Home Inspections Must Be Totally Independent

Written by Posted On Wednesday, 15 June 2016 13:34

You are about to sign a contract to purchase an older home. The real estate agent has given you the name of a home inspector, and has advised you to use the "specific inspection contingency" clause in the contract instead of the "general inspection contingency" clause. There is a major difference between these two concepts and it may cost you a considerable amount of money if you use the wrong one.

When ever you purchase a house -- especially an older one -- it is imperative you have the house inspected by a professional -- and independent -- home inspector. While you certainly are free to use the inspector recommended by the real estate agent, you should make your own choice.

You should include an inspection contingency in your sales contract. This would read something like this:

This contract is completely contingent upon purchaser obtaining, at purchaser's expense, a satisfactory home inspection, within ___ days from date of contract ratification.. If purchaser is not satisfied, for any reason, and advises seller in writing within said ___ days, this contract shall be null and void and purchaser's deposit shall be immediately refunded to purchaser. If purchaser does not notify seller within said ___ days, this contingency shall automatically expire and the contract shall remain in full force and effect.

This is known as a "general inspection contingency". Basically, if the buyer -- for any reason -- does not like the results of the inspection, the buyer can terminate the contract and the earnest money deposit will be refunded to the buyer. Indeed, many buyers are adding language in their purchase and sales contract to the effect that their deposit will not be cashed until after the inspection contingency has been removed.

The contingency recommended by the broker -- referred to as a "specific inspection contingency" -- is much more limited. Although different contract forms contain different variations on the theme, the thrust of a specific contingency is that if the buyer finds defects in the house, the buyer will give the seller three days in which to agree to make the repairs. Once the seller responds, the buyer then has one or two additional days in which to decide whether to accept what the seller is prepared to do, or to terminate the contract.

I oppose the specific inspection contingency, since I believe it is unfavorable to both buyers and sellers. From the buyer's point of view, if the house is structurally sound, but the roof, for example, has a short useful life, the buyer may not want to complete the transaction faced with a large expenditure two or three years down the road. However, since there are currently no defects, the buyer cannot get out from under the contract.

At first reading, the specific contingency appears to favor the seller, since it does not permit the buyer to terminate the contract for any reason. However, my experience is that when a buyer wants out of the contract at an early stage, it sometimes is better to terminate the contract at this early point in time rather than have continuous hassles all the way through to settlement.

Why should a home seller permit the buyer to inspect the house? While sellers may think that an inspection is not in their best interests, if you really stop and think about it for a moment, it should become obvious that even from the seller's point of view, it is advisable to let buyers have a short period of time in which to cancel their contract if they are not satisfied with the condition of the house.

Clearly, sellers would rather have their purchaser cancel the contract early in the process than wait until the very last minute and raise all sorts of problems on the day of settlement. From my own personal experience, this is a common problem at a real estate settlement where the buyers really do not want to complete the deal, but know they are legally obligated to do so.

Of equal importance, if the purchaser has obtained a satisfactory home inspection report, that same purchaser will be hard pressed to raise issues about the house on the day of settlement. Often, I have heard sellers tell buyers, "You removed the inspection contingency, and if you have a problem with our house, look to your home inspector."

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Benny L Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of KASS LEGAL GROUP, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.


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