"What is the home inspection contingency? Can anyone explain it?"
First, you should be asking your RealtorÂ® 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 Â§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 RealtorÂ®! 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.
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!
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.
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.
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.
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.