Home Buying in Union City>Question Details

Joe, Home Buyer in Newark, CA

What is the home inspection contingency? Can anyone explain it?

Asked by Joe, Newark, CA Fri Aug 30, 2013

The seller and listing agent disclose a lot of issues like leaking faucet and asked to sign the cover letter which says received a copy of all disclosures and reports. Can I get out of the contract using the inspection contingency if I don't find anything other than the ones in the disclosures?

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If you find things in the disclosures that you are not comfortable with AND the seller will not deal with those issues, then you should have the right to cancel using the Inspection Contingency. Since I am not a party to all the details, this is only a general answer - your Realtor should be the one advising you on this.
1 vote Thank Flag Link Sat Sep 14, 2013
A home inspection is a limited inspection of the condition of the property. As a buyer you have to do a thorough investigation personally and hire professionals who can give you a written report of their investigation. You are given a limited time period in your contract to complete the investigation. You can request the seller in writing to repair any items specially if it is a health and safety issues. If the seller does not agree, then you have a valid reason to cancel the contract provided it is within the time period stated on your contract.
1 vote Thank Flag Link Fri Aug 30, 2013
It will depend how the contract is written. Some contracts state only if the seller refuses to credit or fix for them. You should ask your agent and be up front so they can properly guide you.
1 vote Thank Flag Link Fri Aug 30, 2013
Hi Joe,

"What is the home inspection contingency? Can anyone explain it?"

First, you should be asking your Realtor® this question since nobody on this forum knows all of the details of your transaction - and yes, knowing ALL of the facts can make a difference!

Quite frankly, with the exception of destructive inspection(s), the Inspections Contingency within the CAR Residential Purchase Agreement is extremely LIBERAL. The Buyer has the ability to perform a wide range of inspections based on what THE BUYER CONSIDERS TO BE MATERIAL. Some common examples are Pest, Property, Roof, Electrical inspections; however, some lesser known or exercised inspections carry the same level of importance. The subject property's school attendance boundaries, air quality, noise, crime statistics, traffic flow, and quality of life variables are equally important and material!

During the inspection contingency period (contract defaults to 17 days) the buyer is also reviewing the disclosures of the Seller. If the Buyer sees anything not to their liking they can cancel the contract within the inspection contingency period and request release of their deposit funds.

If the Buyer finds an issue and moves to cancel the contract and Seller subsequently does not agree to release the Buyer's deposit within 30 days, the Seller can be subject to a civil penalty of up to $1,000 for refusal to sign such instructions if no good faith dispute exists.

See: CA Civil Code §1057.3

"The seller and listing agent disclose a lot of issues like leaking faucet and asked to sign the cover letter which says received a copy of all disclosures and reports."

This is quite normal. Non-disclosure of material fact is the #1 reason Sellers are sued by Buyers.

"Can I get out of the contract using the inspection contingency if I don't find anything other than the ones in the disclosures?"

Speak with your Realtor®! Did you order any of your own inspections?

The CAR Residential Purchase Agreement Inspection contingency requires "active" removal in writing; as opposed to a "passive" removal where a date simply passes and automatically removes the contingency. In fact, if you do not remove the contingency the Seller must send you a Notice to Buyer to Perform to remove the Inspection Contingency or cancel the contract.

I believe your best course of action is to be truthful with the Seller regarding your hesitations(s). As covered below, if you have damage concerns ask the Seller to pay for the repairs needed. If that's not the case just be upfront; remember the Seller can make you wait 30 days before your deposit is returned.

1 vote Thank Flag Link Fri Aug 30, 2013
Listing agents and their sellers try to minimize surprises by providing inspections at the seller's cost. Not all sellers do that. If buyers want to have inspections done, then they pay for the cost of inspection. When sellers provide those inspections, they become part of the disclosures which the buyers should acknowledge having read and received. That's the whole point of providing disclosures.

AND even if the seller provides inspections, it is the buyer's right to hire his own inspectors for a second opinion.

You have other contingencies -- appraisal and loan approval. As long as you haven't released/cleared all those contingencies, you may still back out of the agreement and get your deposit back.

In this seller's market, where multiple offers and overbidding is more common than not, buyers celebrate when their offers are accepted. BUT...you seem to look for a reason to back out. Are you discussing your concerns with your realtor? If not, you should!
1 vote Thank Flag Link Fri Aug 30, 2013
I would need to know how it is written to answer and be 100% sure, but normally if there is an inspection period (different states have different names) that is a period where you can get inspections done to determine the condition of the house to decide if you wish to continue with the purchase. What often happens is a buyer gets inspections and estimates to repair issues and asks the seller to make the repairs or give a credit so you can make them or drop the price of the house. The seller can say yes or no. As long as you are in the inspection period you can ask, if they say no you can walk away and terminate the offer. Your Realtor should be explaining all this to you - MAKE THEM since it is all in how the contract is written.
1 vote Thank Flag Link Fri Aug 30, 2013
Did you receive the disclosures before writing your offer? If so, you wrote the offer with those disclosures in mind. If subsequent inspections showed no additional problems, what reason would you cite for cancellation?

Sure, you can cancel but the seller may accuse you of acting in bad faith and try to claim your deposit.

The inspection contingency is designed to giva a buyer time to review the seller's disclosures and have desired inspections performed in order to determine the condition of the house to the satisfaction of the buyer. If not satisfied, a buyer can request that the seller make changes to the property or the buyer can cancel. The seller is not required to agree to changes. The buyer must exercise these rights within a limited amount of time...the Contingency Period. Upon satisfaction on behalf of the buyer or expiration of the time period the buyer is expected to release the Inspection Contingency or cancel.

Cancelation should be done in good faith.
0 votes Thank Flag Link Fri Aug 30, 2013
What is your motivation for wanting to cancel the contract? If it really is the condition of the property ask the seller to make repairs. If the seller agrees to make the repairs then there is no problem and you can move forward with the purchase. If the seller does not make the repairs you can cancel. IF you have some other reason for wanting to cancel and are just looking for an excuse talk to your Realtor about your real reason.

J.R. Thrasher
0 votes Thank Flag Link Fri Aug 30, 2013
You can ask the seller to repair the items that concern you before you think about cancelling. Also, you have a disclosure contingency that you can approve or disapprove.

Sit down with your agent, I assume you have an agent, and discuss this matter with them. They know more about the situation than we do.

0 votes Thank Flag Link Fri Aug 30, 2013
Hi Joe,

Trying to use the inspection contingency to get out of a contract without the inspections revealing anything, then I think the seller can insist on you forfeiting your earnest money deposit.

It sounds like you are wanting to cancel the contract under false premises and looking for a way to save your deposit. Remember, the seller accepted your offer to purchase and took his/her home off the market. From what you've said, the seller was very open and thorough in meeting his/her disclosure obligations.

Sorry, Joe, I think if you really don't want to purchase the home you should tell your agent and ask him/her to cancel the purchase agreement and forfeit your deposit to the seller.
0 votes Thank Flag Link Fri Aug 30, 2013
Not sure what you're asking exactly? Sounds as if you are wanting to get out of the contract? First you need to talk to your REALTOR. You CAN get out of the contract based on inspection issues -- even if the seller disclosed those to you up front. But again, I dont' know what your contract says, or what your deadlines are, etc. Talk to your agent.
0 votes Thank Flag Link Fri Aug 30, 2013
Signing disclosures means that loosely you have read understood, and accepted the disclosures. Getting out of the contract via inspection contingency means you are discontent with a specific aspect of the house discovered in inspections or disclosures.

Identify the aspect of the house that brings you discontent, cite your inspection contingency, and safely cancel the contract by using the CAR form that cancels the contract and asks for your deposit back, assuming your deposit is already in escrow. Now it will be up to the seller to countersign and release your deposit.
0 votes Thank Flag Link Fri Aug 30, 2013
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