As a real estate agent, I would never advise a buyer not to write a home inspection contingency in an offer to purchase contract. What I would do is advise the buyer that every house has defects. Some are readily observable; others are hidden. Some are trivial; others may be deal breakers. Dispensing with a home inspection requires a willingness to accept more risk; it is up to the buyer to decide if the level of risk is acceptable. Defects in a home may affect the buyer’s decision to buy, as well as the price he or she is willing to pay. An inspection contingency in the purchase contract allows the buyer time before the purchase becomes final to hire a home inspector to conduct a pre-purchase home inspection and to negotiate with the seller concerning defects (a defect as defined by the language of the purchase contract.)
A standard home inspection covers a home’s major mechanical systems – electrical, plumbing, and heating and air conditioning, as well as its construction from roof to foundation, exterior and interior. The inspector may also provide the buyer with additional information beyond the actual inspection regarding home repairs and maintenance. The inspector must inspect certain features as required by state law and may inspect additional components and features at his or her discretion or by agreement between the home inspector and the client. See my report at http://www.vincehoehn.com/Util/GetDocument.ashx?docId=1183074 for a chart detailing required and optional components, systems, and items covered in a home inspection performed by a Wisconsin licensed home inspector.
A home inspection contingency does not authorize any testing. Items such as a water test or tests for radon, mold, and asbestos require additional contingencies to be written into the contract. The home inspection contingency also does not automatically allow for well and septic inspections – these must be specifically addressed.
After receiving the inspection report, the buyer must evaluate whether there are any defects listed in the home inspection report to which the buyer objects and which the buyer wants the seller to fix before the buyer will purchase the property. A defect as defined according to the language of the offer to purchase, is a structural, mechanical or other condition that would have a significant adverse effect on the value of the property, significantly impair the health or safety of future occupants, or, if not repaired, removed or replaced, significantly shorten or have a significant adverse effect on the expected normal life of the entire property. Not all defects listed in the inspector’s report will rise to the level to be considered as a defect in this context. If the buyer wishes to give notice to the seller concerning defects, either to have the seller cure the defects, or to be released from the contract if the seller does not have the right to cure, it must be done on the proper form in the proper time frame (spelled out in the terms of the inspection contingency).
The language of the home inspection contingency (paraphrased) of the residential offer to purchase is thus: This offer is contingent upon a home inspector performing a home inspection of the property, and an inspection, by a qualified inspector of (insert other inspections, such as one for a specific component by an engineer, architect, or contractor) which discloses no defects as defined. The contingency shall be deemed satisfied unless buyer, within ( ) days of acceptance delivers to seller a copy of the written inspection report and a written notice listing the defects to which the buyer objects. Buyer shall order the inspection and be responsible for all costs of the inspection. Seller (shall) (shall not) have the right to cure. If seller has the right to cure, seller may satisfy this contingency by delivering a written notice within 10 days of receipt of buyer’s notice; curing the defects in a good and workmanlike manner; and delivering to buyer a written report of work done no later than 3 days prior to closing. This offer shall be null and void if seller does not have the right to cure or seller delivers notice that seller will not cure or seller does not deliver timely notice of election to cure.
An important item to keep in mind concerning this contingency is that the deadline for the buyer to deliver the notice of defects is also the deadline for the buyer and seller to conclude negotiations relative to the buyer’s concerns about defects detailed in the inspection report. The buyer must allow enough time for the inspection to be completed, to analyze the report, and then potentially negotiate via contract amendments with the seller before arrival of the deadline. If the parties cannot reach an agreement, the buyer has until the deadline to decide if he or she wishes to risk losing the deal by giving the seller an ultimatum – the notice that says “correct these defects or I am walking.”