Sharing Home Reports Can Create Liabilities

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By Barry Stone
Saturday, April 8, 2006

Q DEAR BARRY: I have a recurrent problem in my home inspection business. A buyer hires me to inspect a home. After reviewing the report, he decides not to buy the house. A few days later, a real estate agent calls to say there is a new buyer and would I please provide a copy of the report. It is my understanding that the original buyer is the legal owner of the report, so I routinely decline to provide a copy to other buyers. Some agents have been angry about this, and that has not been good for business. What is your opinion? -- Wayne

ADEAR WAYNE: Many home inspectors refuse to provide old reports to new buyers. For inspectors who wish to provide friendly service to clients and agents, it is an uncomfortable policy to enforce. However, there are two sound reasons for this practice.

Buyers tend to view a report for which they have paid as their property. In cases where reports have been given to second buyers, first buyers have sometimes become irate. Some have even demanded refunds. Whether this view of ownership is consistent with the law varies among states and has been interpreted differently by different courts.

The other reason for withholding copies of inspection reports has to do with home inspector liability. The buyer who pays for the report must sign an inspection agreement, acknowledging the scope and limitations of the inspection and accepting those terms as a precondition to the inspection. Specifically defined in the contract are limitations on the inspector's financial liability, with lists of conditions that are included or omitted from the inspection. The contract clarifies those areas of the property that would be covered by the inspector's disclosures. Buyers who read and sign the contract are informed of these conditions and accept them. This is not the case with a second buyer who is simply handed a copy of the report.

The second buyer, contemplating a major investment, could base his decision upon the findings of the home inspector. If those findings are found later to be incorrect or incomplete, that buyer could hold the inspector liable for damages, even though there was no financial or contractual relationship with the inspector, even though no fee was paid and no acknowledgment was made regarding the terms of the inspection. The inspector would have a degree of liability limited only by the expectations of the second buyer, whether or not those expectations were consistent with the scope of the inspection.

Some inspectors have found an alternative. Instead of giving or withholding the report, the inspector meets the second buyer at the property and conducts a full review of the original report. Defects are rechecked to see if they remain as previously reported. In exchange, the inspector receives a signed contract for a reduced price -- possibly half the original inspection fee. The buyer gets a full explanation of the property's condition, the inspector agrees to stand behind the findings in the report, and the transaction can proceed. Although the original buyer might still complain, this outcome seems to satisfy all the other parties.

Barry Stone is a professional home inspector. If you have questions or comments, contact him through his Web site,http://www.housedetective.com, or send mail to 1776 Jami Lee Ct., Suite 218, San Luis Obispo, Calif. 93401.


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