Inspection Contingencies with a "Subject To" Clause

By
Services for Real Estate Pros with Escrowcoord.com

Yosemite Seller SamIn an effort to save time and show good intentions, a few agents are now removing the inspection contingency subject to a repair list.

As someone who sat on the CAR contract committee for the contingency removal, I’m well versed in its intent and why you should never remove a contingency in this manner!

The Inspection Contingency Removal and Request for Repairs are two separate issues.

The Request for Repairs is simply a request to the seller. NOT a demand. The seller has a right to accept/reject/counter the request.

By making the inspection contingency “Subject To,” the buyer is then demanding the seller complete the repairs or they will not remove the contingency (which may or may not be true!).

This could create an escape for a seller who is trying to get out of the contract.

Yosemite Seller Sam says, “That varmint buyer ain't removin' the inspection contingency cuz’ I’m rejecting the repair list, so I'm cancelling the contract!”

This also creates a problem later on if repairs are negotiated back and forth because it voids out the original removal (Subject to Addendum A that was rejected by the seller). Another contingency removal needs to be generated, signed and submitted to the seller for acknowledgement.

Remember, the inspection contingency is neither a request nor a demand. It’s a removal that the seller cannot accept/reject/nor counter. That’s why there is no signature line for the sellers to “accept” the removal, only an acknowledgement initial line.

 

Best practice is to negotiate repairs first (ideally prior to the inspection contingency removal date) and THEN remove the contingency once the repairs have been settled.

Comments (6)

Margaret Kapranos
Berkshire Hathaway Home Services - Novato, CA
San Francisco Bay Area REALTOR. 415-608-5070

In fact, we just had that conversation at last week's office meeting.  Right on!

Aug 28, 2015 05:49 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

 You bet Margaret. We always track contingency removals for our agents. It's such an important part of the contract. Thanks for your comment! 

Aug 28, 2015 06:03 AM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Diana - These are very valuable educational tips for inspection contingencies.

Aug 28, 2015 09:58 AM
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

Yes, that's the way I view this topic too, Diana!  I also agree with your #2 comment about tracking contingency removals.

Aug 28, 2015 09:58 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

Thanks John. I like to keep things very clear and fair between the buyer and seller.

Aug 28, 2015 10:11 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

I hear you Mryl! It gets complicated with back and forth negotiations on the repairs. So much easier to negotiate repairs first, then remove the contingency. 

Thanks for your comment! 

Aug 28, 2015 10:13 AM