Defining a Home Inspection Agreement
Home Inspection Agreement is an agreement made between an Inspectors and their clients that specify the rights and responsibilities of both parties in the context of conducting a home inspection. These agreements can take many different forms, with varying levels of detail, but they all serve roughly the same purpose: to clearly lay out the terms of the services being provided and to warn the client of any limitations or restrictions associated with the home inspection.
With regard to timing – it is generally best to not "wait" until the inspector arrives on site to read the agreement. The agreement is a contract and should be signed in advance to avoid any potential miscommunication about what the inspection will include and what it will not. It is also important to either have the agreement signed by all parties to the transaction or at a minimum , let all parties know the inspection is taking place and sign the agreement on behalf of the parties prior to the arrival of the inspector.
The purpose of the agreement is to clarify the scope of the inspection and limit liability to the client and reasonable consequential damages to the property (it does not protect you or your client from claims of negligence). It is not a waiver of any rights that your client would otherwise have pursuant to state law, nor is it an acknowledgement that all of the limitations are intended to limit the inspector’s liability in all circumstances.
Essential Components of a Home Inspection Agreement
Most inspectors use written home inspection agreements, which inform the consumer of the scope of their inspection. Home inspectors may include in their home inspection agreements, to name a few:
• Background of the inspectors – the qualifications and experience of the inspector performing the inspection.
• Scope and purpose of the inspection – for example, is the inspection for the buyers or the sellers.
• Listing of systems and components that are either inspected or excluded from inspection.
• Limitations of the inspection.
• Non-client provisions – establishing that the customer cannot transfer his or her rights under the agreement to any third party (i.e., the new buyer).
• Fees
• Payment terms
• Limitation of damages – providing for only a partial refund of inspection fees, which are deemed as liquidated damages, in order to encourage the consumer to first resolve their dispute with the home inspector.
Responsibilities and Obligations in Home Inspections
The Home Inspection Agreement contains separate Sections for the Duties and Responsibilities of the inspector and the responsibility of the homeowner. The Duties of the inspector include some items that the inspector may or may not be paid for, depending on what type of inspection it is. For example, the inspector is responsible for examining a structure for an infestation of wood destroy pests, but part of that examination is to perform a visual inspection to see the evidence of feces, tunnels, mud tubes, etc. The inspection for rodents and insects can be charged in either direction depending on the custom of the particular inspector.
The Agreement clearly defines the Duties of the inspector, and includes the responsibilities to report as follows: DUTIES: A. To personally observe and examine, in the following general manner, as site conditions permit: 1. Any major visible defects or deficiencies in structural, mechanical, electrical, plumbing and engineering systems or components and any adverse conditions, including but not limited to: incomplete or unacceptable work; damage or decay due to moisture exposure; rot; termites and other insect/vector pests; or violations of statutes, ordinances, regulations, codes and standards. 2. Any conditions in or about the premises which could result in a condition where the defects of deficiencies mentioned above could occur. 3. Any odors associated with the above. 4. Areas of possible and probable non-compliance with statutes, ordinances, regulations, codes and standards, except as noted above. B. To prepare a written report of any findings made pursuant to Paragraphs A1-4 above in accordance with ASHI Standards of Practice.
ASHI refers to the American Society of Home Inspectors, which has its own Standards of Practice based on the Practices of the American National Standards Institute, Inc. (ANSI).
It is essential for the homeowner to know what the inspector is and is not responsible for. The inspector is not responsible for the cost of any repair of the violation or defect. The homeowner is responsible for the deciding the scope of the repair. He has five basic responsibilities if he disagrees with a finding: A. To make any inquiries regarding responsibilities for repairs or replacements with the Real Estate agent, seller and others involved in this transaction. B. To inform the inspector if there is, or has been, any leaks in the plumbing, heating and air conditioning systems, if he is aware of such. C. To inform the inspector of any repairs, rebuilding and renovations that have been made, if he is aware of such. D. To provide access to all areas of the premises, including locked areas and out-buildings, and to furnishings and storage, and to take the necessary steps to insure that those areas are accessible by the inspector. E. To submit all material, information, concerns and inquiries regarding the Premises to the Real Estate agent, seller or others involved in this transaction.
When the time comes to do the home inspection, make sure you read the Home Inspection Duties and Responsibilities before the inspector shows up. If you or your agent have any concerns about any issues you could be responsible for them.
Legal Consequences of Home Inspection Agreements
The parties to a Home Inspection Agreement are the Seller or Seller’s agent, the Buyer, and the Home Inspector. The legal implications for each of the parties to an agreement have been litigated and will be discussed below.
Seller’s Obligation
Once a purchase contract is signed, the Seller must pay for the inspection. If it is included in the purchase contract that the Buyer pays for the inspection, the Seller could be held liable for the inspection even if the Buyer agrees to pay for it. The best practice is to have the inspection paid for upfront, so that there are no misunderstandings between the Seller, Buyer and home inspector.
Home Inspector’s Obligation
The Home Inspector enters into an agreement with the Buyer, but may also enter into an agreement with the Seller. A home inspector performing a home inspection in Colorado does not have to be licensed. However, there are several associations that provide certifications for home inspectors, which the home inspector may hold. Regardless of the certification, a home inspector is a contractor, and is subject to the provisions of the Consumer Protection Act and the Lawful Occupations regulation. The home inspector performs a service, which is expected and relied upon by the Buyer. In Colorado, a home inspector will be liable to a buyer when they fail to provide a service in accordance with the standard of care, which is "that degree of knowledge, skill and judgment which is commonly possessed by those in the profession." This is a very high standard, and it is best to rely on the actions of a home inspector who is affiliated with one of the home inspector organizations or certified through another organization, if possible. It should be noted that the home inspector’s final report should be provided to the Buyer in electronic format as well as the hard copy.
Buyer’s Obligation
This is a non-binding agreement between the Buyer and the Home Inspector, and either party can cancel the agreement at any time. If the Home Inspector breaches the contract, they may be liable for the damages caused by the breach, and/or will forfeit the Home Inspection fee, and/or the Buyer may be entitled to a refund of the fee paid to the home inspector. If the Buyer cancels the agreement prior to the inspection, the Home Inspector must return the fee paid. The Home Inspector’s liability to the Buyer is limited, unless the Home Inspector commits fraud or gross negligence:
A contract can limit the scope of the home inspector’s liability; however, if the limitation is unreasonable, the courts will not enforce the limitation. Federal law allows the Buyer to bring a cause of action for physical defects in the home. This cause of action is separate from the contract between the Buyer and Home Inspector. The courts have held that the time limitation imposed on the Buyer in the contract does not apply to an action alleging defects. Sellers should have a clause in the listing agreement that protects them from liability in the event there is a defective home.
If real estate is acquired "as is," and Buyer waived the inspection and neither the Seller nor the Home Inspector knew or should have known of the defect, the Seller will not be liable for defects. A seller is not liable to the buyer for a physical defect known to the buyer, or of which the buyer is charged with knowledge, or for a physical defect, the existence of which the buyer could have discovered by reasonably careful inspection of the property, or for a physical defect which renders the property unfit for ordinary purposes.
Selecting the Best Home Inspector for Your Needs
Choosing a qualified, responsible home inspector is very important for making sure that the inspection can be relied on to represent (or at least fairly report) the true condition of the property. Here are a few things to keep in mind when searching for the right home inspector:
— Most professional home inspectors will be members of the NCPPI or one of its regional affiliates. You can check their websites to see if the inspector you’re considering is listed as a certified member.
— Do some research on the internet or with your real estate agent about the inspector you’re considering using. How long have they been inspecting homes? What type of training and professional oversight do they have?
— Ask for references from recent clients.
— Reputable inspectors will not be upset with you for asking these types of questions.
Once you have a chance to meet with the inspector (before the inspection date), here are a few questions to ask:
— Are you allowed to follow along as the inspection is taking place? Some inspectors will allow this, but most will not. If the inspector does not allow this, try to sit down with them for 30 minutes or so before the inspection actually begins .
— Do you think that the inspection agreement allows for adequate time to do a thorough inspection of the property? If the agreement does not specify how much time the inspection may take, then you should ask the inspector how much time he/she thinks it will take to inspect your specific property after being told the size of the structure, address the age of the structure, and other aspects of the property (i.e., basement, crawlspace, fireplace, etc.). Remember that it’s important for the whole house to be inspected regardless of the specific limitations that are described in the agreement.
— Has there been any complaints or lawsuits against you as a result of your inspections? While no inspector in the world has never received a complaint, the amount and type of negative feedback should make you either comfortable or uncomfortable with your choice.
— Does the inspector have adequate insurance? The inspector should have insurance that provides for a professional liability benefit of no less than $250,000 and adequate insurance in the event that damage is done to the home. You may want to get some evidence of this before the inspection is set to take place.
Common Findings in Home Inspections
Common issues that are often found during home inspections include:
- Roof Issues such as bad shingles, buckled flashing, and missing gutter downspouts were also often cited in inspection reports.
- Bad A/C Duct Work was noted by 29% of home inspectors in their reports.
- Septic Problems were noted by 29% of home inspectors in their reports, including, out of service septic systems, septic systems backed up into the home, clogged septic systems, etc.
- Inoperable Hot Water Heaters.
- Bad or Unstable Steps, Handrails or Handrails Missing.
- Bad or Unstable Decks.
- Major Plumbing Problems, such as leaking toilets, hot water heaters, faucets.
- Active Roof Leaks.
- Furnace or Boiler Problems.
- Interior Cracks with Bowed Walls.
Commonly Found Issues: This first part of the checklist includes both major and minor issues for a home inspector to observe. This list is not exhaustive and a home inspector may note conditions not listed. This information shall be considered merely as an observation and not a dictate.
Negotiating the Terms of a Home Inspection Agreement
When you find a house to buy and want it inspected you need an inspection agreement however the parties can agree to anything they want. The parties can set out who pays what and when and what happens after the inspection. Here are some tips for negotiating an inspection agreement that can protect both parties. If the home buyer will offer a contract making a satisfactory home inspection a condition of the sale then the parties can have the seller pay for the home inspection and provide a copy of the report. This will allow the buyer to review the report beforehand and ask the seller to fix any defects noted in the report. A lawyer could prepare the inspection clause in the offer to purchase. If the seller refuses to pay for the inspection or provide a copy then the buyer can ask the seller to:
If none of this is acceptable to the seller then the buyer could pay for the inspection and have the home inspector directly report to the buyer. This can narrow the disputes as the buyer does not expect the seller to fix something the inspector notes in his report . When the home inspector provides a report to the seller, the buyer and seller should discuss who is getting a copy of the inspection and whether the buyer will agree to waive the right to have further inspections after the seller considers any requests for repairs. The seller may want the right of first refusal – the right to keep the deal alive by providing a counter-offer for the buyer to consider if the buyer wants any repairs. The seller may wish to hold back some money from the purchase price by way of a holdback to make sure all of the repairs have been made. In that case, the buyer must agree to allow the seller’s inspector back into the home to ensure proper repairs have been made. If a holdback is not added to the offer the buyer may wish that a part of the deposit be held back by a lawyer as security for the proper repair of defects. If the parties can negotiate these or similar provisions into the home inspection agreement then the sale will close and the deal will unravel over disputes concerning the defects in the house. Making the home inspection part of the agreement to purchase is advisable.