The following questions and answers presume the parties are using the Inspection Contingency without modification in the WB-11. 

Should the buyer include an inspection contingency?

When drafting an offer, the broker will discuss the value of inspections of the property. It is especially important for the buyer to know the property condition if the property is being sold “as-is.”

Should the buyer include any component inspections?

There are three types of inspections per the offer:

1. 1. The home inspection conducted by a Wisconsin-registered home inspector.
2. 2. Component inspections included at lines 413-414.
3. 3. Any follow-up inspections resulting from recommendations of the home inspector or component inspectors. 

At the time of the offer, the buyer may choose a home inspection and specify component inspections; whether or not any follow-up inspections will be necessary will be determined after the buyer obtains the inspector(s)’ written reports. 

Does the buyer want to include any testing?

The home inspection contingency is exactly that — an INSPECTION contingency. The contingency does not include any references to testing at lines 413-414. See Cori Lamont’s article, “Let Them Inspect, Not Test." Any request for testing must be included in additional provisions or in an addendum. 

Should the seller have the right to cure? Yes or no? 

When negotiating the offer, this decision is left to the buyer who can “kill the deal” after the home inspection. If the buyer wants the right to terminate based on the discovery of defects by an authorized inspector, the buyer should negotiate for no seller right to cure. Otherwise, the offer may include a seller right to cure, giving the seller the choice to cure defects or allow the offer to become null and void. 

What if the inspection is not conducted by an authorized inspector? 

Brokers should not allow any persons to conduct inspections or tests who are not authorized to do so per the contract. If it is determined that the buyer engaged an unauthorized inspector, the buyer may not use that inspection as the basis to deliver a notice of defects. If time allows, an authorized inspection may be conducted, or the buyer may request an amendment to extend the inspection contingency. 

Can the buyer have follow-up inspections?

After receiving the report, the buyer must decide whether to conduct any follow-up inspections recommended by the inspector. These inspections are at the buyer’s expense. This is not an invitation to conduct testing! If a home inspector suggests testing — but no testing contingency is included in the offer — the buyer may ask the seller to amend the offer to include a testing contingency even though the seller is not required to agree and authorize tests at this point in time. 

Do any of the inspection reports contain defects, and are they “defects” as defined in the offer? 

Everything listed in a home inspection report may not be a “defect” as defined in the offer. The offer states that the buyer may give a notice of defects. As stated on lines 182-184: “DEFECT: ‘Defect’ means a condition that would have a significant adverse effect on the value of the Property; that would significantly impair the health or safety of future occupants of the Property; or that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life of the premises.” The buyer may seek legal counsel if there are questions as to whether any item is a defect as defined in the offer. 

Does the buyer have to give the seller copies of the inspection report(s) if there are no defects? 

Yes, per line 407: “Buyer agrees to promptly provide copies of all inspection and testing reports to Seller.” This obligation is independent of the decisions the buyer makes about the content of the report. 

Has the contingency time lapsed? 

If the date on line 421 has passed, the buyer has waived the right to provide a notice of defects and should prepare to proceed with the transaction to closing. The buyer’s other option is to ask the seller, in an amendment, to extend the time frame. When negotiating and setting up inspections, the goal is to allow enough time for the initial inspection and any follow-up inspections as well as time for the parties to consider all options. If there is still time … !

The million dollar question! Notice or amendment?

After considering alternatives as well as the buyer’s objectives, the buyer must decide between a notice or amendment. This is when the broker can review the buyer’s position in the flowchart to offer the buyer options, letting the buyer decide which path to take.

No right to cure:

A written inspection report by an authorized inspector listing defects as defined in the offer gives the buyer multiple choices:

1. 1. Do nothing regarding the inspection report and move forward to prepare for closing. In this situation, the buyer must still give the seller a copy of the inspection report.
2. 2. Deliver a notice of defects with a copy of the report thereby making the offer null and void. The buyer may attach a WB-45 Cancellation Agreement and Mutual Release (CAMR) form to facilitate obtaining the seller’s signature and authorizing disbursement of the earnest money.
3. 3. Deliver an amendment. This is the ideal option if the buyer wishes to negotiate purchase price, wants items repaired and/or replaced in a certain manner, or would like to ask the seller to do something regarding the items that are not defects as defined in the offer. The broker may explain that the seller can either agree and move forward with the transaction or reject the buyer’s proposal outright or may come back with an alternate amendment. The amendment is not a notice of defects and does not terminate the offer. 

Right to cure:

A written inspection report by an authorized inspector listing defects as defined in the offer also gives the buyer multiple choices when the seller has the right to cure:

1. Do nothing regarding the inspection report and move forward to prepare for closing. In this situation, the buyer must still give the seller a copy of the inspection report.
2. Deliver a notice of defects, identifying the defects to which the buyer objects along with a copy of the report. This triggers the seller’s election to cure, at which point the seller has multiple choices: 
   1. Do nothing, elect not to cure, and the offer will become null and void after 10 days.
   2. Give a written notice electing not to cure, and the offer will become null and void upon delivery.     
   3. Give written notice of an election to cure — then cure the defects according to the offer. 
   4. Deliver an amendment to the buyer to attempt to renegotiate. Any such amendment must contain language withdrawing the buyer’s previously delivered notice, otherwise the offer will become null and void after the seller’s 10-day window to elect to cure if the seller does not deliver notice of election to cure.
3. Deliver a notice and amendment simultaneously. Although this is a viable option, it tends to cause confusion, and if not executed carefully, may have unintended consequences. An amendment used in this manner should contain language withdrawing the notice of defects if the seller agrees to the amendment to avoid the offer unintentionally becoming null and void if the seller does not deliver notice of election to cure. 

The offer doesn’t talk about the buyer or seller offering amendments — can they still use them? 

Yes, the offer lays out the bare bones of the contingency and does not prevent the buyer and seller from renegotiating by amendment. This is an option even if there are no defects in the offer in the inspection reports. 

Should the broker refer the parties to legal counsel?

Brokers cannot engage in the unlicensed practice of law. Therefore it is competent practice to refer the parties to legal counsel with their legal questions. If there is a question as to whether an item is a defect, that is the time for the attorneys to get involved, likewise if the buyer conducts unauthorized inspections or tests. 

Where can the broker obtain more information about the use of the home inspection contingency? 

Comprehensive coverage of this issue and various strategies can be found in two issues of the Legal Update: August 2004 Legal Update, “Effective Home Inspections,” at www.wra.org/LU0408 and the October 1999 Legal Update, “Home Inspections,” at www.wra.org/LU9910.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.