Inspection & Contingency Management: Navigating Property Issues Without Killing the Deal

The inspection phase. It's where deals get tested and sometimes fall apart.

About 15% of real estate transactions fail during the inspection period, and most of those failures are preventable. The difference between deals that close and those that crater often comes down to how well you manage the inspection process, guide your clients through the findings, and negotiate repairs without killing the momentum.

This guide shows you how to get through one of the trickiest phases of a real estate transaction.

Understanding Inspection Contingencies

An inspection contingency is a buyer's right to have a property professionally inspected and to renegotiate or cancel the deal based on what that inspection reveals. It's one of the most important protections a buyer has, and as an agent, you need to understand both sides of it.

The basics of inspection contingencies:

Most inspection contingencies run for 7-17 days, depending on local market norms and what's negotiated in the offer. During this window, the buyer's inspector can access the property, conduct a thorough evaluation, and produce a detailed report. The buyer then has the right to request repairs, negotiate a price reduction, request a credit at closing, or even cancel the deal without losing their earnest money deposit (if they act within the contingency period).

For the seller, this period creates uncertainty. They know the buyer might walk away if major issues surface. For the buyer, it's peace of mind—a chance to make sure they're not buying a lemon.

Your job is to manage expectations on both sides so the inspection becomes a fact-finding mission, not a deal-killing event.

Pre-Inspection Preparation Makes All the Difference

The best contingency management starts before the inspector even shows up.

With your buyers, have a real conversation about what to expect. Most properties have something that needs attention. The roof might be 15 years old. The HVAC system might need replacement in five years. The water heater could be original to the house. This isn't a reason to panic. It's normal. Set the expectation that inspections reveal what needs to be done over the next 2-5 years, not just what's broken right now.

A good practice is to walk through the property with your buyers before inspection day. Point out the age of major systems. Mention anything you already know about the home. This context helps them understand what they're looking at when the inspection report arrives.

With your sellers, educate them early on what inspections typically find. If you listed the home, you probably know it has some age to it. Talk about common findings in homes of that era and price range. Some sellers get blindsided by inspection requests because they didn't realize their 40-year-old roof would come up. That's on you to prevent through early education.

Selecting the right inspector matters too. Recommend inspectors who are thorough, communicative, and professional. A good inspector will flag real issues without catastrophizing minor wear and tear. They'll explain findings clearly so your clients understand severity.

Coordinate the inspection scheduling and property access early. Make sure the seller knows the date and time. Confirm utilities are on. Give the inspector the information they need about special systems—is there a pool? A septic system? Older wiring? This helps them know what to look for.

The Types of Inspections You'll Encounter

Most transactions start with a general home inspection, which covers structure, mechanical systems, electrical, plumbing, and major components. But depending on the property, you might recommend or deal with specialized inspections.

General home inspections are the standard baseline. These typically cost $300-500 and take 3-4 hours. The inspector walks the entire property, evaluates the roof, foundation, framing, HVAC, electrical, plumbing, and interior components. They'll look at water intrusion, pest damage, safety issues, and overall condition.

Specialized inspections might include:

  • Termite and pest inspections (very common, often required by lenders)
  • Mold assessments (especially for homes with water history)
  • Radon testing (required in many markets)
  • Lead-based paint inspections (required for pre-1978 homes)
  • Roof inspections (for homes with aging roofs)
  • Pool and spa inspections (if applicable)
  • Well and septic system testing (for rural properties)
  • Environmental assessments (for commercial or land purchases)

Your role isn't to conduct these inspections—that's the professionals' job. But you should understand what each one reveals so you can help your clients interpret results and make decisions.

Reviewing and Prioritizing Inspection Findings

When the inspection report lands, it's usually dense and can feel overwhelming. Help your clients break it down.

Good inspection reports categorize findings by severity. Safety issues—like faulty electrical work, gas leaks, or structural problems—require attention. Major system defects—like a failing roof, HVAC failure, or plumbing issues—are serious and expensive. Minor repairs might be routine maintenance items. Cosmetic issues are just that—cosmetic.

Start by identifying the deal-killers. These are findings that fundamentally change the property's value or safety:

  • Structural damage or settlement
  • Foundation cracks (especially if they're active)
  • Roof failure (not just age, but actual leaks or damage)
  • Mold or water intrusion problems
  • Faulty electrical systems
  • Major plumbing issues
  • Systems that won't support the buyer's needs (septic tank too small for a larger family, for example)

Once you've identified serious issues, estimate repair costs. Get actual quotes from contractors if possible. Buyers often panic about cost estimates in inspection reports, which are sometimes conservative. Real repair quotes tell a different story.

For minor items—loose doorknobs, caulk around tubs, cosmetic paint—these usually don't move the negotiation needle. Focus buyer attention on the 3-5 items that actually matter.

Guiding Your Buyer Through the Decision

After the inspection, your buyer is going to have feelings. They fell in love with the house, and now they're learning what's wrong with it. Your job is to keep them rational and forward-focused.

Walk through the report findings together. Explain the severity of each issue in plain language. "The roof is 18 years old and has worn shingles" is different from "the roof is leaking and needs replacement within the next year." Frame findings within context—what's the cost of repair, how urgent is it, how does it affect their decision?

Discuss negotiation options. They can request repairs, ask for a price reduction, request a credit at closing, or—if items are severe enough—walk away. Most deals involve some combination of these approaches.

Help them think strategically. Sometimes asking the seller to make repairs is wise—you know the contractor, you can verify the work. Sometimes a price reduction is better—your buyers can hire their own contractor at their pace. Sometimes a credit at closing makes sense—it covers repair costs but doesn't delay closing.

The key is keeping emotion in check while you work through the data.

Presenting Findings to Your Seller

On the seller's side, be transparent and professional. Present the inspection findings objectively—don't minimize or exaggerate. Give them time to process. Most sellers aren't happy when an inspection reveals their home needs work. That's normal.

Prepare them for what's probably coming. If the roof is 20 years old, a repair request is likely. If there's deferred maintenance throughout, multiple items will probably surface. Help them understand that buyers are making decisions based on facts, not emotion, and there's usually a negotiated resolution that works for everyone.

Be ready to advise on their options: make the repairs themselves, agree to repairs by the buyer's chosen contractor, credit the buyer an amount to cover repairs, or negotiate a price reduction. Each has trade-offs.

Repair Negotiation Strategies

When the inspection response comes, it's time to negotiate. There are several approaches:

Request for repairs: The buyer asks the seller to make specific repairs before closing. This works well when repairs are straightforward and the buyer wants assurance the work is done correctly. Downside: sellers sometimes use cheap contractors to keep costs down. You can mitigate this by specifying quality standards in the response.

Price reduction in lieu of repairs: The buyer gets money off the purchase price to handle repairs themselves. This appeals to sellers who'd rather not coordinate repairs and appeals to buyers who want control over contractors. The number needs to reflect actual repair costs, though—not just inspection estimate costs.

Seller credit at closing: Similar to price reduction but structured differently for loan purposes. The seller gives the buyer a credit that's applied at closing. Lenders treat this differently than price reductions in some cases, so understand your financing implications.

As-is with adjusted price: Basically a price reduction that reflects all inspection findings. This is the cleanest negotiation when there are multiple issues. Instead of haggling over each item, you settle on a number that reflects overall condition.

Hybrid approaches: You might ask for critical repairs (like a roof leak) and a credit for minor items. This is actually quite common in real negotiations.

Common Negotiation Scenarios

Different properties present different challenges.

Major system failures (HVAC, roof, foundation) are serious conversations. Get actual repair quotes. These aren't cosmetic—they affect home value and liveability. Expect the buyer to request repair or significant credit.

Safety hazards and code violations are non-negotiable. Electrical problems, gas leaks, structural issues—these require resolution. Most buyers (and lenders) won't close without addressing them.

Minor repairs and maintenance (loose railings, caulk, weatherstripping) usually resolve with a small credit or buyer acceptance.

Cosmetic issues (paint, landscaping, finishes) rarely move the needle in negotiation. Frame these appropriately so buyers don't over-focus on them.

Deferred maintenance (when multiple systems are aging simultaneously) requires strategic negotiation. You're looking at a cumulative cost picture. Either the seller funds repairs or prices adjust to reflect the work needed.

Previously undisclosed defects (something the seller didn't reveal and inspection uncovers) can create tension. Review your seller's disclosure and contract language. There may be legal implications depending on your market and what was disclosed.

Moving Through Contingency Removal

Once you've negotiated and reached agreement, formalize it. The buyer agrees to remove their inspection contingency (accepting the property in its current or negotiated condition), and the deal moves forward.

If repairs were requested and accepted, coordinate verification. Some agreements allow the buyer to do a final walk-through after repairs are completed. This builds confidence the work was actually done.

If contingency removal is contested—maybe you can't reach agreement on repairs—understand your market's options. In some areas, the buyer can cancel and keep earnest money if repairs aren't addressed within the contingency period. In others, the seller can force a decision: fix it, credit it, or the buyer walks.

Once inspection contingency is removed, you've cleared a major hurdle. The deal is significantly more likely to close.

Key Principles for Successful Contingency Management

First, set expectations early. Buyers and sellers both need realistic understanding of what inspections reveal and how normal it is to address findings.

Second, remain objective. Don't minimize findings to appease sellers or catastrophize them to scare buyers. Let the data speak and help your clients interpret it rationally.

Third, focus on what matters. Not every finding is equal. Roof failure isn't a cosmetic paint issue. Help your clients distinguish and prioritize.

Fourth, negotiate creatively. There's usually more than one way to resolve inspection issues. Sometimes repairs, sometimes credit, sometimes price adjustment—finding the right fit is the art of negotiation.

Finally, keep deals moving. Inspection contingency periods are tight timelines. Slow responses and indecision are deal-killers. Stay organized, communicate promptly, and keep momentum going.

Want to deepen your transaction management skills? Check out these guides:

The inspection phase doesn't have to be where deals fall apart. With clear expectations, smart preparation, and strategic negotiation, you'll guide your clients through inspection contingencies professionally and keep deals moving toward the closing table.