Often, a contingency clause is part of a home sale contract. A contingency clause gives either party an option to cancel the contract under certain circumstances. A home inspection contingency is a common contingency attached to a contract.
The home inspection contingency gives the buyer the right to have the home inspected in a designated period of time. Depending upon the findings during the inspection, the potential home buyer can either negotiate repairs or cancel the contract without any penalty.
There are a few ways you go about handling the home inspection contingency.
Sometimes agents won't allow a complete home inspection because a single-family home can easily take five or six hours. You may not have the time or want to pay a thousand dollars for a home you may not get.
The inspector will provide a detailed report of all house systems in a complete home inspection. When you pay for a comprehensive home inspection, you will receive a full report that varies in size but is generally between 30 to 80 pages. This detailed report will cover everything from the roof to the basement and all foundation, electrical systems, and plumbing.
Unlike the financing contingency, where you know your financial situation - even with the appraisal, you have a ballpark idea of where the home might appraise; you have no control over the outcome of the home inspection contingency.
There is a risk when it comes to the home inspection contingency. If you choose against the home inspection, are not savvy regarding single-family home construction, or home improvement is not your forte, the inspection may be more nerve-wracking because of the risk. However, there are mechanisms in place where you can mitigate that risk.
If you live in the DC area, there are home inspection contingencies that are non-negotiable.
In situations where there are enforced rules set upon the home, like properties belonging to a Home Owner's Association (HOA) or a condominium association, there is an established amount of time after the buyer receives documents where they can cancel the contract without any penalty.
Another non-negotiable contingency for purchasing a single-family home or a townhome is a termite or wood-destroying insect inspection. This contingency doesn't mean buyers can cancel the contract if they find these insects. However, if they find any wood-destroying insects, the seller is responsible for remedying the issues and paying for any damages that occurred before settlement.
For a simple, straightforward understanding of the most common contingencies in real estate, visit our YouTube channel.