What Is a Home Inspection Contingency?

Written by Kim PinnelliUpdated: 28th Dec 2021
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The last thing you want when you buy a home is home repairs and financial issues, right? Unfortunately, it happens, which is why a home inspection contingency is important.

A home inspection contingency protects buyers from buying a home in poor condition. Even if a home looks great when you walk through it, nothing compares to the inspection professional inspectors provide.

A home inspection contingency buys you time to do the inspection to decide if the house is right for you.

What Is a Home Inspection Contingency?

A home inspection contingency gives buyers time to secure a home inspection and review the report before the sales contract is legally binding.

If the inspector finds major issues with the home, the buyer can back out of the contract and keep their earnest money.

Buyers also can negotiate repairs into the contract or ask the seller to credit them at the closing for the cost of the repairs.

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How Does a Home Inspection Contingency Work?

A home inspection contingency provides buyers with time to get the home inspected. If you request this contingency and the seller accepts it, they accept your offer on the house and agree to not take any other offers on the home until the contingency expires.

Sometimes, sellers can still show the property and even accept offers, but they can’t sign any other contracts until your contingency expires and you either buy the house or back out of the contract.

During the contingency period, you must hire an inspector, pay for the inspection, and review the report the inspector creates.

If the inspector doesn’t find anything wrong with the home, or at least nothing major, you can remove the contingency and proceed with the sale.

If the inspector finds things wrong with the home, you can decide how to proceed.

If it’s something major that will cause financial hardship or interfere with your ability to live there, you can cancel the contract and get your earnest money back if you operate within the contingency dates.

When Should You Waive a Home Inspection Contingency?

Waiving the home inspection contingency is risky business. If you’re unsure of the home’s condition or your real estate agent thinks there’s more to the home than meets the naked eye, take the home inspection contingency.

Even if you’re paying cash, I’d recommend the contingency. Who wants to invest in a home that will be a money pit or even be unsafe to live in?

Rather than waiving the home inspection contingency, consider making the expiration sooner rather than later. This way, the seller isn’t keeping the home off the market indefinitely.

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How Do You Waive a Home Inspection Contingency Clause?

If you don’t want a home inspection contingency on your contract, you don’t add one. It’s not a given on every contract, and most sellers will do what they can to minimize contingencies on their contract.

But, if you don’t want to give up your protection, you can offer the seller other benefits, such as a slightly higher offer or meeting their suggested closing date.

What Fixes Are Mandatory After a Home Inspection?

There’s no law stating sellers must fix certain issues found in an inspection report.

But, if you’re securing financing, the lender may have a say if there are major issues with the home that cause it to be unsafe, unsanitary, or unlivable.

How Long After a Home Inspection Does a Buyer Have to Back Out?

You only have as long as your home inspection contingency allows. You put your earnest money deposit at risk if you back out of the contract after your home inspection contingency expires.

If you plan to back out because the home inspection turned up issues, do it quickly, so you get your money back.

How Should You Prepare Your Home for a Home Inspection?

If you’re selling your home, the best way to prepare for the inspection is to make sure your home is in great shape by doing the following:

  • Check the roof for any issues
  • Look for water leaks or water damage
  • Check all plumbing and light fixtures
  • Look for pest or insect damage
  • Have your furnace and A/C inspected and cleaned
  • Clear all clutter
  • Have any major issues you’re aware of fixed

What Should You Ask During a Home Inspection?

You can walk with the inspector through the house if you wish. While you go on the inspection, asking about any areas of concern you have or focus on the major areas, including the roof, mechanical systems, electrical systems, plumbing, and any outdoor pest or animal infestation.

Why Are Home Inspection Contingencies Important?

Home inspection contingencies are important because they protect buyers from investing in a home that is a money pit.

The last thing you want is to invest thousands of dollars in a home you find out has major water issues, a leaking roof, pest infestation, or mechanical issues.

A home contingency gives you time to have someone inspect the home, write up a report, and give it to you.

There should be enough time for you to review the rather lengthy report (they can be 30 pages or longer) and decide how to proceed.

Bottom Line: What Is a Home Inspection Contingency?

We don’t recommend skipping the home inspection contingency. If a seller pushes to skip it, that’s a red flag that something is wrong with the home.

Instead, offer sellers other benefits so they can deal with the time the inspection contingency ties up your offer.

In a perfect world, the inspection goes well, and you can remove the contingency and buy the house.

If not, you protect yourself and your investment in the home, leaving you with your down payment in hand to put an offer on another home.

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.