How exactly does an inspection contingency work while wholesaling

Question

I’m an upcoming real estate investor. I’m starting with wholesaling. How exactly does a inspection contingency work in Ohio? Am I the inspector or do I have to pay an inspector to look through the property before I can back out of the deal if needed? Also, how do I do this virtually ? All info on inspection contingencies and getting earnest back I’d appreciated. Thank you!

Remington Lyman · Answer

It depends on what your contract and your attorney says. Remember - anything can be litigated

Brandon Sturgill · Answer

@Nathan Clingan its what is referred to as an "exit" contingency...if you do not like what you see, you exit the deal...but it does depend on the language you use...usually this is straightforward...under normal circumstances, you would demonstrate the deficiencies you discovered by providing a copy of your inspection report to the seller. In your case, you would need to move quickly to hire a local inspector to do the inspection. You can always insert the clause and elect not to use it...but that is another conversation. Here is an idea of our board approved contract language on inspection:

6. Inspections and Tests:6.1 The Broker strongly recommends that the Buyer conduct inspections and/or tests. The Broker furtherrecommends that inspections and tests be performed by a home inspector duly licensed by theState of Ohio, or, with respect to specific components or conditions, be performed by a qualifiedperson who is exempt from home inspector licensure requirements pursuant to Ohio Revised Codesection 4764.03. The Buyer and the Seller understand and agree that the Broker neither warrants norassumes responsibility for the physical condition of the premises.IT IS NOT THE INTENTION OF THIS PROVISION TO PERMIT THE BUYER TO TERMINATE THISAGREEMENT FOR COSMETIC OR NON-MATERIAL CONDITIONS.Buyer shall be responsible for the repair of any damages caused by the Buyer’s inspections and tests;repairs shall be completed in a timely and workmanlike manner at Buyer’s expense.6.2 Seller shall cooperate in making the premises reasonably available for inspections and/or tests.6.3 Specified Inspection Period: Buyer shall have ____________ (not applicable if the number ofcalendar days is not inserted) calendar days after the date of acceptance of the contract by both parties to have inspections, environmental inspections, and/or tests completed. This time period shall be known asthe Specified Inspection Period. The number of calendar days for the Specified Inspection Period is aspecific time frame agreed upon by the Seller and the Buyer. The number of calendar days cannot bemodified or waived except by a written agreement signed by both parties.All requests to remedy shall be submitted to the Seller or Seller’s Broker within the Specified InspectionPeriod. Time is of the essence in completing any of the inspections, tests, and/or reports.The Buyer, at Buyer’s expense, shall have the right, and is strongly encouraged, to have any and allinspections, tests, and/or reports conducted, including but not limited to the following:(a) Inspection of the premises and all improvements, fixtures, and equipment;(b) Inspection or testing for radon;(c) Inspection or testing for mold, and any other environmental test;(d) Inspection or testing for lead-based paint;(e) A pest inspection for termite and wood destroying insects with a report provided on a FHA/VAapproved form by a licensed Ohio Certified Pest (Termite) Control Applicator;(f) Inspection of the gas lines on the premises;(g) Inspection of the waste treatment systems and/or well systems by a local health authority or stateEPA approved laboratory of the Buyer’s choice;(h) Determination of the need for and cost of federal flood insurance;(i) Confirmation of the insurability of the premises with an insurance company of the Buyer’s choice.With respect to housing constructed prior to January 1, 1978, the Buyer must be provided with thepamphlet entitled “Protect Your Family from Lead in Your Home” and the “Lead-Based Paint and Lead-Based Hazard Disclosure Form.” Every Buyer of any interest in residential real property on which aresidential dwelling was built prior to 1978 is notified that such property may present exposure to leadfrom lead-based paint that may place young children at risk of developing lead poisoning.Lead poisoning in young children may produce permanent neurological damage including learningdisability, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoningalso poses a particular risk to pregnant women. The Seller of any interest in residential real property isrequired to provide the Buyer with any information on lead-based paint hazards from risk assessmentsor inspections in the Seller’s possession and notify the Buyer of any known lead-based paint hazards.A risk assessment or inspection for possible lead-based paint hazards is recommended prior topurchase.6.4 If the Buyer is not, in good faith, satisfied with the condition of the premises as disclosed by theBuyer’s inspections, tests, and/or reports provided for in paragraph 6.3, then the Buyer may elect toproceed under one of the following provisions, 6.4(a) or 6.4(b):6.4(a) Agreement to Remedy Period: On or before the end of the Specified Inspection Period, theBuyer shall deliver to the Seller or the Seller’s Broker a written request to remedy, signed by the Buyer,stating the unsatisfactory conditions, along with a written copy of the inspections, tests, and/or reports,specifying the unsatisfactory conditions.The Buyer and Seller shall have ________ calendar days (not applicable if the number of calendar daysis not inserted), after the end of the Specified Inspection Period, to reach a written agreementregarding remedying the unsatisfactory conditions. This time period shall be known as the Agreement toRemedy Period. The number of calendar days for the Agreement to Remedy Period is a specific timeframe agreed upon by the Seller and the Buyer. The number of calendar days cannot be modified orwaived except by a written agreement signed by both parties. In the event the Buyer and Seller do notreach a written agreement regarding remedying the unsatisfactory conditions within the Agreement toRemedy Period, and the Buyer and Seller have not executed a written extension of the Agreement toRemedy Period, this contract shall terminate. Upon termination of the contract under this provision, theearnest money deposit shall be returned to the Buyer pursuant to paragraph 12.

ORPrior to the end of the Agreement to Remedy Period, the Buyer can, in writing, waive such request toremedy and proceed with the contract.The commencement of the Agreement to Remedy Period does not obligate the Seller to reach anagreement with the Buyer.The delivery by the Buyer of a written request to remedy any unsatisfactory conditions does not precludethe Buyer from later delivering a notice of termination as contemplated by paragraph 6.4(b) below duringthe Agreement to Remedy Period, unless the Buyer and Seller have reached a signed agreementregarding the Buyer’s written request to remedy.OR6.4(b) Notice of Termination: Within the Specified Inspection Period or as provided in paragraph 6.4(a),the Buyer may terminate this contract by delivering written notice of termination to the Seller or Seller’sBroker, along with a written copy of the inspections, tests, and/or reports, specifying the unsatisfactoryconditions. Upon termination, the earnest money deposit shall be returned to the Buyer pursuant toparagraph 12.FAILURE OF THE BUYER TO DELIVER WRITTEN NOTICE PURSUANT TO PARAGRAPHS6.4(a) OR 6.4(b) CONSTITUTES ACCEPTANCE OF THE CONDITION OF THE PREMISESAND SHALL BE A WAIVER OF THE BUYER’S RIGHT TO TERMINATE PURSUANT TO THISPROVISION.