House Detective: Making the Most of Home Inspection

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: We are in escrow to buy a home. When we made our offer, there was an attractive concrete walkway in the front yard. Since then, the sellers hired a contractor to inspect the septic tank. The contractor had to cut out two sections of the walkway, but when he replaced the pieces, he set them in a way that is uneven, unsightly, and could cause someone to trip. Now the sellers and their agent say it is up to us to replace the damaged pavement because temporary removal was required to meet the terms of the sale. Do we really have to fix this ourselves, or is it the responsibility of the sellers?  Misty

Dear Misty: The sellers and their agent are entirely out of bounds. You made an offer to purchase a property in the condition that existed when it was marketed. Since the offer was accepted, that condition was adversely altered by contractors who were hired by the sellers.

The excuse offered by the sellers and their agent is entirely unacceptable. Suppose the sellers’ chimney sweep had damaged the roof? Would that also be your problem? What if the sellers’ painter had cracked a window? Would you be required to replace the glass? In this case, the sellers had to hire a septic contractor. The performance of that obligation did not license them to denigrate the property at your expense. Either the sellers or their septic contractor should restore the property to the conditions that existed when you made your offer. Your agent, not theirs, should step up to the plate and demand that this be done. Hopefully, you have your own agent in this transaction.

Dear Barry: When we bought our house, the home inspector said he could not open the damper in the fireplace and suggested we have it checked further. We probably should have taken his advice but did not. Recently, we used the fireplace for the first time, and our teenage son had no problem opening the damper. The fireplace worked okay, but on a rainy day the brick firebox became wet. Now we’re wondering why the home inspector was unable to open the damper and whether leak repairs are covered by the home warranty policy.  Mike

Dear Mike: Your son would most likely prevail against the home inspector in an arm wrestling match. Be that as it may, leaking at the chimney top apparently caused rusting of the damper hardware, causing the damper to stick. The resistance was too much for the home inspector but not for your son. To prevent further water intrusion and rust, a chimney cap should be installed. It is unfortunate that caps are not required on all masonry chimneys.

You should also follow the home inspector’s original recommendation and have the fireplace system fully evaluated by a qualified professional, such as a certified chimney sweep. And make sure the chimney cap is the type with a four-sided spark arrestor.

As for home warranty coverage, that will depend upon the fine print in the policy. Warranty companies typically exclude pre-existing conditions.

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: When we bought our home, we hired a home inspector who was recommended by our real estate agent. The inspection report contained what appeared to be two minor disclosures: “minor lean to the home” and “some minor seepage in the basement during heavy rain.” The only recommendation was “monitor for further movement.” After we moved in, the rains came, and none of this turned out to be “minor.” For nearly three months, we had a foot of water in the basement. The contractor we hired found that the house is leaning nearly 9 inches. Leveling the home and fixing the drainage will cost many thousands of dollars. We do not believe our home inspector did a competent job. Instead, he portrayed major defects as no big deal. Who is liable for the repairs, and what can we do about it?  Tim

Dear Tim: There are two problems with the disclosures in the home inspection report: 1) Conditions such as leaning of a building and water intrusion in a basement should not be presumed to be minor; and 2) Such conditions warrant further evaluation by qualified experts. Faulty drainage should have been reviewed by a geotechnical engineer. Leaning of the building called for analysis by a structural engineer. What you needed was someone who is licensed in both fields of engineering.

Instead of recommending that you “monitor for further movement,” the inspection report should have said, “Further evaluation by a qualified, licensed engineer is recommended prior to close of transaction.” Your home inspector’s job was to point out significant defects and to make appropriate recommendations. Building settlement is obviously a major concern, as is water intrusion into the building. Determining the extent of these issues was not something to be done by monitoring movement after you purchased the property. You were in the process of making an important purchase decision. That was why you hired a home inspector. He should have considered this when making his recommendation.

Your home inspector may be liable for faulty disclosure, depending on the inspection contract that you signed and pertinent laws in your state. An attorney should evaluate those issues.

The sellers of the property may also share some liability. If they lived in the home for more than a year, they were probably aware of the drainage problem in the basement and should have disclosed it. And here’s a question for your real estate agent: Was this the most qualified inspector the agent knew? Some agents recommend the best home inspectors; some do not.

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: I am the broker of a large real estate company. In my area, most home inspectors use computerized reports, with photos of the defects they disclose. Very few still use the old fashioned, hand-written forms, and I seldom give my business to those backward dinosaurs. One of those technophobes is the most experienced home inspector in my area. He usually finds defects that are missed by other home inspectors. In fact, he even finds problems that are missed by the termite inspectors. But I can’t stand his lousy 1990 carbon copy reports. They’re hard to read and harder to email. So I never refer this Neanderthal to my clients. But when other agents refer him, his reports make me so mad I could pull out my hair. What is it that keeps these closed-minded idiots from getting with today’s high tech program?  Yuli

Dear Yuli: Sit down and cool off. Businesses today are in technological transition, including home inspection and real estate companies. Most home inspectors have made the change to electronic reporting, but a few remain stuck in their old ways. Some are part-time inspectors, without a major commitment to the business. Others are comfortable in their routines and have little interest in state-of-the-art innovations. And there are some professionals who recognize the need to modernize but have been too busy inspecting homes to invest in change.

Old style reports are not as user-friendly as the new electronic versions that include photographs of defects. On the other hand, not all computer reports are as easy to read as they ought to be.  In some reports, the defect disclosures are obscured by paragraphs of “boiler plate” verbiage. In others, the disclosures are so vague that the defects cannot be readily understood. But all of these issues are eclipsed by the essential purpose of home inspection: to disclose property defects.

You admit that the “Neanderthal”, “dinosaur”, “technophobe”, “idiot” who does not get your business is the most thorough home inspector available; that he finds problems that other home inspectors miss. This means that the “high tech” reports that your clients receive from other home inspectors do not provide complete disclosure of all significant defects. It means that you prefer those incomplete reports to the out-dated, carbon copy reports that contain more actual disclosures. The question, therefore, has shifted. Instead of old report forms vs. new electronic reports, the issue has become partial disclosure vs. full disclosure of property defects. In other words, form vs. substance.

If this is the choice, which do you suppose is more important to your home-buying clients? Would they prefer full disclosure or fancy disclosure? And what about your liability as a broker? How would you defend yourself if sued for incomplete disclosure? Would you tell the jury that you avoid thorough home inspectors who don’t print fancy reports? That would hardly invite a favorable verdict.

So here is the bottom line: Home inspectors who take their business seriously should find a comprehensive electronic report system to maintain viability in the marketplace. Meanwhile, Realtors should recommend the most thorough home inspectors available, regardless of the style of reports they generate. In either business, it’s all about representing the best interests of clients, while limiting liability.

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: When we bought our home, the agent was selling it for his mother, and they told us that it was a maintenance-free home, in perfect condition. That was five years ago, and now the undisclosed problems have surfaced. First, we began to have septic problems, but no one could find the access to the septic tank. According to our neighbors, the garage was built over the tank. Another problem was lack of access to the crawlspace beneath the house. The seller had installed a forced air heating system, and the new air ducts blocked the access opening on the side of the building. Our home inspector pointed this out before we bought the property, but nothing was done about it at the time. Well last week, we made a new access hole and got a very unpleasant surprise. The crawlspace is filled with black, smelly, stagnant water from the laundry drain, and mold is growing on the underside of the floor. The seller simply ran a drain hose under the building and never told anyone. After this many years, do we have any recourse?  Leslie

Dear Leslie: If the agent was representing you, as well as his mother, that was not a good arrangement. You should have had your own agent to represent your interests. A good agent, working on your behalf, would have negotiated to have the seller provide a septic inspection report. The septic inspector would have found the septic access or would have discovered that the system was not accessible. In that case, an access would have been created to enable inspection and servicing of the system. If other septic repairs had been needed, that could have been negotiated before you bought the property.

If access to the crawlspace was obstructed, your home inspector should have recommended that access be provided before the close of escrow. If that had been done, the faulty laundry drain, the excessive moisture condition, and possibly the mold would have been discovered.

If these problems had come to light sooner, you might have held the seller, the agent, and the home inspector liable for faulty disclosure. After five years, you may no longer have recourse. However, you should check with a real estate attorney for clarification on that point.

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: I am a Realtor and recently closed escrow on a bank-owned property. The bank insisted on an “as is” sale, which is customary with foreclosed homes. My buyers hired a home inspector but decided to forego a termite inspection. After moving in, they found termite damage in the kitchen and dining room. We’ve also learned that the listing agent knew about this damage but withheld disclosure because it was an “as-is” deal and because the seller (the bank) was not required to disclose defects. Do you think my buyers have recourse?  Karen

Dear Karen: People often misconstrue the term “as is” to mean a release from the requirements of real estate disclosure laws. In the case of lenders who foreclose on delinquent mortgages, there is, in fact, an exclusion from the requirement to disclose. But this exclusion does not excuse Realtors who withhold disclosure of known defects. The requirement to disclose all known defects is an ethical and legal imperative for all real estate agents. Withholding knowledge of a defect, such as termite damage, is not acceptable for an agent, even when the seller of the property is a bank.

In the situation at hand, the listing agent should pay to repair the undisclosed damages. If the agent does not accept that responsibility, the matter should be reported to the state agency that licenses real estate professionals. The complaint, however, should be filed by the buyers, not by another agent.

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: Our Realtor has been showing us listings for several weeks. But last week, we found a for-sale-by-owner property and made an offer to the owner without calling our agent. Since our Realtor spent so much time trying to find a house for us, are we obligated to involve him in this purchase?  Rob

Dear Rob: This type of situation is a sore spot with many real estate professionals. Your Realtor devoted many hours to your search for a home and now will receive nothing for those efforts. Unless you have a contract with him, you are under no obligation. However, most agents feel that the time and effort they spend showing property to a prospective client warrants some loyalty.

The seller in this case is clearly under no obligation to pay a real estate commission, nor is it likely that he would be willing to pay one. So there’s probably no way to involve your Realtor in the current transaction.

The most fair and respectful way to have handled this situation would have been to inform your Realtor of your interest in the property, rather than contacting the seller directly. The Realtor could then have called the seller and said, “I have clients who are interested in your home. Would you be willing to pay a reduced commission if I bring you an offer?” At that point, the seller could have accepted or declined. If he had declined, you would have been free to make your own offer, without misgivings between you and your agent.

At this point, you can choose whether or not to inform your Realtor of the decision you have made. Expressing your concern and extending your apologies would probably be more respectful than to say nothing at all.

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: In one of your columns, a buyer was annoyed that her agent would not recommend a home inspector by name. I’m a Realtor, and our company has a policy against recommending any service providers, and that includes termite inspectors and home inspectors. We simply hand our clients the yellow pages and point out the section where inspectors are listed. Past experience has shown us that this is the safest way to do business. If a home inspector that we recommend makes a mistake, we could be sued for making that referral. We’d like to provide the kind of personal service that includes a list of reliable contractors and inspectors, but our hands are tied by fears of litigation; much to our dismay and disappointment. How do you view this position?  Jennifer

Dear Jennifer: Your fear of litigation is understandable and is shared by many; not just in the real estate profession, but by nearly everyone in business; from grocers to doctors; from plumbers to engineers; from teachers to musicians. Trial attorneys, for whatever reasons, good or bad, have removed from our society the trust that was once communicated by a promise and a handshake. Instead, we have pages of fine-print legalese that no ordinary person can understand. Yet none of these documents eliminates the likelihood of lawsuits: They merely provide talking points for that dreaded day in court. But there are still ways of operating in this defensive business environment, without abandoning the kind of personal service that we prefer to offer in good faith to our customers.

The phone book approach to home inspector referrals may not provide the liability protection that Realtors seek. In fact, it may pose a higher level of exposure to tort liability. The problem with a yellow page selection is that a buyer may randomly hire a home inspector who has very limited experience; someone who is not very thorough or qualified and who may fail to disclose significant property defects. If a buyer chooses a mediocre home inspector from the phone book and the agent fails to give warning — to point out that there are better home inspectors — that agent could be vulnerable to a lawsuit, without having made a referral.

Fortunately, there is a safer middle ground between recommending a home inspector or supplying a phone book. Instead, you can provide a list of the most qualified home inspectors in the area and let your buyers choose an inspector from that list. In fact, you could ask a number of local home inspectors to submit a one-page flier outlining their professional credentials and their levels of experience in the inspection business. A packet of these fliers could then be given to every homebuyer. Buyers could select their own inspector, but their choice would be an educated one, based on information that would facilitate a more thorough inspection and, therefore, less liability. Run that idea up the flagpole at your next staff meeting and see if anyone salutes it.

The House Detective by Barry Stone, Certified Home Inspector

Dear Barry: I’ve been a Realtor for over 10 years and am a strong believer in home inspections. But recently, I had a situation with another agent who does not share my view. This agent represented a buyer for one of my listings, and the three of us were together at the property. The buyer had waived the right to a home inspection in the purchase contract. So I asked her, “Are you sure you don’t want a home inspection?” A few minutes later, the agent cornered me in another room and said, “Don’t you ever say that to one of my clients again!” She was visibly angry and let me know that home inspections create nothing but trouble. She said it was up to buyers to beware when buying a property. I can’t believe there are still agents who think like this and would appreciate your comments. Catherine

Dear Catherine: It is difficult to believe that an agent today could hold such long outdated views. Since the late 1980s, home inspections have been the focus of articles and seminars by the National Association of Realtors and by many of the state regulatory agencies that license real estate professionals. Home inspections have been promoted as an essential component of residential purchase transactions. The emphasis on legal liability, codes of ethics, and the need for disclosure has been unrelenting. Yet some agents remain unconvinced.

When agents advise their clients to forego a home inspection, the problem is two-fold: First is the issue of professional ethics. Some agents argue that they are not required to protect the interests of their buyers because sellers pay their commissions. That is a separate legal issue. Advising buyers to protect their financial interests is simply the right thing to do. It is the way that each of us wants to be treated in business. Agents who advise against home inspections should consider how the picture would look if they were the buyers and were being misled in this way.

For those who are not persuaded by moral arguments, there is a good selfish reason to recommend home inspections: the avoidance of liability. When undisclosed defects are discovered after the close of escrow, financial claims and lawsuits can result. A thorough home inspection reduces the likelihood of this kind of liability. Realtors who have no interest in protecting their buyers should consider this for their own financial wellbeing.

As for the “buyer beware” cliché — it is outmoded and unjustified. In essence, it declares that “I, your agent, am here strictly for the commission check. It is your job, as buyers, to protect your own interests; so don’t look to me for assistance in that pursuit. I’ll smile warmly, shake your hand, and give every outward appearance of working on your behalf, but as far as I’m concerned, you are totally on your own. If you discover major defects after the close of escrow, don’t call me. It’s not my problem. It was your choice not to hire a home inspector. Never mind that I advised you to make that choice.”

In another respect, however, the “buyer beware” policy has some validity. It should be invoked as a warning to beware of agents who say, “buyer beware.” Whether they realize it or not, they are jeopardizing the financial interests of their clients while exposing themselves to possible litigation.

The House Detective by Barry Stone, Certified Home Inspector

Dear Barry: I’m trying to sell my home and my agent presented an offer that sounds fishy. The proposal is to have the house appraised for more than I am asking. The buyer would get financing for the inflated price and I would refund the excess money to him after the close of escrow. What’s your take on this? Anne

Dear Anne: Don’t even consider doing this. It’s an old trick that allows a buyer to purchase a property with no down payment. The practice is totally fraudulent and could get you into serious legal trouble with the mortgage lender and the IRS. Any agent who would present an offer of this kind should be reported to the state agency that licenses real estate professionals.