BETTER HOME INSPECTION REPORT WRITING FOR LOWER LIABILITY
What were going to cover • How to make your clients expectations more realistic even before the inspection • Writing “Every time” caveats directly in the report • Examples of why certain items and systems could not be inspected • How to use photographs to clarify existing conditions at the time of the inspection
Carry E&O Insurance • Best way to limit your liability • Sooner or later, a claim will have your name on it. • Try not to let it affect you personally
You get the dreaded call or letter • You did an inspection for me about six months ago and after I moved in I discovered the sewer pipe was collapsed because of tree roots. It cost me $3, 000 to fix it. If I had known this I would have negotiated. You told me you were going to do a thorough inspection! How could you miss something so big?
• My hot water heater burst and it cost me $80, 000 to replace my one-of-a-kind mahogany wet bar and theater system. I had to replace all of the sheet rock, the appliances and the carpeting, not to mention my $10, 000 Lionel train set. You were supposed to protect me, that’s why I hired a home inspector. You failed to inform me about the hot water heater and I’m suing you.
• I had a roof leak and the contractor said the whole roof needed to be replaced and asked me if I had the house inspected. He said your inspector must have been blind. You should have told me and now I’m out $8, 000. I’ll be contacting my attorney if you don’t pay the bill.
• I had to replace the entire air-conditioning system after you said it was fine. If I had known I would’ve deducted $10, 000 from the purchase price of my home. I’ll see you in court.
• The electrical system started a fire in my house. The whole house burnt down. I thought you did a good job at the inspection and you’re a nice guy but you’ll be getting a letter from the insurance company’s attorney.
• I know you couldn’t get into the attic but the exterminator said you should’ve seen the raccoon urine on the ceiling. It cost me $8, 000 to replace the insulation and sheet rock. My brother-in-law is an attorney. If you don’t pay for it I’m taking you to court.
• My son was electrocuted in the kitchen when he tried to take the coffee pot out of the sink. The GFCI was defective. You should have discovered that in the inspection and now my son is dead.
• I am an attorney representing Mr. and Mrs. Smith. The gate for the swimming pool was defective and a neighbors toddler fell into the pool and drowned. You probably saw the article in the newspaper. Unfortunately, you missed the defective gate. Expect a very large lawsuit and notify your insurance company.
• A dead tree fell on my house and killed my dog. Now I have post traumatic stress syndrome, I can’t work anymore, my wife divorced me and I had to spend $20, 000 for repairs and $30, 000 in psychiatrist bills which Obama Care won’t cover because my doctor is out of network. You’ll be getting a letter from my attorneys, Cellino and Barnes, they said I have a good case.
Include the pre-inspection agreement in the report • Most attorneys don’t know home inspection law • They don’t even look for a pre-inspection agreement. If he reads the report hopefully he will read the agreement • Once he reads the agreement he may advise his client not to proceed
Make your clients expectations more realistic before the inspection with an email to the client. Do it a second time in the report
Expectations 1 - email Suggested expectations for your home inspection: • Your expectations regarding a home inspection should be reasonable and realistic. • Therefore, following are some basic points that are standard within the home inspection industry throughout the United States. Please keep these points in mind as time goes on before and after the inspection.
Expectations 2 – email Read the Pre-Inspection Agreement • The pre-inspection agreement is all about the terms and conditions of the inspection. You should understand it so that your expectations are realistic
Expectations 3 - email Read the report • Read the inspection report. It may sound funny, but many people don’t read the report even though they spent good money on the inspection of the largest investment of their lives! Read the report thoroughly so you understand the home and the limitations of a home inspection.
Expectations 4 - email Limit of Inspector’s Liability • The inspectors liability is limited to the fee of the inspection and no more. This is standard in the inspection industry all over North America. • There would be no inspection industry if this were not the case
Expectations 5 - email Can only see what’s visible • Inspectors can only inspect what is visible. We don’t have x-ray vision. For example, inspectors cannot see inside of pipes, walls, equipment, machinery, above ceiling tiles, behind insulation or storage materials, etc. Sometimes, termites are active inside of the wall without any outward appearance of their presence until someone starts construction, removes the wall and then they become visible. In addition, sometimes, there is no access to certain parts of the home, or certain components or systems of the home. Perhaps the garage was filled with boxes, access to the crawl space was blocked, or there was a freezer in front of the main electrical panel. It was impossible to observe the conditions of these components during the inspection. There may be defects that are not discovered during the inspection. Even if its a very substantial defect, if it's not visible we can't bring it to your attention. Please don't feel that your inspector "missed something" if it was not visible during the inspection.
Expectations 6 - email Effective on the date of the inspection • Inspectors observe and report on conditions effective on the date of the inspection. Because building systems and components are in a constant state of "wearing out" and things change as time goes on, inspectors can only observe conditions as of the date of the inspection, not a week, a month or a year later. As an example during the inspection there were no cracks in the foundation, however, after some slight settlement a crack developed. You understand that you should expect that components might be ready to fail without any outward or visible signs, and things change over time.
Expectations 7 - email Major not minor functions • Inspectors check to see if a component is doing its major function, not minor functions. For example, a heating system operates and puts out heat during the inspection, but one of the radiators does not function correctly, or perhaps thermostat operates, but not well. One room may be a different temperature than another. An appliance operates but does not go through all of its cycles correctly. These items may or may not be discovered during the inspection. You should expect that some malfunctions and abnormalities were not detected during the inspection.
Expectations 8 - email • Sampling • According to NY State law, inspectors use a sampling technique. This means that not every window or door gets checked. Not every outlet gets checked. Not every radiator gets checked. So you should expect that certain items were not checked and may be defective. That’s the nature of a home inspection.
Expectations 9 - email Not code compliance • According to NY State law, home inspections are not code inspections. This is not a code compliance inspection or certification. It is almost impossible for an inspector to accurately state whether an item is within code or not. For example, a house built in 1920 will have been built without any code in effect, therefore, it is "grandfathered". Grandfathering means code modifications after the date of the construction are not applicable. In addition, different municipalities adopt different state and federal codes at different times. Another complicating factor is attributable to the complexity of codes: for example, there may be 10 different code measurements/requirements applicable to a staircase. The only way to see if something is "within code" is to have it checked by the municipal code inspector. Even the municipal code inspector may not take into consideration certain elements of the code.
Expectations 10 No warranty – can’t see into future • Home inspections do not imply any kind of warranty or guarantee of the structure or components. We can’t see into the future so we can't predict when an item or component may fail. We are not an insurance company, although there are many insurance companies available that can offer a guarantee and make a profit doing so.
Expectations 11 Problems? Call the inspector ACCORDING TO THE PRE-INSPECTION AGREEMENT: • If you think the inspector made an error, contact the inspector and discuss the situation. The inspector will likely want to visit the home and see and understand the situation directly. Usually, things can be explained and put into proper perspective and/or an easy solution may be identified. You will have the opportunity to discuss things directly with your inspector.
Expectations 12 Contractors – Monday morning quarterbacking • It's easy to "Monday morning quarterback". Often, a contractor is called in to make repairs or review certain conditions. Often, these contractors will say "your inspector should have seen this - he must've been blind! Keep in mind that the contractor makes his living by doing more work so he may want to talk you into spending more money. For example, a roof leak is discovered and needs a minor repair. The roofing contractor is motivated to sell you a whole roof job even though you don’t need it. In another example, you get water in your basement because the gutters are clogged. You don’t realize the reason for the water in your basement and call a basement water proofing contractor who is motivated to sell you an entire $15, 000 French drain system when all you had to do is clean your gutters. So, watch out for Monday morning quarterbacking by a contractor.
Not technically Exhaustive • THIS IS NOT A TECHNICALLY EXHAUSTIVE INSPECTION: You are advised that you can purchase a technically exhaustive inspection and that a fee for this type of inspection could be $5, 000 or more, depending on the home. The fee is so much more because we will need to retain other specialists as necessary to prepare a technically exhaustive report. Destructive testing (opening some walls and ceilings for example) will be required and will necessitate the sellers approval. A request in writing for this service must be accompanied by a 50% deposit required to commence this inspection. If you wish this enhanced inspection please notify us prior to the inspection and a new inspection date will be scheduled after an appropriate pre-inspection agreement is entered into. Unless you purchase this Technically Exhaustive Inspection you can not and must not assume that we will report on all defects. Therefore you can not and must not base all of your financial negotiations on the results of this inspection. Nor should you base your budgeting for future repairs solely on this inspection, because it is not realistic.
Writing caveats directly into the report
Put the exclusions language directly into the report if it’s applicable to all reports For example, exclude chimneys and fireplaces. Exclude pest inspection (different than termite inspection). You don’t include every light or switch. You don’t check indoor air quality.
In the electrical section of the report • NOT ALL LIGHTS, OUTLETS AND SWITCHES WERE CHECKED: We caution that not all outlets, switches, or lighting fixtures were tested. Rather, a random sample of these devices were checked. It is very possible that one or more of the devices is not working but not tested due to the random sampling of fixtures and devices. This is in keeping with NY Sate Home Inspection Law. Please check them all at your final walk-thru.
Service contractor before the closing • AIR-CONDITIONING /HEATING SYSTEM SERVICE CONTRACT RECOMMENDED: It is recommended that you enter into a service contract with a airconditioning system contractor for preventive maintenance on the air-conditioning system and have the contract take effect before the closing. Also, have the service contractor accompany you at the final walk-through and check the heating and A/C system (if one is present) for properation before the closing.
Three components to every comment 1) What is the issue, 2) what happens if you don’t deal with the issue, 3) how to deal with the issue HOT WATER HEATER APPROACHING END OF USEFUL LIFE: The hot water heater is approaching the end of its useful life and should be replaced. This work should be done by a qualified plumber. Please keep in mind the following: sometimes hot water heaters start to leak very slowly with very little impact on the surrounding area until the leak is discovered and the tank is replaced. However, sometimes hot water heaters burst and flood with a huge impact to the surrounding areas such as flooring, furniture, and walls. If the tank bursts the water continues to flow until someone realizes the problem and shuts off the water valve. By then, substantial damage and flooding may have occurred. Therefore it is prudent to replace the hot water now.
Final walk-thru check list • BASEMENT: • • Look at the walls for any signs of leaks. Make sure all stored items are removed. Look for pipe leaks Look for foundation cracks
COOLING AND HEATING SYSTEMS: Turn thermostat to a higher setting. Feel each radiator or register for warmth. In the summer months, (exterior air temperature must be higher than 60 degrees) turn the air conditioning to a lower setting. Feel each register or room unit for cool air. Obtain copies of all manufacturers manuals and warranties for the heating system and air conditioning system if available. Enter into a service agreement with HVAC contractor before closing and let them check the systems at or before the final walk-thru If the heating system is a heat pump or electric baseboard system, you should obtain copies of the last 12 months electric bills to estimate your energy cost. Operate all ceiling fans.
PLUMBING AND BATHROOMS: • Run the water in all the sinks at the same time and flush the toilet to check the pressure. • Turn on the hot and cold water in each fixture. • If not winterized turn on all hose bibs. • Operate all fans.
ELECTRICAL • Turn all light fixtures on and off. • Test all smoke detectors. Confirm the presence of CO detectors • If any work has been performed on the electrical system since the home inspection, obtain the Fire Underwriters Certificate for same. • Test all alarm systems. • Obtain copies of all warranties and operating manuals. Get information concerning any central monitoring companies as well as a copy of their security agreement. Change all security codes immediately after closing.
BASEMENT • Look at the walls for any signs of water leaks around the foundation • Look at the pipes and around the mechanical equipment for signs of leaks • Make sure all stored items are removed
KITCHENS AND APPLIANCES • Turn on the faucet and sprayer. • Operate all appliances, fans and range hoods. Don’t forget the washer and dryer. • Check the brands of all appliances to make sure they have not been replaced.
WINDOWS AND DOORS • Open and close all windows and operate all locks. • Operate any automatic garage door openers and obtain the transmitters. • Operate all door bells and intercoms. • Change all exterior locks immediately after closing.
ROOFS, GUTTERS AND DOWNSPOUTS • Check the interior of the home for leaks. • Look for missing shingles, shakes, or tiles. • Check to see that gutters and downspouts are secure.
FIREPLACES AND STOVES • Make sure your attorney has a c/o for the stove or fireplace. • Obtain operating and installation instructions for stoves if available.
Software Checklist for what you didn’t inspect • What you didn’t inspect • Why you didn’t inspect it • The implications
Items not inspected • • • • • Air-conditioning Attic Finished basement Basement ceiling Bathroom Behind walls and ceiling Below carpets and furniture Bulkheads and Docks Certificates of occupancy Condo and co-op common area Crawlspace Deck/porch/patio Drainage around foundation Driveways/walkways Electrical Ire escape Fireplace Fire sprinklers • • • • • Garage Generator Geothermal system Heating Hot tub Hot water heater Indoor air quality Insulation and sidewalls Jacuzzi/hot tubs Kitchen appliances Lawn irrigation system Specialty electronic systems No search of public records No warranty Oil tank Pests Plumbing Roof • • • • Rooms Security system Sewage system Sheds/outbuildings Slab construction Smoke and carbon monoxide detectors Solar heating/electric swimming pool tennis court Termite inspection Utility not available Washer and dryer Window A/C units Air conditioning systems other
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