What’s an Inspection Contingency, and Should I Waive It?

A inspection contingency is a written term in the Purchase Offer & Sale Contract for the sale of a home. If your offer includes an inspection contingency, you have the right to have an independent third party perform an inspection of the home before you close escrow. If the inspection reveals any issues, you have the right to either force the sellers to fix the problems, or walk away from the deal. This contingency often seems very attractive to buyers - after all, it seems reasonable that a buyer should be permitted to inspect all of the details of a property before being compelled to purchase it. Conversely, Sellers understandably didn’t like signing up for sales with the possibility that the buyer could raise an issue - however small - and renegotiate the transaction between signing and closing. As a result, Sellers are often more comfortable accepting offers from buyers who have waived the inspection contingency.

In today’s Bay Area market, most buyers get comfortable that they can - and should - waive the inspection contingency when submitting offers. Here’s why: these days, Sellers order third party inspection reports and include them in the disclosure materials available to all prospective buyers while the home was being marketed and shown. That’s why nearly every disclosure packet available for Bay Area homes will already include independent, third-party inspections, such as a contractor’s inspection, a pest inspection and (in some cases) a stand-alone roof inspection as well. By providing these materials in advance, both buyers and sellers can review and address any issues revealed by each report. Accordingly, Bay Area sellers expect that buyers will have satisfied themselves as to the condition of the home before they submit an offer, which in turn allows sellers to expect that buyers will be comfortable waiving the inspection contingency in their written offers.

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