If the inspection is not satisfactory, can the buyer back out of the deal?

In addition to everything else, the contract should include an “inspection contingency clause”; that is, what happens if the buyer’s inspection does reveal problems with the property. What happens following the inspection depends on the terms of the contract. Small problems, like leaky faucets, loose light fixtures or doors that don’t close properly can probably be fixed easily by the seller (i.e., solving the problem and basis for objection). More substantial problems, like a defective furnace, a waterlogged basement, or non-compliance with building codes, that can be structural, need more substantial repairs. Although, depending on the terms of the contract, the buyer can often break the deal without forfeiting his/her deposit, there may be a statement in the contract that says that the seller will either fix the problems, or give the buyer a discount on the price of the house in lieu of repairs. If the house is situated on a hillside, and is about to slide off the side of a cliff, the buyer will most likely want to cancel the contract.

See also https://www.freeadvice.com/legal/buying-a-house-why-a-home-inspection-can-save-you-money/

Case Studies: Inspection Contingency and its Impact on the Buyer’s Options

Case Study 1: Repairs or Price Reduction

In a real estate transaction, the buyer includes an inspection contingency clause in the contract. During the inspection, significant problems are discovered, such as a defective furnace and waterlogged basement. The contract stipulates that if major issues are found, the seller has the option to either fix the problems or provide a discount on the house price instead of repairs.

In this case, the buyer can choose to proceed with the deal if the seller addresses the issues satisfactorily. However, if the seller refuses to make the necessary repairs or offer a suitable price reduction, the buyer can exercise their right to back out of the deal without forfeiting their deposit.

Case Study 2: Structural Integrity Concerns

In another scenario, the buyer’s inspection reveals severe structural problems with the property. For instance, the house is situated on a hillside and is at risk of sliding off a cliff. Given the gravity of the issue and the potential safety hazards, the buyer decides to cancel the contract.

The inspection contingency provides the buyer with the option to terminate the deal and recover their deposit due to the unsatisfactory condition of the property.

Case Study 3: Minor Repairs

During the inspection, the buyer identifies minor issues such as leaky faucets, loose light fixtures, and doors that don’t close properly. These are considered easily fixable problems that do not significantly affect the overall condition of the property. In this case, the buyer may request the seller to address these issues before proceeding with the purchase.

If the seller agrees to rectify the minor repairs, the buyer can move forward with the transaction. However, if the seller refuses to make the repairs, the buyer can choose to terminate the deal based on the unsatisfactory inspection results.