The “information-only inspection only” clause was popular in the competitive housing market during the pandemic. You may have seen it in the offer, or you may have used it yourself. The term sounds simple, but buyers and sellers don’t always agree on what it means once the purchase and sales agreement is signed.
An informational inspection means that the inspection of the house is solely knowledgeable of the buyer and not used to negotiate any small matter. However, rules may vary from state to state, and misunderstandings can lead to disputes during sales.
Whether you’re buying a home in Boston, Massachusetts or selling in Los Angeles, California, here’s what you need to know to navigate negotiations and set realistic expectations:
What does “informational only inspection only” mean?
Information-only inspections, sometimes referred to as “information inspections” or “information-only inspections,” are provisions that allow buyers to complete their home inspections.
Agree to not request repairs or price reductions: Additional terms may be added with key work surfaces, such as not requesting or negotiating repairs below $5,000. Release the seller from the obligation to fix the problem: While the seller is not necessary to correct what appears during the inspection, information inspection reduces the risk of seller negotiation or unexpected costs. Maintain the buyer’s right to leave (depending on the contract): If the offer is accepted as an information-only inspection and maintains the contingency of the inspection, the buyer may leave after the inspection. If only informational inspections are combined with exempt inspection contingencies, the buyer may be locked up in the contract.
The original purpose of the clause allowed the buyer to gain knowledge about the condition of the house without creating additional negotiation hurdles for the seller. This is a particularly strong move when combined with exempt testing contingencies in competitive markets. However, depending on where the transaction is taking place, this phrase can hold a variety of meanings.
What does this actually look like?
I found my dream home in Kansas City, a hot housing market in Missouri. To make a strong offer, we waive the contingency of the inspection, but we retain the right to the information inspection.
The inspection report reveals $15,000 worth of electricity and plumbing updates. Normally, buyers may try to negotiate with sellers to cover some of these costs, but if you have this type of offer in a competitive market, you risk committing or losing serious money. Knowing you have a $20,000 budget for unexpected repairs, you move forward towards closure.
Informational testing is meaningful in your state
Things can become vague. Informational tests do not hold the same weight anywhere. Real estate contracts are written differently in every state, and local market culture also plays a major role. This phrase is common throughout the country, but the standard real estate forms in each state handle it a little differently.
Massachusetts – Common in the competitive Boston market. Buyers usually don’t require repairs, but most contracts still allow for the withdrawal of major issues. “Information Only” does not guarantee that the buyer will remain. New Jersey – Buyers may have an emergency period for inspection. Even if you have an informational test, if a serious defect is found, you can usually leave. Repair requests will be fewer, but there is no complete certainty for the seller. Delaware – The contract prevents repairs or credit requests, but buyers can terminate if they are uncomfortable with the findings. A balance between seller stability and buyer protection. Virginia – Information testing often prohibits renegotiation, but buyers may reserve the right to fire major issues. Legal guidance is recommended. California – Buyer Protection Agreements mean that even with information-only provisions, buyers can often cancel during the inspection period. Sellers should note that they may be underweight. Illinois – Common with competitive offers in the Chicago area. Buyers are generally unable to request repairs, but the attorney’s review period may allow them to withdraw. A clear timeline is important. Texas – The TREC agreement allows buyers to terminate for almost any reason during the option period, reducing information inspection restrictions. Florida – “With the right to inspect” provisions allow buyers to inspect without mandating repairs. Buyers can continue to cancel during the inspection period.
Pros and cons of information testing
If possible, testing combined with home inspections is the buyer’s gold standard. However, if you need a prominent offer, an inspection for informational purposes will only push your offer to the top and will convince the seller that you are serious about the home.
Benefits for buyers
Instead of abandoning the inspection completely, you can gain knowledge about the condition of the home before you buy it. This reduces the risk of becoming blind in home buying. Depending on the state’s contract, it may still be possible to leave the home if the inspection report reveals the issue.
Seller’s Benefits
Information-only testing reduces the risk that buyers will negotiate and return. Usually, less negotiation means a faster path to closing. At Hot Market, buyers with this clause may be more serious about this transaction.
Buyer risk
You lose your negotiation power. Additionally, if you don’t like what you find in your inspection report, the seller may be waiting for a backup offer. If you abandon the unforeseen circumstances of inspection, you could potentially inherit an expensive repair. The contract can remove the right to leave after the inspection and lose serious money.
Seller’s risk
Buyers may still try to negotiate if major repairs such as foundation issues are revealed. If a buyer leaves based on what is found in the report, a major defect may need to be disclosed to the next buyer. Depending on the terms of the contract, the buyer may be able to leave without any results after the inspection.
Conclusion
Although informational testing has its advantages, both parties need to understand the trade-offs of this approach. Buyers offer stronger offers but with less leverage to negotiations. For sellers, that could mean cleaner transactions, but it is still not a guarantee that the transaction will take place. Understanding what informational testing means is something that helps you set the right expectations. Ideally, it creates a smoother path to both parties’ closures.
Information-only inspection FAQ only
Can I cancel my contract even after the information inspection?
It depends on your state and contract. In many states, yes, you can cancel, but you cannot renegotiate. However, when information testing is combined with the unforeseen circumstances of exempt testing, it is more difficult to leave without losing serious money.
Is an information testing the same as abandoning the testing?
no. Test exemption means there is no test at all. An informational inspection means getting a home inspection, but once you receive the report you agree not to request or negotiate repairs.
Should the seller disclose any issues found during the information inspection?
Yes, in many states. If a seller notices a major defect, he may be legally obligated to disclose it to a future buyer.
Should buyers always undergo an information inspection?
yes. Even if you are competing in a hot market, knowledge of the state of your home is important before you promise to close.
