Recently, I had a lively debate with one of my very sharp brokers (my hubby) regarding the removal of the inspection contingency on the CAR-CR form.
His argument was, if the inspection contingency is removed but the disclosures, reports, HOA docs, title report are not, then the buyer COULD cancel the contract if these documents do not meet approval and retain their deposit. He is correct but there is another angle to it.
As one of the original authors of the Contingency Removal form, I do understand the intent and how it’s to be used.
When the contract committee first created the architecture of the contract, we began with only the loan and contingency removal. However, a few of the agents on the team acknowledged that they frequently will remove other items (which are part of the contract) separately as well.
For example, say the buyer is unable to provide the loan contingency in a timely manner to the seller. So in good faith, the buyer instead removes the appraisal contingency, showing the seller that the loan is at least moving in the right direction.
Note that a loan contingency can never be removed BEFORE the appraisal contingency (if it's a contractual obligation) since the property must appraise out before a lender will issue loan approval.
We use this same logic when removing the inspection contingency. If there is a delay removing it, the buyer can option to remove other contingencies such as reports and disclosures to help show they ARE interested in moving forward.
In order for a buyer to remove a physical inspection contingency, it makes sense that in addition to performing inspections of the property, they should also review reports and disclosures provided by the seller to ascertain if additional inspections are warranted such as a termite report from the seller that calls for further inspections.
So, removal of the inspection contingency but withholding removing reports and disclosures, for example, doesn’t make sense from a contract perspective. Can a buyer “undo” the inspection contingency removal and cancel the contract in the event the seller provides a report after the fact? I suppose, but why muddy the waters that involve deposits and liquidated damages?
If you want to game the transaction, go ahead and remove some of the other contingencies like HOA, title report and disclosures/reports before you remove the inspection contingency.
Make sure your buyer has had the opportunity to review and approve all seller required disclosures and reports and be allowed time to perform and review their own investigations prior to removing this important contingency.