It has to be said…
I’m pretty well known for being direct. It’s how God wired me, and though I can sometimes find the space to be quiet and indulge things that aren’t as they appear, more often than not I’m going to share.
Over the last 12-18 months I’ve noticed an alarming trend, that fortunately was not as widespread locally as it was us in other areas. The waiving of a home inspection is in my opinion a short and direct track to a mess. I actually warned of this when it started and encouraged Realtors to consider Buyer’s remorse and how this might affect them in days to come. Fortunately, many shared my opinion and exercised caution in the best interest of their clients – some loosing deals as a result. However, Inman and other real estate news outlets are now reporting the number of lawsuits involving homeowners who waived inspections is on the rise, and rapidly.
Unfortunately, inspectors have little say in this for several reasons. We don’t know the client is waiving the inspection and have little opportunity to speak why this is a bad idea. Secondly, it certainly comes off as self-serving and I understand that. However, waiving inspections has, in my opinion become a secondary problem to other occurrences that I am now learning are happening and commonplace – some of which I was completely unaware of until this week.
As you read this may I also caution you to beware of the “it won’t happen to me” thought. I never thought I’d only have one leg…
The first concern is “I can fix that myself.” Knew this was going on. However, when you’re acting in the best interest of your client do you have a discussion surrounding what the issues may be? I say this because we are reporting on visible conditions, which can admittedly be far less than the true nature of the issue. Once the homeowner delves in, if they find something outside their comfort zone or a major hidden issue – what happens then?
You guessed it they call you (the Realtor) and/or us (the home inspector) wanting to know how we missed this. We didn’t! Most often they don’t even remember the basic defect being in the report in the first place. If they call us, we will always call the Realtor and discuss and commonly here we discussed it and they said they’d fix it themselves. And here we are now…
Secondly, we hear many times that they got a credit for that when we reach out to the Realtor. The worst-case scenario is one that happened a few months ago. We received a call from a client that we had missed a major structural problem with the foundation. I first looked at the report and saw where in fact we had called out numerous instances of failure points at the foundation and recommended a Structural Engineer no less than three (3) times. After that I made the call to the Realtor whom by now had also heard from the client.
The Realtor stated we were good and so was he. In fact, he sent over the agreement for a $15,000 credit on the deal. That’s right the Seller gave a $15,000 credit for repair. This was after the Buyer and the Realtor got a quote of $15,000 from a local foundation repair company to complete the work. Hard to believe right? It took three (3) weeks to get the Buyer to understand that this condition had been reported and they had already been compensated. We worked along with the Realtor during this process.
Once they begin to understand, and this is actually commonplace, they had an epiphany. The $15000 credit sounded great, and they certainly benefited. But now the time has come for them to make the repair which finds them without $15000. Many buyers, especially when there are large scale and expensive repairs such as this one finds themselves cash starved and without the necessary funds to get the work done without borrowing the money thereby increasing their monthly debt. The credit can be a shortsighted benefit without the reserves to make the proper repairs, which may worsen without the repair leading to additional costs. Are we discussing the pros and cons of these credits? I don’t know, but I would hope we are so the Client is making an informed decision.
And lastly, the one I learned this week that really just made me sit back and think what we are doing as an industry. After working with a Realtor on a complaint that we had no liability for, we decided to pool resources with a Realtor to help the client only because the Realtor admitted they did not understand some of the complexities in the report regarding several issues. We’ve heard this from clients before, but this was the first time for a Realtor directly.
Clients have told us “I just figured that was a CYOA statement, I didn’t know it was that important”. Some have said their Realtor told them that and honestly, I dismissed it thinking that couldn’t be true. But this week, a prominent local Realtor, and a second helping us understand the deal told me that for the last seven (7) years they have been taught that home inspectors put things in their report to CYOA and should be considered as such. They went on to add this is not just at the local level, but at regional, and national training events both affiliated and unaffiliated with any specific brokerage. If I’m being honest, I just shook my head in disbelief. This is wrong on so many levels.
Let me first say these things –
- There are local inspectors I like, partner with, work with, support, train with, encourage, and learn from
- There are local inspectors I don’t care for personally and that’s mutual. Not everyone gets along.
But there is no local inspector killing your deals purposefully by putting things in your report to CYOA or scare the client. In my opinion, the home inspection process begins with you the Realtor. When you give them the agency disclosure and have first substantive contact, the process you discuss with them should include inspections. As the time draws near and you go under contract, you expand on that. If I were practicing real estate, I’d even go so far as to say “Hey, when you get the inspection report don’t freak out. I use this inspector because he’s through and we want to know these things. So, when you get it planned to be overwhelmed, then we can work together to get the repair request done in a way that makes sense for you. Also know the Seller is very unlikely to make every repair the inspector recommends, nor should we ask for them all. There are several other options we can explore as well, but let’s get the report back first and we’ll work together to get a plan of action. The inspector will also help clarify if we need them to.” There you’ve set the expectations and planned for success.
The Realtor in this deal glossed over several things because they felt as though they were in there for CYOA. This doesn’t make them a bad person or a bad Realtor. Especially, when you begin to learn this is how they have been trained by leading real estate educators. They are trained to downplay the report. In this case alone, one single reference to a problem if acted upon would have prevented a $6700 repair. But because it was only a switch, and the Realtor didn’t reach out to ask and the client and electrician said they’d fix it – the underlying problem became a nuisance prompting it to be our fault even though our language clearly said this is a significant problem for repair and safety. Nonetheless, based on our relationship with this Realtor we are stepping up to help them and the client based on the kindness and honesty they have demonstrated.
I also do a ton of expert witness work reviewing reports, most out of the area so as to avoid conflict. But recently, I was asked to consult on a case locally for which a suit is most likely to be filed. This particular suit is a perfect storm of examples of each of these three (3) topics. Contractor estimates were over $50,000 for non-structural defects with another $50,000 + for structural defects. Not only were these three instances utilized and discovered to have been used by the Realtor involved with the Buyer, but the inspector added further mistakes by not reporting significant defects, issuing a CL100 without a license and missing active termites, and not adhering to the state’s Standards of Practice for Home Inspectors. While I conducted a review and report for the client, they have not yet engaged an attorney nor have I been engaged to represent them as an expert witness, thus I can speak to this matter without mentioning names. The report by the way was 212 pages long.
So, how do we stop this and make sure we don’t find ourselves walking this path together from either side of the table?
- Make sure to prepare your client for what a home inspection is. If you need help, we can and will help you.
- Make sure to review the entire report with your client, not just the summary.
- Reach out and contact your inspector directly with any questions. Make sure the client knows their inspector will talk to them. If you used another inspector and can’t get them on the phone call me if you’re comfortable. I can’t speak specifically to that house, but rather common findings associated with the reported condition(s).
- Get a contractor out to the house to ensure you have full and complete information on the reported conditions.
- Get quotes on repairs if you’re going to get a credit. And know it’s far more likely than not the cost will rise once the condition is opened up and truly observed. If you’re doing a credit prepare your client and make sure they know that the credit is a cash discount, unless it is held in escrow – they will fund the repairs. I promise you this seems simple to us – some clients on the other hand, may not know.
- If the client says they’ll fix it themselves, ask them are you sure. Do you have the necessary skills, knowledge, and ability to do this. This isn’t the time to be afraid to upset them. Sometimes we are afraid to admit we don’t know. Respect that and make sure they are educated on what may be required – even down the tools that likely don’t even possess.
There are obviously some general comments in a report that are CYOA related, but not as a recommendation for repair, replace, or safety.
If you are a real estate educator telling your students that home inspectors, put things in the report just to CYOA, then STOP! You are doing yourself, your students, and the real estate industry a huge disservice. More importantly, you are damn near encouraging Realtors away from working in the client’s best interest by making assumptions that aren’t true. I don’t get in your lane, stay out of ours please. Or better yet, invite us in to help you with these trainings.
As a Realtor, if you find yourself in a class where an educator is telling you that home inspectors put stuff in the report just for CYOA, get up and leave immediately. Because I promise you this educator has no business at the front of that room or on that zoom and they are setting you up for a lawsuit.
In reality, most Realtors never get sued even though the fearmongering happens. The average realtor E&O fee annually is $300-$500. The annual Home Inspector E&O insurance annually is around $1500. That means I am more three (3) to five (5) times more likely to be sued than you.
But your home inspector is the number 1 reason you’ll get sued. Pick a good one…
Dave