January, 2012
Feature
Inspection News and Views from the American Society of Home Inspectors



Reducing Risk in the Property Inspection Business

JOHN B. ELSON

Performance Risks

Part 1 of a 2 part series

Key Concepts
  • ASHI inspectors are expected to demonstrate technical expertise, solid interpersonal skills and the ability to write and speak well.

  • As meeting expectations becomes more difficult, the likelihood of client dissatisfaction increases, creating greater risk of claims.

  • Consistency in the performance of inspections can reduce the risk of clients filing claims.

  • The ASHI Standards of Practice (SoP) provide a framework for the inspection and for the report.

  • A report is useful to a client only to the extent it is easily understood.

Our clients and referral resources expect ASHI inspectors to be technical experts, easy to work with and excellent communicators.

However, as real estate transactions become more complex, it becomes more difficult to satisfy these expectations, thereby increasing the possibility of client dissatisfaction.

Often properties are vacant and distressed, leaving us to conduct inspections without any seller-based information about components or systems. Some houses are purchased to be flipped. Often, only minimal repairs are made, including cosmetic repairs such as painting. This makes it riskier for the inspector.

The area of risk management is both complex and detailed. Two articles cannot teach you the technical aspects of risk management. They are intended to provide practical applications of risk management within the property inspection business. This article discusses performance risks. Part 2 will address communication risks.

Performance risks

Performance risks are those associated with the performance of the inspection. The ASHI Standards of Practice (SoP), effective October 15, 2006, establishes our methodology for conducting home inspections.
Performing inspections that adhere to these standards and that follow a standard methodology will help reduce the number of claims you receive from clients.

Here are two suggestions for reducing performance risks:

1. Examine your methodology.
How do you conduct inspections?

I suggest you follow the same methodology on every home that you inspect. This provides consistency, reduces the anxiety associated with the inspection of different properties and minimizes mistakes.

At the risk of being bombarded with emails, here's a brief summary of my basic roof inspection approach:

  1. Adhere to the ASHI Standards on every inspection, no matter the size or type of property.

  2. Look at the home on a macro level first; then a micro level.

  3. Enter the home to gain perspective on ceilings directly underneath the attic and/or roof spaces to identify potential problem areas when you access both the roof and the attic.

  4. Whenever possible, walk every roof and access every attic.

  5. Take pictures that provide both a macro view of the roof's planes and attic configuration, as well as a micro view of any other concerns such as deficiencies. Pay particular attention to areas that were not inspected and state why they were not inspected (see below).

  6. Document everything per the ASHI standards.

Based on conversations with liability insurance providers, the two locations most often cited in claims are the roof and the foundation. Mistakes on these areas may result in large claims.
Per 2.2 C. 4 of the ASHI Standards of Practice, you must "report: systems and components designated for inspection in these Standards of Practice that were present at the time of the home inspection, but were not inspected, and the reason(s) they were not inspected."

Practical Suggestions

Even though the ASHI standards do not require communicating with realty agents, let's assume you have received permission from your client to share the inspection findings with the client's agent. I suggest you communicate to the agent any component that is part of our standards that you could not inspect. Make sure you communicate these limitations to both the client and the realty agent, and document this in your written report. Consistency is key. A client making a claim may ask for your past records to see if you have scaled a roof on another home with similar construction as a way to try to prove your negligence.

Take numerous photos and retain them in a data archive identified for that specific property inspection and make sure it is easily accessible. But, in your report, use only the photos that illustrate the condition of the home. When you inspect a home that is filled with personal belongings that obscure your view of many areas, advise your client of this both verbally and in your written report. For example, if the garage is filled with personal belongings, take a picture and include it in that section of the report for reference. Then, once the garage is clear of personal belongings, the client will understand why you missed the crack in the middle of the floor that was covered up with rubber flooring on the day the garage was inspected.

Don't add excessive protective photos to your report, but do keep them as evidence of the condition of the home at the time you inspected it. Follow a consistent approach and be able to accurately describe it. If your approach varies from home to home, it will be much tougher for you to defend your practice in the event of a claim.

Consider these two statements given during a trial:

Q: Please tell the court the basic methodology you use to conduct a home inspection:

Inspector #1:
"I get to the property early and leave late. I hit all the major areas outside and inside and then I do a verbal summary with the customer when they arrive. Every house is different, so my approach fits that specific house."

Inspector #2:
"I diligently follow both the Standards of Practice of the American Society of Home Inspectors and those of my state. The standards are similar. I am an ASHI Certified Inspector and I hold a home inspector license with my state. The collective standards spell out the areas that I have to inspect. I inspect, describe and report on the following areas: structural system, exterior, roofing, plumbing, electrical, heating, air conditioning, interiors, insulation and ventilation, fireplaces and solid-fuel-burning appliances. In any home, my first look is at the interior ceilings directly under the roof. This provides me with a perspective before I go on the roof and then into the attic space. I can then seek out further explanations for any anomalies such as stains or cracks that I may see on the ceilings.

Then, I start on the exterior at the roof and perform the inspection top to bottom. I make four passes around the perimeter of the house to make sure I get a thorough look at all systems and components.

In the interior, I follow the same basic four-pass approach and in a multi-story home, I work top to bottom. I follow a clockwise methodology within the home and within each room of the home. This ensures that I view each room in detail."

2. Write reports according to our ASHI Standards and do not cut corners.

  • Every time you cite a defect, follow the same approach. That means you must inspect, describe and report on each defect. In inspection terminology, it means that you must include: "What is the defect, why it is a concern for the client and how to address the defect in terms of further review, repair or replacement." Even though our SoP doesn't require it, I add the location of the defect whenever possible. It helps the client and minimizes the number of post-inspection phone calls I receive.

  • Our SoP establishes that inspectors shall report "recommendations to correct, or monitor for future correction…" (See 2.2 C. 2). Obviously, the SoP includes "to monitor for future correction" because it is an accepted approach for ASHIinspectors.

"To monitor" is defined as "to keep close watch over, to supervise." I might use it when I identify common driveway cracks, but often I find it confusing to clients. More about communication next month.

  • Prior to releasing the report, I review every listed defect to ensure each one answers the questions listed above. Per the SoP, we must provide the reasoning or an explanation as to the nature of the deficiency unless it is self-evident. For example, you must provide reasoning as to why a missing anti-siphon device on a hose bib is important because it is not self-evident to the client. However, citing a cracked glass pane in a specific window and recommending that it be replaced by a qualified glass professional is sufficient. It is self evident to the client that a cracked glass pane needs replacement.

Summary

Remember, your client relies on your good judgment in characterizing defects. Plus, a report is only as useful to your client to the extent he or she can easily understand it. Your report is the written legacy of your inspection. Long after everyone has forgotten the negotiations, phone calls and personal meetings, your report will leave a lasting impression of your performance.

Next month: Communication risks.