The inspection can be stressful for everyone involved, but with this agent’s guide to the inspection period in real estate, we hope to put your mind at ease. Whether you’re a buyer’s agent or a seller’s agent, you’ll learn everything you need to know about this point of the transaction process.
In this article, we’ll talk about what the inspection window is, how long inspections take and cover some other important details of the inspection process. This guide is specifically designed for a real estate agent, so while we encourage interested parties to read along, this will be more tailored toward agents who would like to learn more about the property inspection process.
We’ll also talk about inspection clauses and how to use them (as well as what to do if you’re not using them). Finally, we’ll finish by discussing how a Close Concierge can help you take all the stress out of home inspections during a real estate transaction. Read on for more info!
What Does the Inspection Period Mean in Real Estate?
This is the amount of time that the buyers have the opportunity to perform their due diligence on the property they intend to purchase. In other words, it’s the period of time that buyers are allowed to inspect the property, request repairs or negotiate the price of the home.
As a real estate agent, you can choose this time to facilitate the inspection, answer any questions your client may have, and discuss the course(s) of action your client would like to take. You can tailor your level of involvement to your preferences as a real estate agent during the property inspection portion, however.
You can remain in the background as a casual observer, available to the client if they have questions, or you can be actively involved in the inspection and asking questions if you feel it’s appropriate.
If a home doesn’t meet the buyer’s standards, they can cancel the contract or renegotiate the terms. If the buyer chooses not to move forward with the purchase of the home, they won’t lose any money during that time (except the option fee if you’re in Texas, and any applicable commissions they owe you).
Buyers can back out of a contract if they don’t like what they see during inspection. This could be anything from neighborhood issues to structural problems within the home to a distaste for the local school system. Buyers get a full refund of their earnest money if they choose to walk away from the purchase during this time.
How Long Does It Take to Get a Home Inspected?
The time period for inspections changes from state to state. In most states, however, the inspection window lasts no longer than 10 days. For example, it can be anywhere from 1-10 days in Texas and typically lasts about 7-10 days in Colorado for cash purchases. (Of course, a contract can specify another period of time if needed.)
Inspections are best performed well in advance of the inspection deadline, so no one has to rush to get things done at the last minute. The actual home inspection takes the home inspector less than a day to complete, but the report, review, and negotiation processes take more time, so it’s advisable to get the ball rolling as soon as possible.
Most people recommend that buyers contact the inspection company within 24 hours of reaching a deal with the seller so there’s plenty of time to schedule the initial inspection and allow for a second inspection if needed. Real estate agents who attend the home inspection can advocate for their client and prompt them by asking questions throughout the process if they seem confused by the information.
Inspections in Florida
In Florida, the time for the inspection is a bit longer than it typically is in other states. According to lawyer Daniel Pascale on the Florida Real Estate Lawyers blog, “The default inspection period of time is 15 calendar days unless the parties agree otherwise. The property inspection clause provides the purchaser with the opportunity to retain a real estate lawyer in order to perform the necessary due diligence on the property to evaluate the situation.”
Are Inspections Necessary?
Inspections are necessary for all clients who look forward to living in the home they’ll purchase. Inspections generally cost between $250 and $400, so they’re well worth the peace of mind for the buyer. Real estate agents would do well to encourage their clients to go through with inspections to ensure they aren’t blindsided by major issues.
Qualified home inspectors let the buyer know what’s wrong with the property, and usually provide the buyer with a detailed inspection report (complete with photos) that show what’s wrong with the home. Your buyer can even meet with the inspector afterward to have him go over everything with them. Many buyers find it incredibly helpful to talk to the inspector and go over their questions and concerns in person.
Do You Need Receipts After Repair?
Real estate agents should always ensure that they obtain receipts for home inspection repair. Whether you represent the buyer or the seller, you should encourage your customer to ask questions during and after the inspection if they aren’t sure about the findings.
That said, some experts advise buyers not to request repairs in the first place, since it’s fairly common for sellers to try to cut corners in an attempt to get their homes sold as quickly as possible. If a buyer is dead-set on having the seller complete repairs, though, there will absolutely need to be proof for both parties to avoid any legal disputes.
For more information on this topic geared toward you as a real estate agent, check out our article titled, “Do You Need Receipts After Inspection Repair?”
What Can Buyers Do If They Don’t Like Inspection Results?
As we stated earlier, a buyer who doesn’t like the results of the property inspection can simply cancel the contract. If they cancel before the deadline, they’ll get 100% of their earnest money back, but they won’t get a refund for the inspection that was performed.
If they want to go forward with the home’s purchase but want the buyer to make repairs, they can have you prepare a Buyer’s Inspection Notice. This will include all the repairs they want the seller to make. The request will need to be made within the specified time frame: otherwise, the buyer will be agreeing to buy the property as-is. When the request is made, the seller has five days to submit the Seller’s Response.
If the seller agrees to make repairs, the buyer will be bound by the terms of the contract and the inspection window will end. If the seller only agrees to make some of the repairs, the buyer will have 5 days to decide whether they want to move forward or walk away. If the buyer agrees to move forward, the seller will need to make the repairs by 3 days before the close of escrow.
The Seller Property Disclosure Statement
The SPDS, or Seller Property Disclosure Statement, should be given to the buyer within 5 days of signing the contract. This document will provide a lot of information about the property for the buyer to consider during the inspection time frame. If the buyer doesn’t like something in the SPDS, the buyer can cancel the contract. They have the right to do so 5 days after getting the SPDS and obtain a full refund of their earnest money.
Inspection Contingency Clauses
Contingency clauses allow a seller or buyer to back out of the contract if certain conditions aren’t met. They are known as contingency clauses because they indicate a condition that needs to be met in order for the real estate contract to become binding. Every contingency clause should be specific and contain specific terms, time frames, etc.
There are several common contingencies involved in real estate, but for the purpose of this article we’ll be focusing on the inspection contingency.
Inspection contingencies, or due diligence contingencies, allow the buyer to get the home inspected within a specific time frame, like the ten days as outlined above. It protects the buyer, because they can cancel the contract or negotiate repairs based on the professional home inspector’s findings during the home inspection.
An inspector will carefully examine the property’s interior and exterior, making sure that everything is in working order. They’ll check the following elements of a home during the property inspection:
- Electrical. They’ll ensure that there aren’t stripped or exposed wires, make sure the fuse boxes are in working condition, and ensure that all outlets work properly and aren’t damaged. They’ll note anything they find in their inspection report.
- Finish. They will check the condition of exterior and interior paint, examine the home’s curb appeal, and note other appearance-related defects.
- Plumbing. They’ll make sure pipes are working properly and that there’s no indication of corrosion, in addition to checking tubs, sinks, toilets, and other plumbing fixtures.
- Structural. A licensed inspector will make sure that your home is structurally sound, with all walls, roofing, and foundational elements intact.
- Ventilation. The inspector will make sure that the central heating and air conditioning unit (or any other heating or cooling system) works as intended.
Once they’ve checked each of these elements of a home, they’ll furnish a report to the buyer detailing any of the issues they uncovered during the inspection. Depending on the terms of the inspection contingency, the buyer can then:
- Approve the report. In this situation, the buyer will move forward with the deal and be locked into the contract.
- Disapprove the report and back out. If this happens, the buyer will get their earnest money back.
- Request time for further inspections. This usually happens if the inspector would like a field expert to take a second look (ie: if there’s an issue they can’t seem to pinpoint with one of the above elements of the home).
- Request repairs or a price concession. If the seller agrees to the repairs or concession, the deal will move forward and the contract will again be binding. If they refuse, the buyer has a chance to back out of the deal and get their earnest money back.
Sometimes there’s an additional real estate contingency included within the inspection contingency. This is referred to as a cost-of-repair contingency, and it specifies a maximum dollar amount for necessary repairs. If the home inspection report indicates that repairs will cost over this dollar amount, the buyer can choose to terminate the contract.
Usually, the cost-of-repair contingency is based upon a specific percentage of the sales price (for example, 1% or 2% of the sales price).
How to Calculate Home Inspection Contingencies
Home inspection contingency periods – whether they’re in Florida, Colorado, or Texas – are counted using calendar days. This means that weekends and holidays are included in the home inspection window. If the last day of the home inspection window falls on a weekend or legal holiday, the home inspection window will extend to 5 PM on the next business day. Don’t count the first day (the date the contract was signed) as day one – the following day is counted as day one.
Sounds pretty straightforward, but as the Federal Title & Escrow blog states, it can get fairly complicated. This is because a new period of time starts for each step of the process. For example, if a buyer provides the home inspection report and list of items to be repaired earlier than was needed, a new deadline will begin for the seller to respond to the report. The seller will have three days to respond to the buyer, and after that, the buyer will have another three days to respond.
Negotiations should continue that way until the parties reach a final agreement, the parties fail to reach an agreement, or one of the parties select the right to cancel and thereby terminate the contract.
Waiving the Home Inspection Contingency
Since it’s a seller’s market, it’s harder than ever for buyers to find their dream home and have the leverage they need to ask for repairs. Because of that, buyers are making concessions that normally wouldn’t be made. One of the most common concessions is the assurance that they won’t use a home inspector’s findings in the ways we described above. In other words, some buyers are waiving the inspection contingency.
Getting an Inspection Without a Contingency
Despite the fact that they’ll be without the protection of a contingency, buyers should still schedule an inspection. A buyer will want to be sure that the repairs they’d need to make on their new home are negligible, and they’ll still need to know there’s nothing glaringly dangerous about the home.
In the above-linked Bankrate article, former real estate broker Christian Adams advises readers to use the home inspection to identify small problems that can create major issues if they’re neglected. “A $1,200 plumbing repair can turn into $1 million (if left unchecked),” says Adams.
Some buyers aren’t entirely waiving the contingency, but changing the language of their offers within the contract. One example is to conduct an inspection but overlook any single repair that costs less than $500 to replace. Alternatively, the contract could explicitly state that the purpose is to look for major issues like mold, a poor foundation, or radon.
Bottom line: get an inspection so you’ll know what to expect, but don’t nickel and dime the seller. Even if your home purchase isn’t contingent on an inspection, a serious defect can let the buyer out of the deal.
Close Concierge for Stress-Free Inspections
As stressful as the inspection window can be during a real estate transaction, you don’t need to go it alone. At Close Concierge, we have highly-qualified and experienced transaction coordinators who would love to help you get through this painstaking process with as little stress as possible.
Our transaction coordinators are available 24 hours a day, seven days a week to take care of your needs. It’s why top-performing real estate agents love to work with us. Real estate transactions are what we do best.
Check out Close Concierge today and see why it’s the choice for real estate agents throughout the US, including Colorado, Texas, Florida, and more! We’re here to help you with your real estate transactions.