Beginners Guide: Home Inspection Contingency in Maryland Real Estate
Home inspections are an important part of a contract when buying a home. Home inspections in Maryland real estate transactions have their own contingencies that you don't want to overlook.
As a real estate agent I love home inspections, and as a buyer you should too! Before you buy a home, you'll want to ensure the home you're buying is a structurally sound home and future maintenance is addressed.
In this article, I'll explain the home inspection process in Maryland, the common addendums used, and what you'll need to look out for before you start negotiating a contract.
Understanding Property Inspection Contingencies When Buying Maryland Real Estate
There are several home sale contingencies in Maryland that can be added to your contract of sale. The property inspection contingency is most commonly used.
There's a few questions you'll want to ask yourself and your real estate agent to be the most prepared.
When do you add a property inspection contingency?
Inspection contingencies are added to your contract before it is resented to the home seller or the home sellers listing agent. It's important to evaluate the home or condo during your showing to determine what you may need inspected.
How do you know what inspections you need?
Every real estate market in Maryland is different. It's important for you to choose a local real estate agent familiar with local market conditions and issues that could affect your home purchase.
During your showing, you should work with your real estate agent to identify issues. Issues that could potentially be identified before you make an offer could help you negotiate a better price from the beginning. It can help your real estate agent create a plan of action during the inspection period.
For example, if the home you're interested in is not hooked up to public water or sewer, there is a good chance the home uses a septic system for disposing waste water and sewage from your toilet.
Do you know who real estate agents represent in Maryland? Find out in my blog article, Who Does Your Maryland Real Estate Agent Really Work For?
Establishing Timeframes for Completing a Home Inspection
All home inspection contingencies in Maryland establish a timeframe for you to complete your inspections. It's important to determine how much time you'll need for your initial inspection and time for completing additional inspections for specialists.
For example, if your home inspector finds an issue with the HVAC system, you may want to have a licensed HVAC technician inspect the system after the initial home inspection.
If you're going to ask for repairs or replacements, it's best to have all the information gathered before presenting a list of repairs to the seller using the "Property Inspection Notice", which is explained later in the article.
BEST PRACTICE: As a real estate agent, I advise my buyers to complete their initial home inspection within a few days of contract acceptance. When we know a contract is coming to terms, I like to check the schedule with local inspectors, so the inspection can get booked in advance. If the initial inspection is completed within a few days, it allows you enough time to follow up with additional inspections.
Property Inspection Addendum in Maryland
The Property Inspection Addendum is the most common addendum for inspections.
The Property Inspection Addendum establishes:
- Timeframe you'll have to complete your inspection(s)
- Types of inspections you'll be completing
- The process for notifying the seller of issues
- The process for the seller to respond to issues
There are several inspection types that can be added to the Property Inspection Addendum.
Types of Inspections may include:
- Structural and mechanical
- Chimney inspection
- Lead based paint hazard inspection
- Additional inspections, which buyer may feel are necessary
Adding the addendum to your contract
The process begins with you adding the inspection addendum as part of your contract. This allows your offer to be contingent on a satisfactory property inspection or the seller agreeing to make repairs or corrections that you agree to.
Preparing the Property Inspection Notice and the process
After your inspections are complete and non-satisfactory issues are identified, your real estate agent will prepare the Property Inspection Notice.
The Property Inspection Notice is the formal written notice form used to notify the seller of issues that were identified during your inspection(s).
This notice must be signed by the buyer and sent to the seller or their listing agent before your inspection period expires. The notice can be sent by email.
This notice will notify the seller one of three things:
- Buyer has not found any unsatisfactory issues and is not requesting any repairs to be made by the seller
- Buyer elects to terminate the contract due to unsatisfactory issues found during the inspection(s). Buyer may only do this if both the buyer and seller have agreed to the "Buyer's General Right to Terminate" in the "Property Inspection Addendum".
- Buyer attaches their inspection report(s) and requests a list of corrective actions be taken by the seller to satisfy the buyers home inspection contingency.
Repairs, Corrections, and Re-Inspections
Once the Property Inspection Notice is delivered to the sellers or the seller's listing agent, the seller has 5 days to respond to the buyer's notice. If the buyer notifies the seller there were no issues that were unsatisfactory, the seller does not have to respond.
If the buyer requested the seller make repairs, replacements, or corrections to satisfy the buyer, the seller has 5 days to respond. When the seller responds using the same notice sent by the buyers, the seller may decide to:
- Seller agrees to fix the repair list requested by the buyer. Buyer does not need to reply with this notice
- Seller does not agree to make any repairs
- Seller agrees to fix some, but not all of the items requested by the buyer to be corrected. The seller needs to provide a list of items they agree to fix.
- Seller agrees to give a credit to the buyer to be applied towards the buyers closing costs.
The seller could notify the buyer if they will fix some of the items in the buyers list and give a credit towards the buyers closing costs.
If the seller does not agree to fix all of the items in the buyers lists, the buyer has 5 days to respond to the sellers response.
As Is Home Sale Addendum
The As Is Home Sale Addendum is used when a seller does not agree to make any repairs as part of the home sale.
The As Is Addendum is often used in real estate short sales and foreclosures. However, some sellers may elect to sell a home with the upfront disclosure that they are selling without making repairs.
Sometimes, during the negotiation of a contract, the seller may agree to a buyers offer, but require the home to be sold in As Is condition.
What does an As Is Home Sale mean?
When you buy a home being sold with an As Is Addendum, you're agreeing to buy the home in the condition the home is in at the time the contract is presented to the sellers.
Two conditions in the As Is Addendum in Maryland include:
- As Is without inspection(s)
- As Is with inspection(s) and the right to terminate
As Is without inspection(s)
When you buy a home with an As Is Addendum without inspections, you're agreeing to not inspect the property as a contingency to the sale.
You can still get an inspection, you just can't terminate the contract because of issues in the home inspection.
As Is with inspection(s) and the right to terminate
An As Is Addendum with inspection(s) and the right to terminate the contract allows you to get any inspection you need to evaluate the home and determine if the condition of the home is satisfactory.
Unlike the Property Inspection Addendum that identifies all of the inspection you'll be completing upfront, the As Is Addendum with inspections allows you to terminate the contract with any inspection completed on the home.