An inspection contingency period occurs after an offer has been accepted but before the close of escrow. It is an agreed upon amount of time—typically between 7-14 days—allowing buyers to hire inspectors to evaluate the property prior to closing.
Contingencies are part of the initial contract between a home seller and home buyer. They are put in place to protect the buyer, in case the home inspections finds the house is too costly to repair.
In many cases, buyers will put a contingency that allows them to back out of a deal if the home is found to have mold, a pest infestation, structural issue, or similar expensive problem. Sometimes buyers will not put a contingency, agreeing to purchase the home as is, regardless of the inspection results.
After the initial contract is agreed upon, a home inspection is completed. If the home inspection finds a problem, such as a termite infestation, termite repair companies place bids in the hopes of being hired to fix the problem so that the sale can be completed.
Bidding is important when listing a property because the bidding can potentially become an additional negotiation piece between the realtor and the buyer.
A bid is an estimation by an inspector at what the cost of repair is, plus standard fees. Termite repair companies will use the inspectors’ findings to determine the best solution. There are a number of termite repair methods that a repair company might suggest, including fumigation.
Once the potential home buyer accepts the bid, extermination is completed. Another round of inspections will be required to determine the effectiveness of the extermination. If the inspectors find that the extermination was successful, they will issue a “clearance” or “notice of completion” that will allow the buyer and seller to determine the final cost of the home (barring other home repairs that must be completed).
After the repair process is completed, the final sale of the home must be completed. In most instances, the final sale will revert back to the contract that both parties agreed to, prior to home inspection.
Any contingencies agreed to prior to the home inspection and repair will be honored—or negotiated—when it comes to making the sale official. Both parties can agree to the original contract and honor the contingencies, which might include a clause that allows the buyer to back out of the purchase. The seller and buyer can also negotiate a new contract.
A new contract for the buyer often includes negotiating a lower final sale price to cover the cost of the inspection and repair. The seller might try to relist the home if they are seeking to sell the home for a higher price than the buyer is trying to negotiate.
The initial repair bid is very important when it comes to negotiating the final sale price. Repair companies look to make competitive bids that are fair for both the buyer and the seller. A fair bid will go a long way in helping the two parties close on the sale.
If you have further questions on what to expect during a home inspection, the experts at North American Home Services are here to help! We’re happy to answer any questions and willing to provide you with a home inspection.