspection, your home inspector will give you a detailed report with their expert opinion on the condition of the home and any problems they found. For each problem, they will:
- Explain the issue in detail and provide photos.
- Note whether the issue is severe or minor.
- Recommend how to fix the issue.
- Recommend when it should be fixed by (sooner if it’s a safety hazard).
A good home inspector will also provide tips for proper home maintenance in the future.
You want to be present for the home inspection to monitor the examination yourself and ask any questions you have in person. You will have a better understanding of the home’s condition by being there.
The average home inspection takes between 2-4 hours to complete, but it can be more or less depending on the size of the home.
Here’s a brief overview of what your home inspection will include.
Exterior Home Inspection
During the exterior part of the home inspection, the home inspector will make sure everything looks safe and in good repair outside the home. Major areas they’ll look over include:
- The Roof: They will check for damaged and missing shingles, poor insulation, and the condition of the gutters.
- Walls: They will look for cracks, siding issues, and signs of pests.
- Garage: They’ll check how well the garage door functions and how well gas fumes ventilate.
- Foundation: They will look for cracks, settling, and other indications of damage.
- Grading and Water Drainage: They’ll see if the ground slopes towards the home in a way that could cause water damage to the foundation.
Interior Home Inspection
During the interior part of the home inspection, the inspector will ensure that everything works properly inside the home and is in good condition. Big things they’ll cover include:
- Electrical Systems: They’ll check the electrical panel, wiring, outlets, and ground fault circuit interrupters.
- HVAC: They’ll evaluate the size, age, and condition of the air conditioner and ductwork.
- Plumbing: They will check for leaks, water pressure levels, and the condition of plumbing pipes and the shutoff valve.
- Fire Safety: They’ll test smoke and carbon monoxide detectors and check laundry room ventilation.
- Water-Related Bathroom Hazards: They will check for leaks, proper ventilation, and that the toilet and shower are securely installed.
- Water Heater: They’ll evaluate the age and condition of the water heater.
- Major Appliances: They’ll check that appliances like the dishwasher and stove work.
★ Important
Home inspectors look for available visual clues. This means they don’t identify issues that aren’t already visible, and they don’t directly check for asbestos, lead, radon, pests, or hidden mold.
Home inspectors also don’t usually specialize, so if they spot a problem, they will recommend you have another professional look at it. If you’re concerned about a specific issue, you can book a separate specialized inspection.
When Buying a House, Who Pays for the Inspection?
The buyer pays for the home inspection because the inspection protects the buyer. It also allows them to use an inspector of their choosing. Afterward, the seller might agree to fix problems found, give the buyer credit to fix problems found, or reduce the price of the home.
How Much Does a Home Inspection Cost?
The average home inspection costs between $300–$500, but the price will vary based on the size of the home and where you live. Your expenses may increase if you need specialized inspections based on the findings of the initial home inspection.
Results Are In: What to Do After the Inspection
Once you get the results of your home inspection, you might be wondering what to do next.
For Minor Problems
For smaller issues that require a simple fix or replacement, you can use the inspection report to negotiate, or you can decide to handle them yourself.
For Potential Problems
If the inspection report shows that there might be a larger issue, but it requires a specialist’s trained eye, set up an appointment with a specialist right away. You’ll want it looked at before your deadline to back out is up. For example, if the report finds termite damage, you’ll want a pest control expert to verify that it’s not an active infestation. You might be able to get the seller to pay for the follow-up inspection, but it’s usually up to the buyer.
For Major Problems
When it comes to significant issues like a bad roof or severe water damage, you might use the inspection clause to back out of the home offer due to the money and time it will take to fix. (If you have a family or a new job waiting, you might not be able to wait a few months to move in.) However, if you are still interested in the home, you can try to negotiate for a lower sales price, repairs, or repair credit.
When the Property Comes As-Is
If they are selling the house as-is, you won’t be able to negotiate. If you want it anyway, start by getting estimates for the repairs suggested in your home inspection report. Tackle the repairs in order of most to least important.
★ Important
- No inspection is perfect.
Homes are lived in, and even new homes can have problems that need fixing. The goal is to find a home with minimal repairs or repairs that are not too serious.
- Sellers won’t fix everything.
Sellers usually won’t make every repair your home inspector recommends, so some fixes will be up to you. Again, the goal is to keep them minor and to negotiate well.
How Long After a Home Inspection Does the Buyer Have to Back Out?
How long a buyer has to back out after a home inspection depends on your contract and the dates set in your inspection clause. You can back out without penalty until the date specified. If it’s past that date, you can still back out, but you will lose your deposit.
On average, buyers get a week or two to do the home inspection and notify the seller that they want to cancel. You can try to shorten or extend this amount of time during your initial offer negotiations.
Are Repairs Required After a Home Inspection?
No repairs are technically required by you or the seller. If the seller won’t make repairs after the inspection, that’s their decision. You’re not required to fix things either, but it’s difficult to finance the home and get a good insurance rate if the house needs significant repairs or restorations.
Should I Give the Seller a Copy of the Home Inspection?
You don’t have to give the seller a copy of the home inspection or even parts of it. You paid for the report, so it’s your property to do what you want with. In most cases, the seller won’t want to see the report because they will be obligated to disclose its findings to future buyers.
What Is the Average Price Reduction After a Home Inspection?
A small study of 1,000 people found that the average price reduction after a home inspection was $14,000. Your own price reduction will largely depend on what the inspection reveals and the negotiation skills of you and the seller.
And remember: While a high price reduction sounds nice, it means more things were wrong with the property.
Always Get a Home Inspection
If you’re thinking about skipping the home inspection, we recommend that you don’t.
Homes are expensive, but investing in a home inspection can save you thousands by making sure you buy a safe house in good condition. Paying for an inspection is better than getting out another big loan to pay for surprise repairs.
It also makes it possible to negotiate for a reduced sales price that could more than pay for the inspection itself.
With a home inspection, you choose your home wisely, and you’re better prepared to take care of your home upon moving in. The peace of mind is priceless.
Never Forgo Your Home Inspection Contingency
Sometimes buyers forfeit their home inspection contingency to win a bidding war, and much like skipping the home inspection, we don’t recommend this practice. If it turns out that something is wrong with the house, you will either lose your deposit when you back out, or it will be entirely up to you to pay for the repairs needed—no matter how expensive or severe.
Forgoing an inspection contingency is a gamble, and when there’s a house you really want, there are other ways to sweeten your offer.
Ultimately, the home inspection and inspection contingency are two of a home buyer’s most valuable tools. The smartest thing you can do is make the most of them.