The Inspection Contingency: What a Seller Is Actually Agreeing To

What an inspection contingency is

An inspection contingency is a provision in a purchase contract giving the buyer a defined period to investigate the property, and a defined right to do something about what they find.

It is reasonable and it is normal. A buyer committing a large sum to a house they have seen twice is entitled to look properly. What sellers underestimate is that the contingency is where most of the late stage movement in a deal happens, and that its terms are negotiable in the same way the price is.

Our page on the purchase contract covers the document as a whole. This article is about this one provision, because it is the one that most often costs a seller money after the price has been agreed.

The three variables that matter

Sellers hear "there is an inspection period" and think of it as one thing. It is three, and they can be negotiated separately.

The length. How many days the buyer has. A short period concentrates the buyer's mind and gets the house back on the market quickly if it fails. A long period is a long time during which you are off the market and cannot entertain another offer.

The scope. What may be investigated. A general home inspection is one thing. A general inspection plus a sewer camera survey, a structural engineer, a pest inspection, a roof specialist, a pool inspection and a mould assessment is a different exercise with a longer list of findings. Neither is unreasonable. They are different amounts of exposure.

The remedy. What the buyer may do at the end of it, which is the one that actually matters and the one sellers almost never read.

What the buyer may actually do

Contracts differ, and the version you have been handed governs, so have your agent or your lawyer tell you which of these you have agreed to. Broadly, the possibilities run from narrow to very wide:

• Request specific repairs, which you may accept or decline, and the deal continues or ends on that
• Request a credit or a price reduction, same structure
• Terminate for a defect of a defined kind or above a defined cost, which is a genuine limit and a reasonable one
• Terminate for any reason at all during the period, which is the widest version. At that point the price in the contract is an opening position and the earnest money is the only thing holding the buyer in

The difference between the third and the fourth is the difference between a sale and an option. Both appear in real contracts and they are not priced the same by anybody who understands them.

What it costs a seller

Even when nothing goes wrong, the contingency has a price:

• You are off the market for the whole period. Other buyers move on
• You carry the house for those weeks. Our holding cost calculator turns that into a figure
• Your own onward plans are suspended on an outcome you do not control
• You now know things about your house that you did not know before. That is the one sellers never anticipate, and it does not go away if the deal does. Our article on Oklahoma seller disclosure requirements covers what knowing changes
• If it fails, the clock restarts rather than pausing, and the next buyer's inspector will find the same things. Our page on a sale that fell through covers what to do with the report you now have

What to negotiate

1. Shorten the period. A capable buyer with an inspector lined up does not need three weeks. Ask what they actually need and why
2. Narrow the remedy. A right to terminate for a material defect above a stated cost is a fair protection for a buyer and a real limit for you. An unlimited right to walk for any reason is not a limit at all
3. Ask for a larger deposit, or for it to become non refundable when the period ends. That is the mechanism that turns a contract into a commitment
4. Agree how repair requests will be handled before any arrive: in writing, itemised, with quotes attached. It changes the tone of that conversation entirely
5. Ask for a copy of the report. Whether you are entitled depends on the contract, so negotiate it in. It is the most useful document in the transaction and you will want it whether the sale survives or not
6. Consider pre-inspecting. Getting your own inspection before listing costs a few hundred dollars and converts every later surprise into something you chose how to handle

How to prepare for the inspection

• Make everything accessible. The attic hatch, the crawl space entry, the panel, the water heater, the furnace. An inspector who cannot access something writes that down, and "not inspected" reads worse to a buyer than a minor defect
• Have every utility on and working, especially in a vacant house
• Replace the cheap things first: missing smoke alarm batteries, a loose handrail, broken glass, missing outlet covers, a dripping tap. A report with fifteen trivial items reads as a neglected house even when it is not
• Clear the perimeter so the exterior, the grading and the foundation can actually be seen
• Leave out the paperwork: dates and invoices for the roof, the panel, the HVAC, the water heater, any past claim. Our page on the repair cost estimator lists what an inspector looks at that an owner has stopped noticing
• Be out of the house for it, and take the dog

The short version

An inspection contingency has three parts: how long, how wide, and what the buyer may do at the end. The third is the one that matters. A right to terminate for a defined material defect is a sale. An unrestricted right to walk away for any reason is an option on your house, and the two should not be accepted at the same price.

For what it is worth, we do not use one. We walk the house before we write the offer, the repair estimate is attached to it, and the number does not change afterwards. That is the standard to hold any buyer to, in writing.