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Section ONE – Home Inspection
Note 1: In 2013 the State of California reorganized and the Department of Real Estate was placed, as a
Bureau, under the Department of Consumer Affairs. Thus, the DRE has become the BRE. Many references
in the law, as quoted in this document, still refer to “The Department” when “The Bureau” would be the
intended reference.
I. INTRODUCTION
It is unlikely that the home having no defects has ever been built. However minor they might be,
it is not unusual for a home newly constructed to have defects that the contractor is responsible
for repairing once the problems are discovered. Of course the older a home is, the more likely it
is that there will be items in need of repair or problems that need to be corrected. In a real estate
transaction, the key is to discover these problems prior to closing escrow on a home.
In most cases, buyers are making one of the largest investments that they will make in their
lifetime when they purchase a home. Having a Home Inspection is one safeguard that a buyer
would have to help insure that their investment is made wisely. The cost of a home inspection is
minimal when compared to the investment that a buyer is making. It is not only the buyer that is
protected by a Home Inspection, both the seller and the real estate licensee involved in the
transaction benefit from a properly performed Home Inspection.
It is an unfortunate fact of life that our society has become a highly litigious one, California in
particular. Our real estate contracts have evolved over the years to incorporate language that
limits our exposure to law suits. An important part of that contractual language outlines a buyer’s
responsibility to have inspections completed. While this course is primarily concerned with the
Home Inspection, there will also be a brief discussion of other areas of inspection that might be
of importance in a specific real estate transaction.
The California Association of Realtor’s Form BIA, Buyers Inspection Advisory, is used in
association with the Residential Purchase Agreement to advise buyers as to the importance of
various “investigations” of the property. This form lets buyers know that if there are concerns
about any “physical” aspect of the property the buyer has the right as well as the responsibility to
investigate that aspect of the property. For example, should a buyer be concerned about the
square footage of the home or size and boundaries of the lot, they should seek the appropriate
professional to investigate and not rely on the seller or the licensee to provide the information.
When taking a listing, the seller should also receive the Sellers Advisory (SA) reminding them
of the importance of pre-sale investigations.
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Lenders might also be concerned with certain investigations of a property. In most cases the
lender will want a certification that the home is free of infestation by wood destroying pests
based on an inspection by a “Pest Control” company. With rural properties, inspections of water
facilities for sufficient supply of water and of septic systems to assure they are working properly
are not uncommon. This is not a complete list of possible inspections by any means.
The question is often asked, “can a home be sold ‘as is’?” The answer is “Yes”, if all of the
known material facts are disclosed to the buyer prior to closing the transaction.
This is the age of disclosure in real estate transactions. Sellers and real estate licensees are
required by law to disclose any known material facts, anything that would affect the value or
desirability of a property. The problem is that, often certain defects are unknown by the seller or
licensees but are discovered by the buyer after the close of escrow. In these situations the buyer
often asks that the seller and/or licensees pay for correcting the problem. If a lawsuit results from
a situation such as this, the question arises, “who knew what and when did they know it?” It is
difficult to prove that you did not know something. By having a proper Home Inspection (or
other investigations) the problems can be discovered prior to the close of escrow. If a home
inspector does not discover a defect it is more difficult to assert that a real estate licensee, not
trained in construction or home inspection, could have discovered that defect.
With law suits being as prevalent as they are in California, beginning July 1, 2007 the Bureau of
Real Estate has required that licensees complete a three hour continuing education course in Risk
Management before renewing their license. A big part of risk management is to place the
responsibility for discovering defects with an appropriate professional. Real estate licensees are
usually not contractors, engineers, hydrologists, and so on. We should leave these areas of
investigations up to those that are expert in those fields. Should these experts fail to discover
something that should have been discovered, the liability falls more on them rather than on the
seller or real estate licensee.
This course is not designed to make you an expert in Home Inspection. The goal of this course is
to help you understand the importance of a home inspection to all parties in a transaction. The
goal is to help you, the real estate licensee, understand the procedures involved. You should
understand the who, what, where and when of inspection but not the “how”. Who should be
involved in the Home Inspection? What is an inspector looking for? Where (what aspects of the
home) will the inspection be made? When should the inspection be done? This course is not a
“How To” be an inspector course.
This course is designed to give you the knowledge necessary to meet your fiduciary duties to
your principals in a transaction. If you understand the inspection process and can read and
understand an inspection report, you can help your clients understand. If you are convinced of
the importance of having a Home Inspection (or other investigations of the property) you can
convince your clients.
No one wants unpleasant surprises after the close of escrow. It is best to discover problems
ahead of time so they can be dealt with one way or the other prior to completing a sale. Once
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problem areas are noted on an inspection report, licensees need to advise their clients and guide
them to the appropriate decisions regarding dealing with these problems. Buyers and sellers may
need to negotiate to determine what will be repaired and who will be responsible for the repairs.
Perhaps the purchase price will be re-negotiated or certain dollar amounts be credited to the
buyer in lieu of completing certain repairs. It might be that the buyer will decide not to purchase
the property at all but it is far better for the seller to lose a sale and for the licensee to lose a
commission than to end up in court later.
This course should prepare you to help your clients:
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Protect themselves (and you) from undisclosed defects;
Select the most qualified home inspector;
Avoid home inspectors of lesser qualifications;
Increase their understanding of the inspection process;
o Know what to expect from a competent home inspector;
o Ensure that the inspector checks everything that warrants consideration;
Get more out of the home inspection through their direct participation
Be ready to catch the problems before they become even bigger problems
II. Home Inspection Background
To homebuyers of the early 1900’s, property inspection was unfamiliar, unimagined, and
apparently unnecessary. To people of that simpler time the main concerns were sturdy
foundations and roofs that would not leak. Lawsuits were usually the last thought on anyone’s
mind. The worst drawback to a potential home was that the outhouse might be more than fifty
feet from the back door.
In the following decades, home buying changed considerably, from a simple, casual exchange to
a complex, legalistic process; from a handshake to an intricate complex mound of paper work
that had to be signed in triplicate, witnessed by notaries, reviewed by attorneys, evaluated by
appraisers, overseen by escrow officers, underwritten by title insurance companies, and
dominated by disclosure requirements.
Most of this change took place within recent decades. For more than half a century, real estate
complexities increased at a reasonable pace, and property values did as well. By the mid 1960’s,
the purchase price of a home was barely more than two years income for one working person,
unlike today mortgage interest rates were around 5%, and buyers were relatively unconcerned
about routine property defects. The American Dream was affordable, and people just accepted
flaws as part of the deal.
Then came the 1970’s: Society changed drastically, affecting all aspects of business and finance.
Home prices skyrocketed to previously unimagined levels. With the lengthened financial
commitment of huge down payments and heavy monthly installments, people were less willing
to accept homes in “as is” condition. People were catching on. Properties were now expected to
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be in good condition and buyers were less forgiving of unknown defects .In response to these
changes, contractors started to offer a new kind of service: physical inspections for homebuyers.
These early home inspections were just basic overviews, concerned mainly with major structural
and mechanical defects. Yet most people did not know that such services were available, and the
quality of these inspections, with few exceptions, was basic at best.
Gradually, home inspections became more common, and with this growth naturally came the
increasing demand for more detailed inspections. Buyers were becoming educated. The
inspectors then realized that unreported defects spelled financial liability for them. With the
onset of claims and lawsuits, the inspections quickly became more exact. As the demand for
disclosure increased on all fronts, the home inspecting process emerged as a noteworthy new
profession.
The first generation of inspectors, started in the 70’s, included concerned practitioners who
thankfully saw the need for meaningful standards of practice to regulate their new and quickly
growing profession. Across the country, inspectors formed national and state associations called
ASHI, the American Society of Inspections, and NAHI, the National Association of Home
Inspectors. Also just starting were state organizations like CREIA, the California Real Estate
Inspection Association and TAREI, the Texas Association of Real Estate Inspectors.
Home Inspectors are not licensed in California. In the absence of state licensing, self-regulation
by these associations did much to elevate the level of professional inspector ship. Formal
Standards of Practice were drafted, as committees of top home inspectors brought years of
experience. Things were changing. Education was now mandatory for all member inspectors,
and codes of ethics were laid down to oversee professional conduct. This, of course, did not
guarantee that all inspectors performed at their best levels. No method of regulation could do
that. But for the first time, there were specific guidelines defining the performance of a
competent home inspector.
As these transformations were stirring in the marketplace, government agencies and legislatures
were going with the flow of change. By the late 1980’s, many states were enacting seller
disclosure laws, signaling the end of the “buyer beware” era. Before, sellers could “spit shine” or
hide a defective home, declare that everything was perfect, and walk away whistling. New
disclosure requirements altered that picture, now providing a legal responsibility for sellers who
failed to reveal known problems and setting new disclosure standards for agents and brokers The
problem with these new requirements was that sellers and agents were often unaware of innate
defects.
Meanwhile, Texas was in the lead by making state licensing mandatory and apprenticeships for
all home inspectors within its jurisdiction. Other states soon followed suit, only some required a
license, while others merely set regulatory standards. But in most parts of the country, home
inspectors remained a one of a kind profession, ungoverned except by voluntary membership in
inspector associations and a readiness to take the standards established by those groups.
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In 30 years time, the property transaction process has been completely transformed. The fear of
litigation dominates the marketplace, and active disclosure has been recognized as the best
preventative defense. Information is now the central contingency.
For buyers entering this new purchase milieu, the ability to find and select the best home
inspector is crucial. The guidelines contained in the following pages will help in making this
choice intelligent and beneficial.
III. The Home Inspection Process
To get the proper perspective on home inspection, the following analogy might help. An auto
mechanic will provide a detailed report to you regarding a vehicle you are thinking of
purchasing. Mechanism’s normally evaluated are the engine, transmission, drive train, in other
words all major parts Just like the mechanic, a home inspector reviews and evaluates all of the
visible physical conditions of a property, from the chimney top to the foundation.
Common Misconceptions
Public awareness of home inspection has not kept pace with the growth of the industry. Too
many buyers enter the buying market with little knowledge and false perceptions. Some are
surprised to discover the wealth of information a qualified inspector can provide. Others are
disappointed because their expectations exceed the range of home inspection standards. Some
confuse home inspection with a termite report or an appraisal, while others presume that their
home inspector will evaluate structural engineering, geological stability, environmental hazards,
and other conditions not within the range of a home inspection. Some believe that home
inspections are mainly for older homes and that newer homes are defect free. There are those
who think of an inspection as an unnecessary waste of money, providing no particular benefit to
anyone. And lastly, there are some who have never even heard of a home inspection!
Misperceptions like these can cause buyers to waive their right to a home inspection, not
realizing that this is their last and best chance to obtain significant information on this lifetime
investment. Some discover too late that a professional inspection would have in fact benefited
them. When problems are discovered after they own the home; that’s when they become
painfully and expensively apparent.
Brokers and agents alike have been frustrated by the reluctance of some buyers to understand
and appreciate the need for a professional inspection that is for their benefit. In fact, some agents
have chosen to pay for the inspections themselves, rather than take the chance risk and the
liability of undisclosed defects. Unfortunately, there are also less principled agents who view
home inspection and defect disclosure as threats to the completion of a real estate transaction. To
these shortsighted individuals, home inspectors are regarded as “deal killers.” Thankfully, not all
agents are like this.
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Basis of a Home Inspection
The purpose of a home inspection is to discover all significant defects that are visually apparent
and can be discovered without dismantling portions of the property; or opening walls or ceilings
and without digging up the grounds. The inspection process involves evaluation of foundations,
site drainage, floor framing, plumbing and heating equipment, electrical systems, doors,
windows, interior and exterior finish surfaces, fireplaces, attic construction, roofing, and several
more.
Home inspectors test electrical outlets and also the condition of operational electrical light
fixtures they also check wiring within electric panels and elsewhere. They check the operability
of plumbing fixtures and built-in appliances. They evaluate the quality, safety, and general
condition of exposed building systems.
When do you Schedule the Inspection?
Home inspections typically occur during the first 10 days or two weeks of the transaction. The
time limit for having the inspection is usually specified in the contract. Missing this home
inspection deadline places buyers at a major disadvantage. They can forfeit the right to an
inspection or the ability to negotiate the inspection findings with the seller. Therefore, the
inspection should be scheduled as soon as possible after signing the purchase contract. A buyer
that waits too long to call an inspector of their choice may have to settle for an inspector that is
less experienced and, possibly less thorough. The best inspectors are in high demand and are
likely to be booked up when you need them. Therefore, time is of the essence when scheduling a
home inspection. It should be done at the earliest possible time.
How Much Time Do You Need For The Inspection?
The duration of a sufficient home inspection is at least 2 ½ to 3 hours that is for one inspector to
evaluate an average size home (up to about 2000 square feet). Larger homes, or properties with
additional living units, and those, which are difficult or poorly maintained, will probably require
more time. Inspections of short duration mean the inspector is in a hurry and should be regarded
with suspicion. A quick inspection is an indication that thoroughness has been compromised and
that some conditions may have been over looked. Some exceptions to this rule include
condominiums and “cookie cutter” tract homes. Some of these may take only two hours, but in
no case should any inspection ever take less time than this.
Can The Buyer Participate?
The answer is YES. The benefits of a home inspection are greatly magnified when the buyers are
present. Failure to attend the inspection is a missed opportunity that can have significant
consequences. This will be discussed in greater detail in the following chapters.
Inspections Can Also Benefit Sellers
Home inspections are commonly thought to serve the interests of buyers only, and in most
transactions, buyers are clearly the primary beneficiaries of the disclosure report. But the belief
that buyers are the only ones who enjoy the fruits of this process is a crucial error. The positive
benefits of total disclosure serve the needs of all parties of the transaction, even those of the
sellers.
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In the interim of today’s business world, undisclosed defects can have costly and troublesome
consequences in the lives of those who have just sold their homes. Sellers generally assume, after
the sale, that the deal is securely closed and complete, that all related issues are necessarily laid
to rest. This presumed comfort, however, could be interrupted. Undisclosed defects often rear
their ugly faces after a transaction is completed. Even though the sellers may have been up-front
in their efforts to disclose all known defects, still claims and legal confrontations can override the
best of intentions, ending in long, bitter, and expensive conflicts.
In anticipation of such problems, some sellers have chosen to hire their own home inspectors,
prior to selling the home. This way, they increase their knowledge of the certain conditions of
their home, and are able to make repairs to prepare for the sale, they then can provide total
disclosure to buyers, and minimize the likelihood of conflicts after the sale, they also eliminate
the need to renegotiate the terms of sale after the buyers’ hire a home inspector, and they bring
about the trust of buyers by demonstrating a total readiness to disclose.
In spite of the legal benefits and marketing advantages, very few sellers hire their own home
inspector. In most cases, the benefits of home inspection are left to the buyers. Sadly the majority
of sellers bypass home inspection
Seller Preparation
Note 2: References have been made in this document to California Association of Realtor
Standard forms and, in some instances verbiage from these forms is quoted. From time to time
these forms are revised and it is possible that the revised forms will have different verbiage or
that something that is said to be on page 4, paragraph 9 is now on a different page or in a
different paragraph. The references in this document are current as of March 2014.
The California Association of Realtors form RPA, “Real Estate Purchase Agreement”,
paragraph 10 B addresses seller preparation for a home inspection.
“Seller shall make the property available for all buyer investigations.” Paragraph
10 C goes on to say, “Seller shall have water, gas, electricity and all operable
pilot lights on for Buyer’s investigations and through the date possession is made
available to Buyer.”
According to the California Real Estate Inspector’s Association (CREIA),
“Having everything ready for the inspection can prevent unnecessary delays. For
liability reasons home inspectors do not move personal belongings. Most home
inspectors will charge an additional fee if they must return to the property to
inspect item which were not accessible.”
CREIA goes on to give the following check list for Sellers;
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“The seller should verify that:
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All utilities are on
Pilot lights are lit (The gas provider will usually light pilots at no cost to the owner)
Attic access is clear of clothing or stored items
Crawl space entrances are not blocked or nailed in place
Water heaters are accessible
Furnaces are accessible
Sinks, showers and bathtubs are clear of dishes or personal items
Built-in appliances are free of stored items and can be operated
Electrical panels are accessible and not locked (Electrical sub-panels inside the home
are often painted and removing the cover will mar the finish. The seller’s agent should
ask the seller to grant permission to the inspector to remove the panel cover to look for
life/safety issues)
Areas or items to be inspected are freely accessible
Pets are secured (Unsecured animals should be removed from the property or secured in
an area that will not need to be inspected if the seller [or occupant] will not be present)”
Inspection Contingency
In most cases, the sale is contingent upon the buyers’ acceptance of the inspector’s report. This
means that you, as buyer, have a specified number of days to accept or decline the property in
“as is” condition. If you decline acceptance, you have five basic choices: You can:
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Ask the sellers to make a few repairs
Ask the sellers to make many repairs
Ask the sellers to reduce the sales price
Ask the seller to credit you the cost of repairs
Decline to purchase the property.
IV. ATTENDING THE HOME INSPECTION
Who Should Attend
In today’s high tech world of Real Estate many Multiple Listing Services have electronic lock
boxes. This makes it possible to give a home inspector a digital code to access the lockbox and
obtain the key to enter a home. Assuming the inspector is someone that is known to all or some
of the parties to the transaction and trustworthy, this may seem to be a good idea due to the
convenience for all of the parties concerned. The inspector can schedule the inspection easily
without concern over conflicts in scheduling with the other parties to the transaction. The buyers
and sellers do not have to worry about missing a day of work. The real estate agents are free to
deal with their business of the day. However, it would never be wise to give the home inspector
access to the home without at least one other person present.
While it may be important that at least one party to the transaction be present, in the opinion of
this author, it is more important that all parties to the transaction attend the inspection. Those
parties would be the buyer(s), seller(s), listing agent and selling agent. Despite the logistical
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problems inherent in scheduling the inspection so that all parties can attend, the potential benefits
are such that everyone should cooperate and, possibly compromise, to make it possible.
Note that not all Real Estate Agents agree with this opinion, this author has had experience with
agents that refused to have the seller present at “the buyer’s inspection”. Obviously, this is
something that should be discussed by the parties and an agreement reached.
Why Should All Parties Attend
To begin with, the inspector should not be alone at the time of inspection because the seller
might have items of value in the home. If something should be broken or disappear, obvious
issues will arise. Also, keep in mind that there is a potential for the home inspector to be injured.
If the injury is serious and no one else is present, the situation could be life threatening for the
inspector. A true story experience can illustrate this possibility. An agent was opening a home
for a repairman and had planned to let the repairman in and then leave, letting the repairman lock
up the home. For some reason the agent decided to stay. Before long, the agent heard the
repairman’s screams. He had seriously cut his wrist. The agent was able to apply emergency
first aid and get the man to a hospital for treatment. The Doctor indicated that the repairman
could have lost use of his hand completely had he not been treated so promptly.
The buyers’ decision to purchase probably resulted from a brief, cursory examination of the
home. The buying decision is often an emotional one. The buyer is responding to the overall
look and “feel” of the home. Neighborhood, location, architectural appeal, schools and other
items extraneous to the home are considered when making that decision. There generally is not
time, nor does the buyer have the knowledge, skill and experience needed to make an adequate
inspection of the systems and components of the home itself. In other words, the buyer generally
has no idea what the true condition of the home might be.
The home inspection will result in a number of issues, questions and potential problems. Some
of these can be deal killers if they are not properly understood. The basic home inspection report
is detailed and lengthy. On the other hand, it does not always provide complete explanations of
items mentioned in the report. If the buyer and or seller and or agent(s) are not present during
the inspection, they do not have the opportunity to have the inspector actually show them the
problem, explain the extent of the problem and discuss possible remedies. A good home
inspector will take the time to explain items as the inspection is made. This will help the
buyer(s) as well as seller(s) and agent(s) understand important details of the inspection report.
This also presents an opportunity to ask questions of the inspector and to be sure that items that
may be of particular importance to the buyer are dealt with. By being present at the inspection,
the parties can satisfy themselves as to the thoroughness of the inspection.
Certain items in the home inspection report will be categorized as “health and safety” issues. If
buyers do not hear the inspector’s explanation of these items they might get the impression that
things are worse than they really are. On the other hand, if sellers do not hear the explanations,
they may balk at making the repairs called for. After all, they may have been living in the home
without having any problems related to that “health and safety” inspection item. On older
homes, there may be building code violations mentioned on the report. The buyers may get the
impression that the home was poorly constructed if many of these violations are pointed out.
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However, the item mentioned on the report may have been in compliance with the code at the
time of construction, building codes do change over the years. The inspector can explain the
nature of the item mentioned and whether or not any true “health and safety” issues arise due to
the apparent code violation. The inspector can also tell the parties whether or not it is required to
bring an item up to code.
As mentioned, the inspection report is quite detailed and lengthy. Home inspectors tend to list
numerous items that may be minor or of little consequence. To protect themselves from possible
civil action, inspectors want to be sure that they do not miss any potential “defect”. As a buyer
reads the report, the impression that the home is defective can result from this multitude of small
items being listed in the report. If buyers are present at the home inspection, the inspector’s
explanations of each “minor” issue can ease their minds with regards to the overall condition of
the home. Or, the sellers, by not being present at the inspection, might be hesitant to respond to
other, more important matters because they think that the inspector is “obviously being too
picky.” Corollary to this is that the sellers might not understand the serious nature of certain
items on the report and, consequently, they would hesitate to deal appropriately with the issue.
Once the final inspection report is delivered to the buyers and sellers (and agents) it might
become necessary to begin negotiating over repairs to be made. A discussion of the buyers’ and
sellers’ options comes later in this course, but briefly stated, the transaction might be cancelled if
buyers and sellers cannot agree on what repairs are to be made and at who’s expense. The agents
must aid their principals in these negotiations. In these negotiations there will be some give and
take and compromise. Knowing where to give, take or compromise will be crucial to these
negotiations. When all parties have been present at the inspection and heard the inspector’s
explanations, they have more knowledge and this will facilitate the decision making process.
Some Arguments for not having All Parties Attend
The buyer might be reluctant to openly discuss problems with their agent or with the home
inspector if the sellers are present. The sellers might feel it necessary to respond defensively to
things pointed out by the inspector. Also, sometimes a buyer or seller will be too chatty and say
things that could cause a problem with the transaction. Also, there is the possibility that
personalities of the parties involved could be abrasive and cause conflict. The agents counseling
their clients might help to avoid any of these possibilities.
What if someone cannot attend?
Unfortunately, it might be impossible for one party or another to be present at the inspection.
Should this be the case, arrangements should be made to have the missing party discuss the
report with the inspector. This may have to be accomplished over the phone due to logistical
problems. However, it is best if this can be done face to face. An inspector may even agree to
meet at the home to discuss the report and point out items of importance and answer questions.
If you request repairs or a price adjustment, based upon the home inspection report, the Sellers
have choices. They can:
1) Agree to all of your requests
2) Agree to some of your requests
3) Agree to none of your requests
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4) Tell you to take it or leave it.
The sellers’ only obligation is to address the defects that are named in the purchase contact or
required by state and local laws. If the contract specifies an “as is” sale, the sellers have the right
to refuse to make repairs of any kind or to adjust the price in any way. Lawful exceptions may
include strapping water heaters for earthquake safety, providing smoke alarms in specified
locations, or upgrading plumbing fixtures for water conservation. Law must do these items.
V. Choice of Home Inspector
In a perfect world, all home inspectors would be equally proficient. We do not live in that
perfect world. All professions have the same dichotomy; there are good Doctors and bad
Doctors, good Attorneys and bad Attorneys, good Real Estate Agents and bad ones, and so on. It
can also be said that there are the honest and ethical as well as those who may not be. The same
will hold true for Home Inspectors. The question is; how do we know the good from the bad?
In an article titled “Elevating The Standards Of Home Inspectors And Reducing The Exposure
Of Real Estate Brokers” attorney K.P. Dean Harper states that
“insuring that your buyer hires a competent, insured home inspector in a
residential sale may be the single most important factor in reducing your future
liability to a buyer. A well qualified, competent home inspector should discover
the types of defective conditions that, if not disclosed, could lead to potential
litigation.”
Again, in that perfect world, a home inspected by two different inspectors will result in two
identical reports. Quite possibly this would not be the case. One inspector may not discover the
roof defects revealed by another inspector. Plumbing, electrical, or heating problems, disclosed
in one report, may not be mentioned in another or they might be interpreted or emphasized
differently. The items left off in one report just might be the un-disclosed items that result in a
dispute. Neither the buyers, preparing to make one of the largest financial investments in their
life, nor the real estate agent can afford incomplete or incorrect disclosure. Just one omitted item
could adversely influence a buyer’s decision to purchase or could lead to years of financial
problems for the buyer which could result in both the seller and the real estate agent being sued.
Therefore, choosing the right home inspector is important to all parties in the transaction.
Attorney and syndicated columnist, Robert Bruss in a July 2003 article titled “Lawsuit lurks
behind undisclosed defects” states that,
“there are lots of outstanding professional home inspectors. Many are retired
contractors and engineers who understand residential construction. There are
also younger home inspectors who use modern computerized checklists and test
equipment.”
The question remains, how does one find a qualified, ethical and competent inspector?
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Using Cost As A Criteria
Guidelines for choosing a home inspector offered by CREIA warns against choosing a home
inspector based on price. CREIA states that the consumer should,
“Avoid Price Shopping. Home inspection fees vary widely. A home is the most
expensive commodity you are likely to purchase and or sell in a lifetime. One
defect missed by your inspector could cost 100 times what you save with a
bargain inspection. The best method of price shopping is to shop for quality.
Considering the high cost of real estate today, an inspection fee is a small price to
pay. It can save thousands of dollars and years of regret.”
The old saying, “you get what you pay for” could very well hold true for Home Inspections as
well as with anything else. Home inspections will vary in price based on varying factors. The
size of the home will be one factor; the larger the home, the longer it will take to inspect so the
cost will generally be higher. However, different inspectors will have different pricing structures
and choosing the inspector based on the lowest price may not be the optimum method for
choosing the right inspector. An inspector that underbids the competition could be doing so for
various reasons. It could be that the inspector cuts corners to save time, therefore charges less.
Or, perhaps the inspector is new in the business and is using a lower price as a means to get
established. Perhaps an inspector is not as skilled or as reliable as other inspectors and
compensates by offering discounted inspections. If a home inspection is important (it is!) than it
is important that it be done correctly. The lowest cost does not guarantee the lowest quality but
inspectors offering low cost inspections should be checked out thoroughly to be sure they are
also offering quality inspections
Real estate licensees often establish a relationship with a trusted home inspector that is skilled,
knowledgeable and reliable. If an inspector knows that the agent will recommend him/her in all
of the agent’s transactions, the inspector might be willing to offer a discount for “volume”. The
licensee must take care when doing this. For one thing, when recommending service providers,
agents sometimes discover that the buyer or seller might blame them if something goes wrong
with the inspection. There have been lawsuits for “negligent referral”. An attempt to limit the
agent’s responsibility and/or liability with regards to such recommendations is made in the
California Association of Realtor’s purchase contract which states that,
“Brokers do no guarantee the performance of any vendors, service or product
providers (“Providers”), whether referred by broker or selected by Buyer, Seller
or other person. Buyer and Seller may select ANY Providers of their own
choosing.”
Another reason that recommending only one inspector to all clients could be problematic is that
the buyers, sellers and even other agents might get the impression that the inspector is “working
for the agent” and not keeping the interests of the buyer and or seller foremost in their minds.
There have been “exposes” on the relationships between inspectors and real estate agents. On
one T.V. “News Magazine” program there was a segment on Home Inspectors and the Real
Estate Industry. The gist of the program was that Home Inspectors were “in the pockets” of the
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real estate agents, meaning that the inspectors would purposely doctor reports so as not to “kill”
a real estate deal. Of course this would be both unethical and illegal. CREIA has a Code of
Ethics which makes it clear that an inspector shall not,
“Inspect for a fee properties where the employment itself or the fee payable for
the inspection is contingent upon the conclusions in the report, pre-established
findings, or the close of escrow.”
A “doctored” home inspection report is not in the best interest of any of the parties, not even the
agent and home inspector. Missed items, whether accidental or on purpose, could result in costly
and time-consuming disputes and/or litigation.
It should go without saying that the real estate licensee should not benefit from the actions of the
Home Inspector other than the mitigation of risks provided by a competent inspection. It
certainly would be inappropriate and in violation of the law for a licensee to receive any kind of
“kick back” from the home inspector. In fact, the CREIA Code of Ethics states that an inspector
shall not,
“Offer or deliver any compensation, inducement or reward to the owner of the
inspected property, the broker, or agent, for the referral of any business to the
inspector or the inspection company, or for inclusion on a list of recommended
inspectors, preferred providers, or similar arrangements.”
It is the buyer and seller that select the home inspector. There may even be some negotiation
over which inspector will be used. In most cases the buyer pays for the inspection and gets to
make that selection. However, the majority of buyers and seller have no idea who the inspectors
are and which inspectors are best. They rely on the real estate agent for that information. It is
generally recommended that the licensee offer the principals a list of home inspectors that are
competent and reliable, in the experience of the licensee, and allow the principals to choose from
that list.
Home Inspector Regulation
On the California Real Estate Inspection Association web site, advice on choosing an inspector is
offered. To begin with, CREIA suggests looking for an inspector with a, “Professional
Affiliation:
In California, there are standards for home inspectors that have been enacted by
the California Real Estate Inspection Association (CREIA) and recognized in
California statutes. Membership in this professional association requires
obtaining initial training, passing a rigorous membership exam, and mandatory
adherence to professional standards of practice and participation in ongoing
education (a minimum of 30 hours per year). When you choose a home inspector,
you should specify membership in CREIA.”
With real estate licensees and contractors the regulatory bodies allow a person to search a web
site database to see if person is licensed and whether there have been any disciplinary actions
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against that person. Checking for licensed inspectors and whether they have had any disciplinary
actions is not an option at this time. Unlike the Real Estate Industries Bureau of Real Estate,
there is no regulatory body overseeing home inspectors and no specific licensing required. There
are, however, laws that do govern home inspections and inspectors. These laws are embodied in
Chapter 9.3 of The California Business & Professions Code entitled, Home Inspectors, and
Sections 7195 – 7199. Section 1 of Stats.1996, c. 338 (S.B.258), provides:
“It is the intent of the Legislature in enacting this act to assure that consumers of
home inspection services can rely upon the competence of home inspectors. It is
the intent of the Legislature that, in ascertaining the degree of care that would be
exercised by a reasonably competent home inspector pursuant to Section 7196 of
the Business and Professions Code, the court may consider the standards of
practice and code of ethics of the California Real Estate Inspection Association,
the American Society of Home Inspectors, or other nationally recognized
professional home inspection associations.
Without the option of checking with a regulatory body, other sources are needed to help with
finding and choosing a home inspector. In a “Question and Answer” document found on the web
site for the California Real Estate Inspectors Association, CREIA (www.creia.org) the following
advice to home owners is given:
“The best source is a friend, or perhaps a business acquaintance, who has been
satisfied with, and can recommend, a home inspector they have used. In addition,
the names of local inspectors can be found in the Yellow Pages where many
advertise under “Building Inspection Service” or “Home Inspection Service”.
Real estate agents are also generally familiar with the service, and should be able
to provide you with a list of names from which to choose.
“Whatever your referral source, be sure to ascertain the home inspector’s
professional qualifications, experience, and business ethics before you make your
selection. You can do this by checking with the local consumer affairs office or
Better Business Bureau, as well as by verifying the inspector’s membership in a
reputable professional association.”
You can search for Home Inspectors that are members of CREIA on their web site. There are
also the American Society of Home Inspectors, ASHI and the National Association of Home
Inspectors (NAHI). Their web sites, www.ashi.org and www.nahi.org also offer an inspector
search option. While any home inspector can choose to join one or more of these associations
each offers a “certification” program that requires an inspector to meet certain criteria. For
example, for CREIA, an inspector must,
1. “ . . . Secure/document thirty (30) Continuing Education Credit (CEC) hours relating to
real estate inspection. One Continuing Education Credit (CEC) is awarded for each hour
of attendance at a pre-approved inspector education program. A CREIA approved
educational supplier must provide a certificate of attendance that is to be submitted by the
inspector to CREIA Headquarters for recording . . .” and,
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2. “Attend two (2) of your local CREIA Chapter meetings. Pass the California Home
Inspector Exam (includes questions on CREIA Code of Ethics) CREIA goes on to advise
their members that “Once you have successfully passed the above requirements you will
be entitled to use the CERTIFIED CREIA INSPECTOR (CCI) designation and logo on
your business and marketing materials. We strongly urge you to seek this CERTFIED
CREIA INSPECTOR (CCI) Member status so that we can recognize and refer you to
REALTORS® and consumers seeking a CERTIFIED CREIA INSPECTOR (CCI)
Member While it is no guarantee for the quality of inspection, choosing an Inspector that
is “certified” by one or more of these associations will ensure that the inspector has met
certain experience and knowledge qualifications. It is not enough for the inspector to
state that their inspections are done according to CREIA, ASHI or NAHI standards (any
inspector can make this claim). Check to see that the inspector is actually “certified” by
one of these organizations. CREIA issues a badge to its “Certified Inspectors
**** Copied from www.creia.org
According to CREIA,
“A home inspection is an independent, unbiased review and report on a home’s
systems, components and conditions. Consumers and real estate professions
should expect no less than full professionalism, education, competence,
credentials, knowledge, courtesy and an adherence to CREIA’s Code of Ethics
and Standards of Practice
Additional Criteria For Choosing An Inspector
Even “Certified” inspectors are not created equal so it is a good idea to consider additional
criteria when choosing an inspector.
Experience
CREIA offers the following advice on choosing a home inspector;
“Inspection Experience. Of paramount importance is an inspector's actual level
of direct experience in the practice of home inspection. A general contractor's
license can be an important credential, but when it comes to home inspection, a
license to build indicates very little as it relates to competence as a property
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inspector. The experience that matters most is specific home inspection training
and experience, not building experience.”
There is no requirement that a home inspector be a licensed building contractor. However,
experience in that field is certainly helpful. Home Inspectors do not have to have the skills
necessary to build a home but they do need to have investigative skills and a general knowledge
of construction and of building codes. Before hiring a home inspector (or recommending one)
ask about their level of experience; how many years have they been doing home inspections?
And, how many home inspections have they done? You should also ask for references. A good
inspector should be eager to give you a list of previous clients (home owners and/or agents) that
will attest to the quality of the inspections performed. Don’t just ask for the list of references,
call a few of those listed and see what they have to say about the inspector. You might want to
ask some of the following questions:
1. Was the home inspector reliable – showing up on time and producing the report in
a timely manner?
2. Did the inspector do a thorough inspection?
3. Did the inspector take time to explain things to the parties present at the
inspection?
4. Did the inspector answer all pertinent questions?
5. Did the inspector have a professional appearance and demeanor?
6. Was the report legible and prepared in an organized way? Was it a “standardized”
format?
7. Were there any “mistakes” in the report and, if so, how did the inspector respond
to the situation?
The inspector may also be able to give you copies of letters of recommendation from satisfied
clients. An inspector’s long history in the business of home inspection does not always mean
quality performance. Still, an inspector might find it hard to stay in business if their work is not
up to par. People do talk! If you have not had previous experience with home inspectors you
can ask others for recommendations. When choosing a Doctor or Dentist for the first time
people often ask their friends or business associates for a recommendation. People are generally
willing to talk about the experiences they have had, both good and bad, with service providers.
You can ask the other licensees in your office or experienced agents in your market area. By
asking around, you can get a good idea of a home inspector’s reputation.
A part of the reputation of a home inspector will relate to how they respond to any mistakes that
might be made in an inspection. If a buyer discovers a defect after they have purchased and ask
to have the situation redressed, how does an inspector respond? Is the reputation that they have
the attitude of “too bad, it’s your problem” or is it that they get involved and help to resolve the
issue. In one “true life” situation, the buyer of a mobile home called the real estate broker when
certain supposed defects were discovered once the buyer had moved in. The broker called the
home inspector. That inspector met with the broker and the buyer at the mobile home to review
the inspection report with the buyer and to re-inspect those areas of concern. Once the inspector
took the time to explain exactly what was happening and why as well as what could or should be
done, the buyer was satisfied
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In this example, one part of the problem was that the seller had ordered the inspection prior to
receiving any offers to purchase the mobile home and the buyer did not have an opportunity to
attend the inspection. Although the buyer received the report, he did not ask to meet with the
inspector to go over the report (something the buyer’s agent should have urged). As it turns out,
the problem items had been mentioned briefly in the report but not the details that could have
come from the inspector’s explanation when going over the report with the buyer. This points
out the importance of having all parties present at an inspection. In this case, where the
inspection was performed prior to the buyer entering the picture, the inspector would have met
with the buyer at the property and gone over the report (prior to closing escrow) for a reasonable
fee, had that been requested.
The inspector acted promptly, courteously and professionally in the above case. He not only
took the time to meet with the buyer and explain the situation but he had the attitude that “if I
made a mistake, I will make it right”. These are some of the attributes to look for in a good
inspector.
Errors and Omissions Insurance
It is a good idea to hire an inspector that has Errors and Omissions Insurance (E & O). E & O is
like a Doctor’s malpractice insurance. If the inspector makes a mistake and misses some item of
importance it could result in substantial financial liability. If a buyer should choose to bring suit,
an attorney will be looking for “deep pockets”, that is to say they will be looking for a party to
the transaction that has the assets worth going after. That generally means that all parties to the
transaction will be named, seller, real estate brokers and inspector, in hopes that at least one will
have those “deep pockets”. Losing such a lawsuit could bring financial ruin to one or all of these
named parties.
According to Barry Stone, in his book, A Consumer’s Guide To Home Inspection,
“Inspectors who take their business liability seriously carry errors and omissions
insurance for these untimely mistakes, to ensure that funds will be available when
undisclosed defects take on major proportions. Buyers should favor those
inspectors who provide this protection.”
Barry Stone goes on to note that,
“Two types of E&O insurance are available, one of which provides superior
consumer protection. The best E&O is a ‘per occurrence’ policy, because
coverage remains in effect, even after the inspector goes out of business. The
other type is called ‘claims made.’ This type of coverage can be effective on the
date of inspection but invalid when someone is ready to file a claim. This
deficiency is not widely known among home inspectors.”
Not all inspectors will choose to purchase E & O, as Barry Stone points out,
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“some very qualified home inspectors have chosen to conduct their businesses
without E&O insurance. This decision is based upon the fear that insurance
coverage attracts litigious attorneys and clients, just as sugar attracts flies. These
inspectors prefer to discourage lawsuits by offering no pot of gold at the end of
the rainbow.”
Whether or not the above concern is realistic, lawsuits do occur and real estate licensees, to
protect themselves as well as their principals, should considering using those inspectors that do
carry E & O insurance.
Knowledge of Building Codes
In CREIA’s “Definition and Scope” of home inspections they list items that are typically
excluded from the home inspection. Among others, CREIA lists as exclusions,
“Determining compliance with manufacturers’ installation guidelines or
specifications, building codes, accessibility standards, conservation or energy
standards, regulations, ordinances, covenants, or other restrictions.”
When a home is built, a municipal building inspector inspects the home to see that building
codes are met before giving a final approval on the construction. These inspectors have been
known to make mistakes from time to time. Besides that, building codes change and a home that
was built years ago may not meet current building standards. The newer standards were more
than likely instituted for some health and safety reason.
Despite the exclusion above, the fact is that many health and safety issues that an inspector
should address in a home inspection result from a failure to comply with building codes. A
home inspector that is familiar with building codes will stand a better chance of discovering
these issues. A home inspector that has a background as a building contractor will more than
likely be familiar with building codes. Those inspectors without that background can familiarize
themselves with the codes. Unfortunately there is no way for the consumer or real estate
licensee to know that an inspector who is not a licensed building contractor has become familiar
with building codes.
Municipal building inspectors take course work and pass an exam to become certified to inspect
for building code compliance. According to the United States Department of Labor,
“The International Code Council (ICC) offers multiple voluntary certifications, as
do other professional associations. Many categories of certification are awarded
for inspectors and plan examiners in a variety of specialties, including the
Certified Building Official (CBO) certification, for code compliance, and the
Residential Building Inspector (RBI) certification, for home inspectors.” The ICC
website is http://www.iccsafe.org/.
A home inspector can also take advantage of these courses, take the exam and become certified
in building code compliance. While there is no requirement that a home inspector do this, by
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doing so they would be able to provide proof of their knowledge of building codes. It makes
good sense to higher an inspector that willingly as gone above and beyond the minimal
requirements in order to become a more proficient home inspector.
Inspection Training
In the 1980s disclosure of material facts in the sale of real property became a big issue and has
grown in importance every year since. As a result, some entrepreneurial individuals began
offering their services as home inspectors. Many of these individuals were licensed contractors
that realized there was a growing need for home inspections. Even as contractors, experienced
with building, they did not necessarily have the investigative skills needed for a comprehensive
home inspection. Besides that, a contractor that specialized in plumbing, or framing or electrical
may not have had the knowledge necessary to identify problems in areas outside of their
specialization. Others getting into the field of home inspection were not contractors but, perhaps
had worked in construction and saw an opportunity to get started in their own business.
No training courses geared towards developing home inspection skills were available at the time.
So, in its infancy, a field with no licensing, no regulation and no training struggled to get a
foothold in the world of real estate disclosures. Those with the skill and knowledge began to
develop a good reputation, were getting repeat business and many survived. Those without the
skill and knowledge found it difficult to gain that foothold and many failed to stay in business.
As Barry Stone states in his book,
“By the early 1990’s, this pattern began to change, with the emergence of formal
home inspection training schools. The pioneer among these was Inspection
Training Associates, which today is recognized as the premier establishment for
preparing individuals to commence meaningful home inspection careers.
“The specific knowledge imparted by formal home inspection training provides
entry-level inspectors with a foundational understanding of home inspection as a
business, as a skill, and as a service.”
Today, with the organizations such as CREIA, ASHI and NAHI, home inspectors have an
opportunity to earn a certification to show the consumer and real estate licensee that they have
the basic knowledge necessary to complete an adequate home inspection and subsequent report
ask your home inspector about the level of training they have received.
Sample Report
Another thing to ask the home inspector is to be given a copy of a report that they have
completed. What better way is there to judge a product or service than to see a final product?
As a part of their business development and promotion, some home inspectors are willing to
come to a real estate firms office meeting to discuss what they do how they do it. Often they will
bring sample reports and review the report with the agents present. This not only gives the
inspector a chance to show a sample of their work, it also gives the inspector a chance to educate
the real estate professional with regards to inspection reports. If the agent can understand the
report, it will be easier when it comes time to negotiate what is to be done as a result of the
report.
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Proof of a home inspector’s level of service is in the product; in the style, format, and
thoroughness of the report. So be sure to request a sample copy from each of the inspectors on
your list of prospects. In reviewing a report, precise detail and extensive thoroughness are
obviously important. However, an essential consideration is often overlooked: accessibility of
pertinent information. How easy is it to find and understand the disclosed defects in the report?
Deciphering the inspector’s meaning should not be a laborious effort. A quality report should be
thorough and comprehensive, but also easily interpreted, making a clear distinction between
defective building conditions and “boiler plate” verbiage. When immediate repairs are
recommended or if experts are needed to affect such repairs, clear indications should be made in
the report.
Some reports are narrative in style while others are organized in a check box/comment format.
Either can become burdensome and difficult to understand. Important issues mentioned in a
report could be overlooked if they are drowned in an ocean of words.
Look for a report that is organized in a way that makes it easy to read and understand as well as
being detailed enough to cover everything that must be covered. The home inspection report will
often point out numerous insignificant items along with those that are more important. A report
should be organized in a way that the health and safety issues are easily recognizable and not
confused with issues that might be of less importance.
Note: You must complete the “Section Assessment #1” before advancing to the next section.
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