Once the inspector completes the inspection, he'll work up a written list of action items (typically there are at least a few things that need to be done).
If the buyers aren't satisfied with the condition of the house, and don't think they can get satisfaction from the 
seller, they may choose to terminate the contract at this point. This is fairly rare; most buyers will negotiate with the sellers.
Typically the buyers submit a Inspection Notice, with a "notice to correct", asking for specific items to be fixed. Buyers and sellers negotiate through their agents until there's satisfactory resolution for both parties.
This isn't a complicated process; even though it seems like there are many steps, the whole process usually takes only a few days.
The agents will help the buyers and sellers obtain estimates and coordinate repairs. Typically all repairs are done before closing; if they're not, there's a survival clause in the inspection notice, meaning that the seller is still obligated to fix any remaining agreed upon inspection items after closing.
Sellers should provide the buyers receipts for all work done, and it's also up to the buyers to do a "final walkthrough" with their agent before closing.
Ken and Sandy Wickham, the authors of this article, are REALTORS® with RE/MAX Real Estate Group in beautiful Colorado Springs, CO, and they welcome your real estate inquiries. To contact them, visit their website.
