It’s the age-old question: does a buyer give a notice or an amendment after obtaining the written inspection report? Navigating the inspection contingency requires an understanding of the buyer’s options and the implications of each. The decision is ultimately up to the buyer because there is no “one size fits all” answer. Using the flowchart on page 16 can help the parties understand the process and potential outcomes. 

Thinking about the contingency as a decision tree, or flowchart, can provide clarity for each party’s options at any point in time in the transaction. Given the contingency in the WB-11 Residential Offer to Purchase, there may be three types of inspections as a three-prong contingency. The inspection contingency allows for a Wisconsin-registered home inspector to conduct an inspection, hopefully disclosing no defects, as well as component inspection(s) for any identified components and applicable follow-up inspections. In the event any of these authorized inspections result in a written report that identifies defects or not, the buyer will have choices regarding how to proceed. If there are no defects as defined in the offer, the buyer may still attempt to negotiate with the seller by way of an amendment. Whether agreed upon or not, the parties will proceed to closing.

The licensee working with a buyer would discuss the content of the inspection report and the definition of defect in the offer to purchase. The buyer may object to items labeled as defects in the summary page of the home inspection report. In some situations, certain property conditions that could be defects as defined in the offer may not be contained in the inspector’s summary. A defect as defined in the offer may exist if the condition relates to the value of the property. 

Presuming there are defects as defined in the offer, the next consideration is whether the parties have included a right to cure or no right to cure in the inspection contingency. If there is no right to cure and the buyer issues the notice of defects, the offer will be null and void. To avoid that outcome, so long as there is time in the inspection contingency, the buyer may try to renegotiate by way of an amendment or proceed to closing now knowing the results of the inspection report.

After discussing opportunities, the agent drafts any notice of defects based on the buyer’s instructions, including the list of defects to which the buyer objects. It’s important for the agent to educate the buyer that per the contract, the seller electing to cure is only required to address defects as defined in the WB-11. If the buyer were to object to items that are not defects as defined in the offer, the seller is not required to cure the non-defects. 

Another fork in the flowchart is whether items in the written report are defects as defined in the offer. Home inspectors now have a statutory requirement to identify defects during the inspection and to label those items as defects in the inspection report. A home inspector will label items as defects based on the home inspector’s judgment at the time of the inspection; the inspector is not making any warranties as to the future condition of the property. 

It is also possible for a buyer to deliver a notice and amendment simultaneously. Although this is a viable option, it tends to cause confusion and may have unintended consequences if not executed carefully. 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 a notice of election to cure.

After receiving a notice of defects, the seller has three choices:

1. Terminate the offer, electing not to cure.
2. Deliver notice electing to cure all the items listed in the buyer’s notice of defects.
3. Deliver written notice electing to cure only the defects as defined in the offer.

When electing to cure, it’s essential to communicate in writing with the buyer; for example, stating the seller elects to cure defects in the buyer’s notice. Alternately, if some items are not defects, the seller may also state the buyer’s notice included items that are not defects as defined in the offer. The seller may, but is not required to, list the items that are not defects that the seller does not intend to cure. To be clear, the seller may also affirmatively state they expect the buyer to complete the transaction because the seller agrees to cure only the items defined as defects in the offer. 

If a party asks a real estate licensee if something is or isn’t a defect, the licensee may review the definitions of defect with the person, but ultimately may need to refer the party to legal counsel because licensees cannot render legal opinions as to what is or is not a defect under the offer. 

Additional information

• Share the WRA’s handout, “Understanding Wisconsin Home Inspection Reports,” with parties if there are inspection report concerns.
• If a buyer is looking to customize the inspection contingency, see the September 2022 Wisconsin Real Estate Magazine article, “The Inspection Contingency Returns ... But Sometimes with a Twist!”