Thread: Pre-listing inspection liabilities?

Just wondering what liabilities there may be for pre-listing inspections. If the seller (or buyer who uses the report) feel that I missed something, what scenarios could I expect? The buyer is not part of the contract in this case.

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My concern is that my report is for one individual (or family) and not for the general public. If I report for the seller, and he gives his report to the buyer, they buyer has recieved the benefits of my inspection without paying for it. This has happened to me, and the buyer has asked me about the inspection. I don't answer questions about my reports to anyone other than the actual customer. In one case, the buyer (not the original customer) asked for a re-inspection. They balked when I told them that they could not have a re-inspection, but they could have a full inspection. I cannot re-inspect for someone who was not my original customer.

It's a slippery slope. I make good money on pre-sale inspections, but you have to be careful about who you answer questions for.

Originally Posted by Eric Laney

Just wondering what liabilities there may be for pre-listing inspections. If the seller (or buyer who uses the report) feel that I missed something, what scenarios could I expect? The buyer is not part of the contract in this case.

Well, if you screwed-up and missed something important you would have the same liability as if you did it for a buyer.

The contract is just a bluff and does not stop you from being named in a lawsuit. You can not disallow professional liability.

"what scenarios could I expect?"

The same scenarios if you missed something on a "normal" inspection and someone called you upon it.

ASHI in Michigan has a "Review by Peer" program. Half a dozen experienced ASHI inspectors inspect a home as a team for 2 hours. Notes are taken of all the faults found. The team prioritizes the list of faults. They are sorted into items that every home inspector should find and report. That becomes the standard for that house. Candidates are given the same amount of time to inspect the house as the team had. They are allowed to use any and all of their normal tools and aids. They are given a couple of hours to review their notes and prepare for a presentation to the team. The candidate presents his report orally to the team. The team asks questions and the candidate has the opportunity to access his notes.

The interesting part is every inspector has areas they are weak and strong. As a team, there is an eggspert for every topic. Overall the team is more experienced than an individual. During the discussion to determine which faults should be found by the candidates, each team member fights for his area of strength. The final list when reviewed objectively is a good and fair inspection.

The candidates who take this challenge must have performed at least 100 inspections. Most have 5+ years and are generally held in high regard by peers. The fella who wrote the licensing laws for our state 12 years ago, took the challenge recently. He scored 42 out of 100. Most candidates do not pass the challenge.

All that to say, every home inspector will find something different than the previous one. Some has to do with training, experience, judgment, distraction, and time. My goal is to find all the defects that would cost $100 or more to repair. I hope I find all the defects but know that I will not. I make judgment calls on the severity of defects and some make the report, and some do not.

I follow a routine to limit that amount of items I forget to inspect. Sometimes I am talking to the client about the defect and forget to write it down. Other times I intend to come back and investigate further and don't. Hopefully I get all the big stuff and most of the little stuff.

I performed a pre-listing yesterday. I told the seller I was going to miss things. I set the expectation that while there is a state mandated minimum standard, inspectors can and do exceed that standard. Depending on how much they move past a visual inspection and more towards a technically exhaustive inspection, they may find additional items.

Originally Posted by Bruce Ramsey

ASHI in Michigan has a "Review by Peer" program. Half a dozen experienced ASHI inspectors inspect a home as a team for 2 hours.

Candidates are given the same amount of time to inspect the house as the team had.

Let's see ... that's 6 inspectors for 2 hours ... you give the candidates 12 hours to do the inspection? Great!

Anything less than 12 hours and you are expecting the candidates to do more, do it faster, and do it as better, than experienced inspectors - somewhat of an unfair 'trial by fire'.

Personally I think characterizing the "big stuff" from less important defects is treading a very slippery slope. Hoping to find defects with a cost limit of $100 also sounds foolish as a loose ground wire could cause a house fire resulting in personal injury or death. Basically it sounds like your team has not thoroughly thought this project through from the aspects of the legal liability that hovers over every home inspector in the country. As a long time CREIA inspector during another life we ran “This Old House” group inspections where the more experienced inspector members ran candidates and newbies through a previously inspected house and then went over the details at a group meeting after.

There is no doubt it’s an excellent teaching method for a very complicated profession that’s often convoluted by state laws and civil codes wherein not only the detection and disclosure of defects is vital, but also the method of how they are reported and the recommendations suggested by the inspector. The inspectors running such an exercise must be very careful not to muddy the waters by pushing their personal agendas or what they perceive to be their list of the most important issues, but rather stick to accepted industry protocol. Those that have been involved in home inspector litigation for any length of time cannot help but change their view of the industry by the revalation of its conundrums and pitfalls.

I performed a pre-listing yesterday. I told the seller I was going to miss things.

I don't think that statement would instill much confidence in me if I were the client.

and do it as better

ECJ:

Is that ASHI house speak?

Aaron

I know my reports are passed on to others, thats just a fact. How do you stop it? If you did a house inspection two years ago or longer and your client puts the house up for sale and leaves the original inspection report on the kitchen or dining room table with multiple copies for open houses, how do you stop it?

I fail to see the difference in liability with pre listing inspections. Liability is liability regardless how you slice it. Can another inspector come through and find issues sure they can, where is the line drawn?

It can really go both ways. I did a listing inspection about 6 months ago. A buyer hired another inspector who came in and said there was a gas leak I missed. The seller sent it to me and said he wanted me to pay for it. Even though it was 6 months ago and anything could have happened, I agreed to meet the 2nd inspector on site at my expense (I WAS going to pay his trip fee) and turns out there was no leak, he had adjusted the thermostat on the water heater too low and blew out the pilot. When he turned it back up he smelled gas. With his buyer standing there, he didn't look too good, unfortunately. Right next to the water heater was the gas furnace with the flex line extending into the furnace. I reminded the client of the hazards of that as we were leaving and the buyer noticed it wasn't even on his inspector's report so he finally read my report and found many items that his inspector missed.

Point is, it have just as many risks as the 2nd inspector as you do the first, especially if you don't take the time to read the first inspector's report and make sure everything on his/her report is on yours that has not been repaired.

And finally, just don't be afraid of liability. That's part of the risks of being an inspector. I just do the best I can and try my best not to miss anything no matter what type of inspections I do. If I know I did my job the best I could, then if/when the law suit comes, I approach it confidently. Don't think I'm wording this as well as I wanted too, but hopefully you get the point.

In all a pre listing inspection is liability waiting to happen. Boy, that sounded negative.

Yes, big or small, depending on the seller and there general attitude you may (and more than likely will) be held liable for anything you miss. They want to know anything that is wrong with there home before they get an offer.

A written explanation to that seller should be just as it should be to a buyer. We are there to help 'reduce' the risk (cost) in selling/buying a home.

As you know you can have ten inspectors come in to inspect a home. They will all (more than likely) word there findings slightly different but most of the inspectors will find most (maybe all) Major items. Some will find more (usually smaller items) but as the Wise one said (Jerry M) that small item could turn into a hundred or 2 before it is done.

Not that you are not going to do a lesser or greater inspection for a buyer or a seller but personally I charge more for a pre listing inspection and spend more time at that inspection (more technically exhaustive). Three small hundred dollar items could be the 300 you get for doing the inspection in the first place.

With a buyers inspection I write and explain to the buyers that I am there to find (for the most part) major concerns in the home and 'reduce' their risk (cash) in the home buying process. Dirty carpets, knicks in the wall, minor paint touch up, well this is a used home as in a used car, it has been lived in and there are normal wear items. A seller may not see it that way and when some one comes back and wants aged carpets replaced (not ripped, torn, badly stained) and such and you do not mention them they may come to you on these items.

Ted

Boy, I hear it coming already. I know I did not do a Jerry P explanation

Originally Posted by Jerry Peck

Let's see ... that's 6 inspectors for 2 hours ... you give the candidates 12 hours to do the inspection? Great!

Anything less than 12 hours and you are expecting the candidates to do more, do it faster, and do it as better, than experienced inspectors - somewhat of an unfair 'trial by fire'.

My thoughts exactly!
Well said!

I do listing inspections although not as many with the REO market we have today. I wish all of my inspections were listing inspections. If I were to miss any item that a second inspector found the only harm to me is my ego and reputation. Newbee’s should never do listing inspections as the second inspector could well make you look bad. Look bad and you make the agents black list.

I have no liability to the buyer or seller for any item missed, if that item is disclosed by any source before the removal of contingency or the close of escrow including the second inspector. The seller cannot not get an award or judgment under this scenario because the seller has sustained no loss; it is a condition that is pre-existed prior to my visit.

If I and the second inspector both missed the same item my liability is reduced by the joint and several liability/contributory negligence liability that all parties share in the transaction including the seller and all agents involved.

I use a special listing inspection agreement that states to any potential buyers that it is for the sole and exclusive use of the original client and for an additional fee of one half the original fee I will sit down with the buyer and discuss the findings in my original report. I will not reinspect defective items in my original report. I will only perform a full inspection for the buyer at the original full fee and I refer them and exclude repaired items as stated below.

The standard California Real Estate (RPA-CA) contract has a provision in the contract that I abide by and quote:

Reinspection's are only performed on items not accessible at the time of original inspection or that were unable to be inspected due to utilities not turned on. Should repairs be necessary we suggest they be performed by appropriate persons and that work complies with applicable Law, including governmental permit, inspection, and approval requirements. Buyer should obtain from seller receipts for Repairs performed by others, a written statement indicating the date of Repairs performed by Seller and provide Copies of receipts and statements of seller prior to final verification of condition. (Ref: Residential Purchase Agreement Form RPA-CA, page 4 item 10.)

As everyone has said liability and industry protocol are essentially the same for both.
I do some pre list insp, not too many because the calls don't come in for it that much. I know that some realtors in our area shy clients away from pre list insp on the basis that 'if you don't know about it, you don't have to disclose it'. I think it's the more experienced realtors who are ok with prelist insp because they understand that it can make the deal smoother. (if the client actually fixes stuff before list)
I approach both insp the same. I do, as Ted, charge more for prelist insp. They are more work and take longer. Not only am I doing an HI but I am also, to a 'small' extent, providing consulting services. I'm not just telling them they should consider replacing the 12yr old HWT but also that they need to pack up all the crap in the garage so it looks like 2 cars actually fit in there.
One of the big problems people face when attempting to sell their home is appearance. The stains in the carpet, the nicks on the walls, the clutter in the rooms and garage, etc. These are everyday defects that the residents have become blind to overtime. I've pointed things like that out to people and they are surprised.
A prelist insp (at least for me) involves some handholding and guidance to the client.
If you don't write up the bad furnace, people are going to be pissed. If the buyers insp finds an outlet not working that you missed, it's not going to make or break the deal or your reputation.

If your inspection report is viewed by many people, wouldn't that be good, nearly free marketing for you as an inspector? In theory.

Originally Posted by Ben Garrison

If your inspection report is viewed by many people,

It's not that it will be "viewed" by many people that is the problem.

It's that it will be "relied upon" by many people that is the problem. People whom you have NO contract with, no contract limiting anything. By limiting anything, I am referring to "expectations" as much as "liability".

One of the biggest concerns with any pre listing inspection is the clients subconscious belief that you are the fix all. If the HVAC unit is checked after you inspect (it could be the next week) and the unit is now malfunctioning you get put back into the position of explaining that homes systems have mechanical failures. An element goes out in a hot water heater and it looks like you missed it etc. etc.

From Mr Jerry in Florida

"It's not that it will be "viewed" by many people that is the problem.

It's that it will be "relied upon" by many people that is the problem. People whom you have NO contract with, no contract limiting anything. By limiting anything, I am referring to "expectations" as much as "liability".

What I said above is what Jerry is saying. Different words (but that is the point)