The Ins and Outs of Inspection and Financing Contingencies

The Ins and Outs of Inspection and Financing Contingencies


Homebuyers face a barrage of paperwork including a detailed contract with the sellers. Contracts can be confusing without input from a real estate attorney to help ensure you understand the terms and language. A home buying contract is especially important as it is the document that keeps the house off the market during the closing process.

In the Chicagoland area, there is the Multi-Board Residential Real Estate Contract (“Multi-Board”), and the Chicago Association of Realtors Contract (“CAR”) which may be signed to seal the agreement between the home buyer and seller. Both contracts outline important “contingencies” the parties must adhere to before the sale is complete. 

Here’s everything you need to know about inspection and financing contingencies for your home purchase.

Inspection Contingencies

Both contracts allow the buyer to conduct various inspections. These inspections are at the buyer’s expense and may include:

  • Major house components including heating and air conditioning, plumbing and well systems, electrical systems, roofs, walls, windows, ceilings, floors, appliances and foundation
  • Radon
  • Lead-based paint and/or lead-based paint hazards
  • Wood destroying insect infestation


Once the inspections are complete, the home buyer and seller negotiate any issues the buyer chooses to bring up to the seller.

Reaching an Agreement

Both contracts limit a buyer’s inspection requests to “major components” which are a threat to health or safety or are not performing their intended function. A component’s age or that it is at the end of its useful life is not considered a defect if the component is functioning properly. The CAR contract states “the Buyer agrees that minor repairs and maintenance costing less than $250 shall not constitute defects.” The Multi-Board provides “(m)inor repairs . . . and items of a cosmetic nature, no matter the cost to remedy same, do not constitute defects.” Therefore, minor disputes are intended to not interfere with the sale. This can be troublesome to the buyer as this information is not often known to the buyer at the time of their offer and these issues taken together may require costly repairs in the near future. A real estate attorney along with the buyer’s real estate agent will work together and assist the buyer in determining what items are acceptable to raise with the seller.          

A significant difference between the contracts involves the sharing of the buyer’s inspection report with the seller. The Multi-Board prohibits the buyer from sending the inspection report with their inspection requests, unless specifically requested by the seller, while the CAR contract states the buyer is required to share the relevant portions of the report with the seller. The Multi-Board may put the buyer at a disadvantage as the report often gives added credibility to the buyer’s inspection requests and allows the seller to see all of the defects the buyer did not raise as issues.      

Finally, the Multi-Board gives the two parties 10 business days from the date of contract acceptance to come to an agreement to resolve any issues raised while the CAR contract has a set time limit negotiated between the buyer and seller when entering into the contract. In either case, if they are not able to work out an agreement, either party has the right to cancel the contract and the buyer would be entitled to a full refund of their earnest money deposit. 

Financing Contingencies

Financing contingencies provide time for homebuyers to obtain a mortgage. Should the buyer be unable to secure a mortgage within the contract deadline, the contingency provides them with an out so they can terminate the contract, while also reclaiming their earnest money. The buyer’s real estate attorney must closely monitor the financing contingency deadline, and make sure the buyer’s loan is either clear to close or request an extension by that date to protect the buyer’s earnest money. This is one of the reasons that in a seller’s market, it is best for homebuyers to have a pre-approved mortgage. It can work as a powerful negotiation tool, especially in the case where there are multiple offers.


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