Bad Inspection (or not)… You Can Cancel!

Jason Sirois January 16, 2024

Congratulations! You’re offer has been accepted! You’ve FaceTimed your friends and family, you’ve deposited your earnest money to the title company, you inspected the house and discovered the foundation is unstable, a family of mice has found comfort in the warmth of the Zinzco electrical panel, a retaining wall in the back yard is on the verge of literal collapse and the gorgeous mature tree out front that was featured in the cover photo has destroyed the sewer line.

That’s alright… you can cancel and keep your earnest money too.

When a buyer and seller enter a contract to purchase a home, the seller is stuck with the buyer, but the buyer… is not stuck with the house. The due diligence period, also known as escrow, is the time frame in which the buyer has the opportunity to investigate everything there is to know about the house. If anything is determined to be unsatisfactory by the buyer, then the buyer has the ability to terminate or object as long as the contingency wasn’t previously waived.

By the way…you should never waive both your inspection termination AND inspection objection, but there is a time and place to eliminate one or the other.

The Inspection Termination found in Section 10.3.1 of the Colorado contract to buy and sell real estate is the most lenient and subjective contingency, which favors the buyer. This contingency allows the buyer to terminate the transaction due to any unsatisfactory condition as long as two conditions remain true.

  1. The inspection termination deadline has not yet passed… AND
  2. The buyer has not already submitted an inspection objection, which is a list of items presented to the seller from the buyer that were deemed to be unsatisfactory at the inspection.

Upon buyer submission of an inspection objection, the ability to terminate on inspection is now eliminated, in addition, in order for the contract to proceed, an inspection resolution must then be agreed to and signed by both parties.

The key takeaway here… if something big comes up at inspection, you can cancel the transaction and keep your earnest money.

As always, feel free to reach out to our team if you have any questions.


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Jason loves Denver and he's passionate about helping people achieve real estate goals, which is much bigger than buying and selling houses.