Recommending specialists and contractors

[Elizabeth Chambers]

My question is, what happens if a HI recommends a contractor or specialist to further evaluate some component or system and the contractor screws up somethimg and causes damage, who is responsible?

[Jack Feldmann]

MY guess it would fall on the contractor that did the evaluation and repairs. I generally do not actually name the contractors, but make a statement that tells my client to get qualified (and licensed if applicable) individuals to do the evaluation and repairs.
That said, many times, our clients do not have a choice on who does the evaluation and/or repairs.

Our job is to inspect, and write reports giving our opinions, and telling the client what to do about it. Once we have informed them of a problem, and told them they need to have someone else (qualified contractor) look at it further, our job is done.

[Jim Luttrall]

My question is, what happens if a HI recommends a contractor or specialist to further evaluate some component or system and the contractor screws up somethimg and causes damage, who is responsible?
Simple, the guy who screwed it up.
That said "I" do not recommend contractors.
In Texas it is illegal for me to do work on a home I have inspected and I take it a step further by not even recommending a person to do the work. I don't want even the appearance that I might be drumming up business for my "brother-in-law". My reputation is the most valuable possession I have.

[Elizabeth Chambers]

Now I understand this better. So, we dont need to have a list of local specialists or contractors the client can call to get things evaluated further. The reason I ask is, that kind of list was included in my sister and brother-in-laws home inspection report. Made me wonder why a HI would do that, but I was thinking liablity not ethics. Thank you two for setting the subject straight for me. Much appreciated.

[Welmoed Sisson]

My question is, what happens if a HI recommends a contractor or specialist to further evaluate some component or system and the contractor screws up somethimg and causes damage, who is responsible?

The person who touched it last owns the problem. So if I point out that a pipe is leaking, and say in my report that a plumber should come fix it, then if that plumber screws up and breaks the line instead and floods the basement, well, he's the one who touched it last so it's his fault.

We do include a list of companies in our area but make it abundantly clear that (a) we are not paid to include anyone on the list, (b) these are companies we have used for our own homes and were happy with their work, (c) we receive no "referral fees," freebies, discounts or any other benefits from the company being on the list, and (d) if a company on the list doesn't treat our customer right, they are off the list. We haven't gotten any bad feedback (yet...) from companies on (or not on) the list. Since our area gets a lot of buyers new to town, it's been well-received.

On that list, we include a paragraph telling people that just because WE liked these companies, they may not, so they should do their own due diligence.

[Roy Lewis]

It would be the contractor, but you will look like crap for referring them.
That is why I don't refer anyone. Let the client find them.

[Marc M]

It would be the contractor, but you will look like crap for referring them.
That is why I don't refer anyone. Let the client find them.
Exactly...

[Elizabeth Chambers]

So you pretty much make a suggestion in your report that a qualified licensed contractor should further evaluate the problem you have found.

Are there certain systems or components that you look at but always automaticly refer for further evaluation by a specialist? Like for instance HVAC systems? Or only if you find a problem?

I ask because I have read on here and elseware that if you refer specialists for everything you find a defect with then it de-valuates the work of a HI.

It seems to me that in this profession, you can make yourself look bad even when you are performing your work in an exellent manner, and following, even exceeding the SOP of your choice.
And...
Sorry for my long winded posts!

[Jerry Peck]

So you pretty much make a suggestion in your report that a qualified licensed contractor should further evaluate the problem you have found.

Nooooo!

That a qualified and licensed contractor should make all repairs noted and any other repairs they may find or create during their work ... but not "further evaluate" ... if you defer to the contractor to "further evaluate" what you said, and they come back with something totally off the wall and WRONG ... well, there isn't a thing you can say about it because you deferred to them ...

... and how many times have we seen contractor come in and say 'that looks good to me'? (Of courses it does, they probably did it!).

[Elizabeth Chambers]

Aha! I see, understood. Thanks for all your responses.

[Lon Henderson]

It would be the contractor, but you will look like crap for referring them.
That is why I don't refer anyone. Let the client find them.

I have had a referral list of contractors for years. At the top of the list, I have a disclaimer stating that I don't get any kickback from any of them, nor do I warrant any of their work. If any of them, do a bad job, let me know and I will remove them from the list.

Shor nuf, yesterday, a realtor texted me that one of the guys on the list had screwed up a repair at her house and would not return her calls now. He hasn't returned my call either, so adios.

[Gunnar Alquist]

I generally tell people that I have been inspecting for so long now that all of the contractors that I used to work with have since retired (or...). Generally, agents keep lists of contractors that they refer. I am fine letting them take the flak for someone else's poor work.

[Jerry Peck]

I generally tell people that I have been inspecting for so long now that all of the contractors that I ...

I thought Gunnar was headed in the direction that I used to go ... but he didn't, so I will finish his sentence the way I used to: " ... all of the contractors that I have been behind don't do the work correctly, so any name I would give out would be that of someone who did not do the work properly."

[Stephanie Jaynes]

The person who touched it last owns the problem.

While that's how most people see it and even how a judge may rule it, this does not prevent you from having a claim filed against you for work that a specialist or contractor did.

To protect yourself, we recommend taking a few steps:



Make sure there aren't any rules about making recommendations to specialists and contractors. Some states do restrict or even prohibit referrals, so you've got to look into that first.
Once you establish that it's okay in your area to make recommendations, get yourself named as an additional insured on your specialists and contractors insurance policies. That way, if you're named in a claim for something they did, you'll be covered by their insurance policy.
Know that receiving benefits, like a cut of what they make from your client using them for the repair, can muddy the water. Again, this can be state-specific, so look up the laws or talk to a local attorney to see what the restrictions are.


Good luck!

[Elizabeth Chambers]

Funny, your last name is almost my middle name, "Jayne". Thank you for the input.
I know for a fact that it's unethical to take any kickbacks or gifts or benefit in any way from anyone whom you refer for work to be done for a client. That runs under the bad business practice kinda thing. It's common sense. Because if a HI is gaining financially from that kinda thing, they might be more concerned about the money than their clients being well served.

[Stephanie Jaynes]

Funny, your last name is almost my middle name, "Jayne". Thank you for the input.
I know for a fact that it's unethical to take any kickbacks or gifts or benefit in any way from anyone whom you refer for work to be done for a client. That runs under the bad business practice kinda thing. It's common sense. Because if a HI is gaining financially from that kinda thing, they might be more concerned about the money than their clients being well served.

What a coincidence! And I totally agree. It sounds like you have things under control. :)

[Jim Luttrall]

While that's how most people see it and even how a judge may rule it, this does not prevent you from having a claim filed against you for work that a specialist or contractor did.

To protect yourself, we recommend taking a few steps:



Make sure there aren't any rules about making recommendations to specialists and contractors. Some states do restrict or even prohibit referrals, so you've got to look into that first.
Once you establish that it's okay in your area to make recommendations, get yourself named as an additional insured on your specialists and contractors insurance policies. That way, if you're named in a claim for something they did, you'll be covered by their insurance policy.
Know that receiving benefits, like a cut of what they make from your client using them for the repair, can muddy the water. Again, this can be state-specific, so look up the laws or talk to a local attorney to see what the restrictions are.


Good luck!

You can quickly run afoul of federal RESPA rules and be violating federal law by accepting or providing referrals involved in a real estate transaction. To be safe, "I" don't do any referrals or give or take fees.

[Elizabeth Chambers]

Mr. Jim, please tell me, what is the RESPA?
The FEDs, oh my!!

Again, thanks to all for your responses.

[Gunnar Alquist]

Mr. Jim, please tell me, what is the RESPA?
The FEDs, oh my!!

Again, thanks to all for your responses.

https://www.respanews.com/RN/RESPADefined.aspx

[Stephanie Jaynes]

You can quickly run afoul of federal RESPA rules and be violating federal law by accepting or providing referrals involved in a real estate transaction. To be safe, "I" don't do any referrals or give or take fees.

Great addition regarding RESPA restrictions!!!

[Lon Henderson]

It's been a few years since I last attended a seminar regarding RESPA, but I don't remember it as a concern for us as home inspectors. It is more designed to limit real estate agents, lenders, and title people.

[Stephanie Jaynes]

It's been a few years since I last attended a seminar regarding RESPA, but I don't remember it as a concern for us as home inspectors. It is more designed to limit real estate agents, lenders, and title people.

I was really intrigued by this premise. I'm unfamiliar with RESPA myself, so I went to our claims team for additional insight. Here's what I found out:

Our understanding agrees with Lon's memory: that RESPA primarily deals with settlement service providers, mortgage services companies, and the lenders.

However, there are numerous states that have disclosure requirements for realtors and home inspectors. While every state is different, there are some universal requirements that should be followed if not required by statute. Essentially, any referral which results in a monetary payment to the inspector by the entity referred, should be disclosed. Not so universal, but still of significant importance, any referral to a family member should be disclosed, as well as referrals to individuals that the home inspector has had a previous financial relationship, a current financial relationship, or hopes for a future financial relationship.

On InspectorPro's end, we rarely get claims where a component of the claim is the failure of a referred entity. However, it's always wise to be cautious and, if there's a specific concern regarding a referral or how you're going about it, you can always ask your insurance provider for risk management assistance. They should be able to point you in the right direction.