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What Is a Home Inspection Contingency? 

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Asking deals in the real estate market is not a simple task. There are several agreements, clauses, and mandates. One such condition is the Home Inspection Contingency report, which is difficult for the market buyers and sellers to comprehend. Let us explore it further and know everything about it.

What Is a Home Inspection Contingency? 

Source: Freepik

What Is a Home Inspection? 

To understand the contingency part better, you must know the meaning of the Home Inspection in real estate.  

A home inspection uses third-party agencies or individuals in thorough property inspections. Majorly, the following areas or discrepancies:  

  • The safety issues associated with the property, both structural and mechanical  
  • The end of the service life of the various materials and parts the builder used to build the property. For example, how old are the kitchen cabinets or the bricks used in construction?  
  • Dis-functionality of the installed equipment and parts, for example, the windows do not open and close properly.  
  • Any other type of significant deficiency can hinder natural living.  

Hence, a home inspection is a detailed analysis of the property. Everything, from its walls to ceilings to electrical and plumbing installations, the home inspection needs to examine and report.  

Usually, a home inspector performs a home inspection and prepares a report which covers the following issues:  

  • Is there any structural damage to the building?  
  • Is the roof of the property damaged?  
  • What is the state of electrical installations?  
  • What are the different plumbing issues associated with the property?  
  • What are the various sections of the house damaged by water?  
  • Is the heating and cooling system faulty?  
  • What is the gravity and the extent of insects, pests, and rodent infestation?  
  • How is the woodwork on the property?  
  • Are the electronic equipment, gadgets, and other appliances working appropriately?  

The primary purpose of this report is to let the buyers know the natural state of the property. It helps them to price the property based on its natural state. 

What Do You Mean by Home Inspection Contingency? 

If you are a property buyer, you will extend the offer to buy to the property seller. This offer usually contains the clause of the home inspection contingency, which states that:  

If the results of a home inspection are negative, then this offer to buy shall lapse and be considered null & void or amended based on such a report.  

So, a home inspection contingency makes the offer letter dependent or contingent on the report of the home inspection based on which the buyer of the property can:  

  • End the offer letter and withdraw it  

or  

  • Negotiate with the seller to perform repairs   

or  

  • Reduce the purchase price considering the home inspection report  

How Does the Home Inspection Contingency Works?  

The clause of home inspection contingency is usually present in the purchase offer and makes the entire transaction “conditional” and based on the home inspection report. In most cases, the buyers get about two to three weeks to get the home inspection.  

Let us now understand the working of a home inspection contingency clause through this practical example.  

  • Alex Smith is a salaried professional looking to buy a property in the Greater Toronto Area.  
  • After participating in several showings, he has shortlisted a residential property in Brampton.  
  • As advised by his real estate agent, he has extended a purchase offer to the property seller with a “home inspection contingency.”  
  • Alex hired a specialized agency for a home inspection.  
  • The agency sent home inspectors to perform an audit of the said property. 
  • The home inspectors prepared the following report after checking the property. 
S. No. Problem Area Description of the problem 
1. Plumbing • Growth of several tree roots seen in the plumbing system
• The pipes are corroded due to impact of time and consistently leak water
2. Roof • The granules of the roof have loosened due to time
• Most shingles are broken or curled
• There is the presence of a hidden leak due to rotten wood in the attic
3. Electrical • The property is observed to have code violations and is susceptible to sparks and electrical fires
• The power grid is made of low-quality material and leads to power sags
• Most light switches are not working properly
  • After the home inspection report, Alex negotiated with the seller to undergo repairs.  
  • The seller was unwilling to perform repairs and was determined to sell the property on an “as is, where is” basis.  
  • It prompted Alex to revise his purchase offer and lower the offered purchase price.  
  • After a few negotiations, Alex could strike a deal and finally owned the property.  
What Is a Home Inspection Contingency? 

How To Do House Inspection and the Cost?  

You should hire specialized agencies that have several professionals for performing a home inspection. It is because a house comprises several regions/ sectors that require special domain knowledge.  

For example, a specialist in electrical inspection might not perform a roof audit.  

Thus, as you will need several professionals to perform a comprehensive house inspection, it is slightly expensive, with a single home inspection costing you around $500.  

Further, you must also review their qualifications and certifications. You can also check whether they are members of reputed associations, such as the Canadian Association of Home and Property Inspectors. 

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