Inspection Contingency

An inspection contingency is a contract clause that gives the buyer a set number of days to have the home inspected and then cancel, renegotiate, or ask for repairs. If the buyer cancels within that window, the earnest money is normally returned.

Say an inspector finds a failing roof on a $500,000 house where the buyer has $10,000 in escrow. Inside the inspection period, the buyer can ask for a repair credit or walk away with the deposit. After the period ends, the same roof is no longer a clean exit.

Some contracts give the buyer a broad right to cancel during this period for any reason, while others limit it to defects found. Check your form, and see whether you get earnest money back if the inspection fails.