Best of the hotline: Inspection contingency

If a buyer relies on a previous home inspection report, without conducting their own, are they waiving their inspection contingency?

In this situation, the sellers accepted an offer contingent on a home inspection. The home inspection was performed timely and a copy of the report was given to the sellers. For reasons not relating to the inspection report, the buyers terminated the Agreement of Sale and the property’s status went from pending to active.

Fortunately, the sellers received a second offer in very short order. The new buyer (buyer #2) was aware that the property had recently been inspected and asked to see a copy of that report. Her offer, too, included an inspection contingency. This buyer, however, did not engage a home inspector, but prepared a corrective proposal based on the findings of the inspection report performed for the previous prospective buyers.

Did buyer #2 waive her inspection contingency by relying on a report issued to others without engaging their own inspection? 

Probably. Okay, yes. But does it or should it matter? The inspection contingency is based on the results “of any inspection elected in Paragraph 12(C) (Buyer’s Due Diligence/Inspections). Since buyer #2 did not have any inspection that was elected from that paragraph, the contingency was waived.

Advising buyer #2 that she has waived her contingency and is therefore buying the property in its present condition may be counter to the sellers’ objective of selling their property. In other words, telling buyer #2 she is stuck with the property might result in the buyer finding some other way, legitimate or not, of terminating the agreement.

The advice given to the listing agent was to sit down with the sellers and advise that buyer #2 had not complied with the contingency provisions, but that a corrective proposal has been submitted which deserves attention. After all, if the sellers can make peace with buyer #2 and sell their property, that may be much better than rubbing buyer #2’s nose in a technical failure.

Keep in mind that licensees do not have the authority to make decisions for their clients. Buyers and sellers need to know when there is a technical failure, but also need to be counseled on choosing a path that best meets the needs of the respective client.

As an aside, a buyer who is relying on a previous inspection is at risk. If the inspection report that is relied on turns out to be flawed, the buyer will not likely have a cause of action against the inspector for the damages sustained. This is because the buyer did not engage that inspector; rather, the buyer relied on a report prepared for another person pursuant to a contract between the inspector and the other person. Do not expect legal recourse against a home inspector you did not engage and did not pay.