By nature, home inspectors are distanced from the logistics of a real estate transaction. Whether performing a home inspection for a buyer looking to purchase a home or a seller looking to sell a home, your objective is simple – to visually inspect the home and produce a thorough home inspection report.
And yet, since the bulk of your inspection clients hire you based on their home inspection contingencies, it’s important to understand them. Knowing the ins and outs of this common legal clause helps you provide quality service to your clients – and meet their deadlines.
What is a home inspection contingency?
A home inspection contingency – also called a due diligence contingency – is a legal clause added to a real estate purchase agreement that gives the buyer the right to inspect the property (or perform “due diligence”) during a specified timeframe. The inspection contingency also gives the buyer the right to negotiate repairs or cancel the contract based on the results of a home inspection.
Here is a basic example of a home inspection contingency and a breakdown of how the inspection contingency works.
According to the National Association of REALTORS® (NAR), 75% of buyers include a home inspection contingency in their purchase contracts. They are also among the most used in purchase contracts – alongside mortgage, appraisal, and title contingencies.
What home inspection contingencies mean for buyers.
Home inspection contingencies help buyers avoid risky home purchases – and costly repair expenses they may not expect. With an inspection contingency in place, buyers can:
- Discover potentially costly defects, repairs needed, or safety issues in a home they’re looking to buy
- Negotiate with sellers for repair of major issues or a reduction in home sale price based on the inspection results
- Understand and plan for the ongoing maintenance (and financial) needs based on the condition of the home
- Determine if a home is a financially sound investment, or if they should walk away and keep looking
What home inspection contingencies mean for sellers.
For sellers, home inspection contingencies are essentially contractual obligations. When negotiating with a buyer who has an inspection contingency in place, a seller would:
- Respond to the buyer’s additional negotiation requests (if made) based on the inspection report findings within the legal contingency period
- Determine if they will make the repairs requested, reduce the purchase price for the buyer, offer other concessions, or let the sale contract expire and return the buyer’s earnest money
An upside in this process? Sellers may learn about the flaws of their home that could affect a sale – and take steps to fix serious problems. This is one reason why more home inspectors are offering seller pre-inspection services, and real estate agents encourage their sellers to get them.
What home inspection contingencies mean for home inspectors.
For home inspectors, the home inspection contingency clause boils down to one thing: urgency. Unlike seller and homeowner clients who have looser timelines for pre-inspections, buyer clients generally expect a fast turnaround. When you work with a buyer, your first question should be: “What’s your deadline?” You want to ensure you can complete your inspection and deliver the report within your client’s legal due diligence period.
Tips to better serve buyer clients.
Working swiftly with buyers to conduct inspections and deliver reports within their timelines hinges on establishing good systems in your business. For example:
- Create time-freeing processes. Create a process for scheduling inspections and capturing client information, such as timelines and inspection request specifics, ahead of time.
- Use inspection report software. Invest in timesaving inspection report software to make your inspection and reporting process more efficient.
- Always follow up. Make sure to follow up with your client after sending the inspection report and answer any questions they have – ideally before their deadline is up.
Let great service speak for itself.
Stick to the inspection fundamentals in every job, provide a great client experience, and watch your quality service speak for itself in your local real estate community. By helping buyers with solid inspection services and a contingency-friendly turnaround, word will travel fast and so will repeat business.
Learn home inspection and how to build your inspection business with AHIT.
At AHIT, we’re here to help you master the fundamentals of home inspection – and learn how to build a thriving home inspection business. Learn your state’s licensing requirements and enroll in home inspection training today. We’ve trained over 60,000 skilled home inspectors across the U.S. since 1993. Are you next?