What is an inspection contingency and how do I handle it?

The home inspection contingency is the clause in a purchase contract that gives the buyer the right to have the property professionally inspected within a defined timeframe, typically 7 to 14 days after the contract is ratified, and to negotiate, request repairs, or in some cases exit the contract based on what the inspector finds.

It's one of the most consequential pieces of a real estate contract, and how you handle it as a FSBO seller will significantly affect your net proceeds and whether the deal closes at all.

A licensed home inspector does a visual assessment of the home's structure, systems, and components. Roof condition, foundation, electrical panel, HVAC, plumbing, water heater, insulation, windows, and evidence of water intrusion are all standard. The inspector produces a written report with findings ranked by severity. Buyers get this report and use it as the basis for their post-inspection requests.

The inspection is not a checklist of repairs you're required to make. This is a critical point that many FSBO sellers don't fully understand. An inspection contingency doesn't automatically obligate you to fix everything the inspector finds. It opens a negotiation. The buyer will present a list, sometimes their entire inspection report, sometimes a targeted list of significant items, and you have options. Fix the items, offer a credit in lieu of repairs, negotiate a price reduction, provide documentation that an issue has already been addressed, or decline to address specific items.

Safety issues are almost always worth addressing before you list. Electrical problems, structural concerns, handrails that don't meet code, missing GFCI outlets near water, smoke and CO detector issues. These items will appear on inspection reports, create buyer anxiety, and become negotiating leverage. Fixing them before listing removes that leverage and makes the post-inspection process smoother.

Rather than completing repairs, which requires vetting contractors, managing schedules, and verifying quality, many sellers offer buyers a credit at closing in lieu of specific repairs. The buyer uses the money after closing to address the issues however they choose. This approach works well for cosmetic or lower-priority items. It works less well for major systems issues, where buyers typically want the problem resolved before they're committed to the purchase.

Before you're in the middle of post-inspection negotiations, decide in advance what you're willing to do, what you're willing to credit, and at what point the deal no longer makes sense for you. Having that clarity prevents reactive concessions under pressure during a stressful negotiation.

The inspection contingency isn't the enemy. It's a normal part of a real estate transaction and most deals survive it. Going in prepared and understanding your options is what determines whether it costs you a little or a lot.