Patch Blog: The Physical Inspection Contingency

When a buyer makes an offer on a house, there are usually three contingencies that are made a part of the contract.  The first two are related to the buyer's financing, which includes the appraisal and the individual's ability to qualify for a mortgage.  The third, which is just as important to the buyer, is the physical inspection contingency.

Typically a buyer has 17 days to complete their inspections, accept all the seller disclosures, and remove their contingencies.  During the first two weeks of their escrow, a buyer will hire a licensed physical inspector and have them check all aspects of their potential new home.  Those inspections include checking roof condition, plumbing, electrical, foundation, heating and air conditioning systems, and the overall general condition of the house.  Many buyers choose to accompany the inspector so they can have first-hand knowledge of flaws and items of concern.  After the inspection is complete, the inspector will provide a written report recapping everything noted.  Some of these items are of little or no concern, such as water pressure and cracked sidewalks, but often times there are concerns related to health and safety that a buyer feels need to be corrected.  In addition, if an inspector notes problems with specialized areas, such as chimneys or soil condition, he will suggest further inspections by other qualified experts.

In the Purchase Agreement, it states that "the Property is sold in its present physical condition as of the Date of Acceptance."  That means that the Seller cannot make any alterations to the property once they are in escrow, and it also means that what the Buyer saw when they made their offer is what they get.  The Agreement also states, however, that the Buyer may conduct investigations of the property and based upon their findings either cancel the agreement or request that the seller make repairs.  In most cases, especially in today's Buyer's Market, the buyers will make requests that the seller fix those things that concern them, or even the entire list of items that need to be corrected.  Depending on the demands made by the buyer, the seller most often will agree to either repair the requested items or offer the buyer a credit in lieu of repairs.  At the time of the final walkthrough, the buyer will check to see that their requested repairs were made.

The inspection process is a touchy subject with sellers.  Many homeowners feel their houses are "perfect," and to have an inspector then come in and tear it apart in his report could cause tensions on all sides of the transaction.  It is important to have both the buyer's agent and the seller's agent be able to communicate to their clients the art of negotiation.  Very rarely do I see escrows fall apart because of a physical inspection.  When that happens, it is usually because of major safety conditions, such as leaky roofs or foundation problems, or the inflexibility of the seller or the buyer to come to an agreement.  In the long run, however, everyone involved in a home sale wants things to end on a high note so that both the buyer and the seller walk away happy.