October, 2013
Opinion
Inspection News and Views from the American Society of Home Inspectors



Contractually Requiring Buyers to Permit Inspectors to Provide Copies of Reports to Third Parties

KEVIN O'HORNETT

October 2013 SMOKE ALARM

 

A response to Keeping the Agent in the Loop without Losing Sight of Who is the Client

appearing in the August 2013 ASHI Reporter.

 

While home inspection has evolved from being a service occasionally requested as the result of the odd purchase contract addendum to an option, which is now part of the preprinted and required real estate purchase contract formats in most, if not all, states, the majority of inspections have been and remain driven by inspection clauses in real estate purchase contracts. Such clauses provide prospective homebuyers not only with a means to learn more about the condition of a home and its related systems but also with potential leverage for renegotiation of the purchase price as well as a means for terminating the contract to purchase.

 

That being said, it is critical that inspectors bear in mind that home inspection clauses in real estate purchase contracts do not make inspectors advocates for homebuyers or parties to contracts or agreements between their customers and any third parties such as sellers, real estate agents, insurers and appraisers. Home inspectors owe no contractual duties to such third parties and should not create any by contractually requiring their customers to permit inspectors to provide copies of reports to third parties.

Home inspectors’ duties to their customers are those mandated by their state laws and by the defined scope of inspection contained in their inspection contracts. The idea that providing copies of inspection reports to anyone who is not a party to the contract between inspectors and their customers “should absolutely” be part of inspectors’ contracts when such a duty seldom exists in law, is particularly dubious considering that the source is an individual who is not a home inspector. Such advice clearly loses sight of who is and is not the customer and may even create the effect of an actual or perceived conflict of interest on the part of inspectors

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While inspectors’ experience tells them that some customers may want their agents to have a copy of the inspection report, mandating that customers permit inspectors to provide copies to any third parties is bad advice. Instead of placing a clause in the inspection contract requiring customers to allow the report to be provided to any third party, it is more appropriate to include a place on the contract where customers can choose to add the names of any third parties, if any, to whom they would like a copy of the report provided.

This removes the potential for the appearance of collusion between home inspectors and the Realtors that might be alleged if the inspection contains language requiring customers to agree to have the inspection company provide copies of reports to third parties. It’s just such minor points as this that some attorneys may attempt to make a case for collusion.

 

To unilaterally state that if an inspector does not include such a requirement in the home inspection contract and does not release/deliver a copy of the report to a customer’s agent that the finding and reporting of adverse conditions is a “useless exercise” and that the customer “wasted” the inspection fee is, at the very least, hyperbole and at the worst, it’s irresponsible. Such unilateral statements serve neither home inspectors nor their customers. They assume that home inspections serve no function other than their potential use as a buyer’s negotiating tool.

The real estate profession has a significant impact on the home inspection industry. At one time, here in Colorado, it was typical to allow a minimum of ten business days for the inspection and response. It seemed to work well, and buyers didn’t feel pressured. Inspectors could schedule and perform inspections, produce and deliver reports, and buyers had time to assess and act on the information in reports. Currently the inspection period may be as short as five to seven days, and often a home inspection and radon screening measurement may have to be conducted within that period.

 

The nature of the relationship between home inspectors and real estate agents can sometimes be an iffy proposition instead of one of mutual respect. Some agents may see the home inspection as a potential generator of additional work for them as well as an impediment to the end goal of receiving a commission check. Some contracts to purchase may provide a very narrow window for having an inspection and responding with any concerns. However, because inspectors are not parties to contracts between buyers and sellers and their respective agents, the contractual length of time for obtaining and completing a home inspection and for responding to the findings of an inspection is the purview of buyers and sellers—not of home inspectors.

 

Today, with the growing use of software-generated report formats, inspectors are now able to produce reports more quickly than they could in the past. However, inspectors still need time to generate accurate, clear and consistent reports (typically with photographs), and they need the time to review and proofread reports before delivering them to their customers or anyone else.

 

Often, unless agents have contracted with buyers to act specifically as buyers agents, they are deemed to be transactional agents whose primary duty is to the seller and are typically prohibited from advising buyers regarding what they should or should not request/demand sellers correct or whether buyers should request/demand a reduction in the selling price to compensate for the cost of corrections.

 

The job of home inspectors is not to act as advocates, advisors or intercessors in real estate transactions. While most home inspectors recognize what often may be the pressures placed on home buyers, they should avoid anything that might be construed as a conflict of interest.

 

Kevin O’Hornett joined ASHI in 1986 and is now a retired member. He is a former ASHI Board member, past-president of the Rocky Mountain Chapter, has served on the ASHI bylaws and long-range planning committees, has chaired the ASHI Education Committee, and is the author of numerous inspection articles. He is also a member of the International Association of Electrical Inspectors, the International Association of Plumbing and Mechanical Officials, and past-president of the Colorado Chapter of the American Association of Radon Scientists and Technologists. He currently lives in Arvada, CO, and owns ProSpex Home Inspection Consulting, LLC. He also presents inspection education and training seminars and taught at InspectionWorld 2008. Kevin can be contacted at prospex@prospex.us or at metacognate@yahoo.com