What Is a Home Inspection Contingency?

Home inspection contingencies are included in most real estate purchase contracts. Contingencies allow buyers to back out of a transaction without incurring a penalty. An inspection contingency applies specifically to home inspections. More than half (66%) of mortgage buyers reported to Zillow in 2024 that they included an inspection contingency in their final offer on a home. In this article, we’ll discuss what an inspection contingency is, how it works, and whether you should consider waiving an inspection contingency when making an offer on a house.

What is an inspection contingency?

Also known as a “due diligence contingency,” an inspection contingency allows a prospective buyer to walk away from a real estate transaction if a home inspection reveals major property damage. Inspection contingencies protect buyers from having to follow through on a home purchase when the property inspection reveals major issues before closing. In other words, the inspection contingency allows you to back out of the deal penalty-free.

How does a home inspection contingency clause work?

A home inspection contingency clause should explain exactly what happens if a home inspection reveals major property damage. Buyers with inspection contingencies typically have 7-10 days to order a home inspection, review the inspection report, and voice objections. 

Depending on the home inspection results, the buyer can either negotiate repairs with the seller or cancel the purchase contract. The seller can respond by making the necessary repairs to close the deal, or lower the sales price to compensate for damages discovered during the inspection.

State and local laws govern home inspection contingency rules. In some states, inspection contingencies automatically expire after the deadline has passed. In other states, contingencies need to be addressed before expiring. Ask your lender, agent, or real estate lawyer how inspection contingencies work in the area you’re buying in. 

Should I waive a home inspection contingency?

Buyers might consider waiving a home inspection contingency if they’re buying in a seller’s market. Sellers are often more willing to accept your offer and sign a purchase contract if you agree to skip a home inspection. However, waiving an inspection contingency isn’t recommended, especially if you’re a first-time homebuyer. 

Home inspections help prospective buyers understand what kinds of improvements a home requires. Being able to calculate how much you might have to spend on home maintenance and repairs can help you decide whether buying a particular home is the right choice.

Is a home inspection required for a mortgage?

Home inspections aren’t required if you’re buying a home with a conventional mortgage or making an all-cash offer. However, mortgages backed by government agencies, such as FHA, VA, and USDA home loans, typically require an inspection before approval.

Why should I include a home inspection contingency?

Depending on where you’re buying, a home inspection can cost between $250 and $700. Buyers on a budget might hesitate to pay for an inspection, but it could save thousands of dollars in unwanted repairs. When compared to the price of major renovations, such as foundation repairs or roof replacement, getting a home inspection is wise.

If you’re paying for a home inspection, you might as well include a home inspection contingency in your purchase contract. However, if you have your heart set on a certain home and want to speed up the closing process, ask your agent if waiving an inspection contingency is a good idea. If you’re looking for an agent, our Premier Agent partners are ready to connect. They can provide local expertise and guide you through every stage of the home buying process.