The inspection contingency clause in a real estate purchase agreement is a legal benefit to the purchaser; this legal right is given by the state in most real estate transactions.
The time period for the contingency varies from state to state; ten to fifteen days is the average. The clock starts ticking after the agreement is signed by all parties and becomes a contract.
Purchasers and sellers may negotiate the time period for the inspections. It is common to see purchasers ask for business days instead of calender days to conduct their inspections.
In some cases, purchasers will waive inspections in order to make their offer more appealing to the seller. This may be appropriate for homes that are gutted or need more than fifty per cent repair. It is never wise to waive inspections on a home in which the purchaser assumes is in good condition.
The inspection period is the time frame, in which a purchaser can back out of the agreement without contractual penalty. If the purchaser is dissatisfied with any components of the property he may cancel his agreement with the seller. This is true even if the seller offers to correct the problems that the buyers discovered.
During the inspection period purchasers should verify the lot size and the square footage of the home. Advertised information on square footage and lot sizes are prone to error.
The purchaser would be wise to hire a general inspector or contractor to inspect the home for mechanical and structural integrity. In addition, a termite and wood destroying insect inspection should be conducted.
The general inspector will recommend additional inspections on any component that may require a more thorough investigation.
Once the inspections are completed, the purchaser will receive a written account of the conditions that were found, both good and poor. The purchaser will make a decision as to what action he will take in reference to the deficiencies found during inspections.
A form generally called “Response to Property Conditions” is submitted to the seller with either the decision to cancel the sale or items that the purchaser wants the seller to correct.
The purchaser’s choices are:
1. To cancel the contractual agreement without penalty of default
2. Request the seller to repair or replace the items that are deficient
3. Ask for a cash allowance to repair or replace the deficient items post closing
4. To ask for nothing and proceed on with the sale
The seller’s choices are:
1. To reject all request of repair
2. To accept some requested repair and reject others
3. To offer a cash allowance for the repairs post closing
4. To lower the sales price to adjust for the deficiencies.
Once the purchaser has completed his inspections he is required to furnish the seller a copy of all reports. Sellers are required to disclose known deficiencies once discovered.
To insure a pleasant inspection period the seller can conduct a general inspection prior to listing the property for sale. This will allow the seller to correct major concerns.
Keeping things pleasant, the purchaser should not take advantage over the seller during the inspection period with nickle and dime repairs. The purchaser should be looking for major issues, items that are costly and were not considered in the offered price.