CAR Residential Purchase Contract 14 B(1)
The inspection contingency protects the buyer if there are defects in the condition of the property, like a bad foundation, termite damage, sewer line replacement etc. During the inspection contingency, this is the time in escrow where a buyer hires a professional inspector to evaluate the property. If the buyer finds a big problem they can either cancel the deal or try to work out an agreement with the seller with a request for repairs.
The Inspection contingency is the broadest contingency. There are no precedents for what the buyer may or may not find “satisfactory” in regards to the condition of the property. The buyer is not even required to hire an expert, they can find the property unsatisfactory from their own inspection. The inspection contingency becomes even more broad to apply not only to the physical condition of the property but also “and any other matters affecting the property”.
Most realtors (including myself), tell our buyers “as long as you have your inspection contingency in effect, you can cancel for any reason”. You are supposed to exercise this contingency in good faith and have a legitimate reason to cancel – but there is no test for good faith or punishment to enforce it even if it isn’t acting in good faith (one reason for bad faith- another property came on the market that I like better). Cancel for any reason? Not exactly a comforting thought for sellers. Many a seller has lost a nights sleep over the inspection contingency. Understandably, sellers are always anxious to remove it.
In Buyer’s markets, the inspection contingency is the standard 17 days which is plenty of time to complete all investigations of the property. Remember, some of the buyer’s investigations depend on information provided by or obtained by the seller, so if the seller drags their feet on providing their disclosures (TDS, SPQ, Prelim), ordering the city 9A report, or ordering HOA Docs for condos, this can make the inspection contingency late. Once a buyer receives a disclosure they have a couple of days to review it.
In Sellers Markets, where multiple offers are common, sellers can improve the terms of the sale by reducing the number of days for the inspection contingency. They usually want 10-14 days (but sometimes they even try to chop it down to 7!). 10 days is just barely enough time to get everything done. Keep in mind, most inspectors don’t book inspections on Saturday or Sunday, and they are booked a few days in advance. Couple that with the fact that they need a day or two to write their inspection report and you have already spent 4-5 days.
If the buyer’s inspection turns up a problem that requires following up with a professional or specialist, and you will need more time for follow up inspections. Anything less than 10 days, is very short and will be very difficult to complete on time. If the seller as for less than 10, hopeful they have some presale inspection reports to provide the buyer to give them a head start.
Expert tip: If you know you are going to have a short inspection contingency (because the counter offer says so), book an inspection before you respond with your best and final and have an accepted offer. That way you don’t waste the first few days of escrow if your offer is accepted. If you offer is not accepted, you can cancel the inspection that you prebooked. As a courtesy to my inspectors, I tell them I am doing this.