On our local purchase contract it’s more formally known as a Section 20(c) election. However, it is more commonly known as the property inspection contingency. There is always a lot of confusion among buyers over just what this contingency covers, how it works and the legal rights that come along with it. The purpose of this post is to give you a complete understanding of this most important right when buying a home.
When buyers elect to have a property inspection contingency, they do so by filling in the number of days for which the contingency will be valid in Section 20 (c) of our local PRDS Offer to Purchase Real Estate form. If accepted by the seller, the buyer then has a right to fully inspect the property for the duration of the number of days that was selected by the buyer. If the buyer’s inspection turns up something that materially affects the value of the property, the buyer has the right to back out of the contract, without penalty, in accordance with the other terms of their particular contract.
What Constitutes a Property Inspection?
The short answer is: anything and everything. Most buyers will employ a general property inspector and a termite inspector. It is the property inspector’s duty to fully investigate all major aspects of the property (unless excluded via contract) including foundation, electrical, plumbing, etc. It is important to note that most property inspectors are not specialists. For instance, the property inspector may find a 1/2 inch crack in the foundation, but he is not going to be able to tell you if there is an engineering problem with the house. Normally, if property inspectors find items that are beyond their scope of duty, they will call out the need for a specialist in their report. Often times this happens with foundations, chimneys and retaining walls.
Section 20 (c) also states that your inspection rights go beyond professional inspections. You also have the right to inspect the secondary conditions on the property. For instance, you have the ability to visit the house at different times of the day and at night. You have the right to understand if traffic impacts the property at certain times of the day, or what the neighbors are doing that may impact your quiet enjoyment of the property.
Lesser Known Items Falling Under the Property Inspection Contingency
There are other, lesser known items which fall under Section 20(c). Your ability to secure homeowner’s insurance, examine a preliminary title report and review all San Carlos and San Mateo County permits all fall under this contingency. In other words, once you waive this contingency your ability to back out of the contract based on your inability to get homeowner’s insurance, state an issue with the title report or the discovery of un-permitted work, has just hit a substantial roadblock.
What Triggers My Ability to Back Out of the Contract?
Technically, any observation or finding that would materially affect the desirability of the property in a reasonable person’s view, which had not previously been disclosed, will trigger your ability to back out of the contract under Section 20 (c). The key here is the word “materially”. Keep in mind that what exactly a buyer finds attractive in a home and what contributes to their quiet enjoyment in a home is a highly personalized matter. Therefore, it stands to reason that even the slightest dissatisfaction with the property relating to something that was previously unknown will be enough to fulfill the requirement for the buyer to back out of the contract. There is a variety of California case law to back up this statement as well.
The information contained in this post is not legal advice and often times agents make changes to offers or add language that could change the rights you have as a buyer, mentioned above.