Reducing Realtor Liability

Lawsuits resulting from a residential real estate transaction almost always result from a feeling on the buyers’ part that they got less than they bargained for. After they have moved into the property, they can sometimes have a feeling of buyer’s remorse. Sometimes the alleged defects were present at the time of the home inspection but for one reason or another were not discovered by the home inspection. The fact that the alleged defects were not discovered by the home inspector does not automatically mean that the home inspector was negligent or that you were negligent for recommending the inspector. Far from it. There could be a large number of reasons why the alleged defect was not discovered at the inspection that fall well short of actionable negligence. The defect could be something that is not discovered because its inspection is simply not contemplated by the home inspection, a determination of the adequacy of any structural system or component, for example. Such a determination is outside the scope of a home inspection. Or it could be something that is not reported because it was concealed by furniture on the day of the inspection or was located in an area that was inaccessible. Not infrequently, known defects are deliberately concealed by the sellers. And far more frequently than anyone would imagine, the alleged defect that is the subject of the buyers’ complaint was actually discovered by the home inspector, noted in the inspection report and not acted upon by the buyers because they did not bother to read the inspection report or do the recommended further investigation. We get asked frequently by Realtors just starting out in the business how to reduce their liability. Some of the ways ways we might suggest but are not limited to are: Insist that your client hire a professional home inspector to inspect the property and strongly recommend that the inspection also include an inspection for the presence of wood destroying insects. Of course, that is entirely up to your client. Take the time to manage your clients’ expectations of what can reasonably be discovered by a limited visual inspection of a property that is full of furniture, carpets and stored items that further physically limit the scope of an already limited inspection. Review the inspector’s Pre-inspection Agreement to verify if it contains a Notice Clause that requires the buyers to notify the inspector within no more than 14 days of the discovery of any defect for which they believe he is responsible. Most inspectors have this clause somewhere within their report, but in case an issue arises it is best dealt with in prompt fashion. Avoid conflicts of interest. Never recommend an inspector who participates in preferred vendor schemes. All major inspector associations prohibit participation in such schemes. You have a fiduciary duty to recommend the very best inspectors based solely on merit, not money. Recommend the inspector based on experience and reputation, not value. Good inspectors charge accordingly but vary exceedingly. Trying to save your client $100 on an inspection could cost them $10,000. Price also does not always equate to professional experience. Only recommend inspectors who adhere to a strict Code of Ethics and Standards of Practice. Always attend the home inspection. Many real estate agents have been advised never to attend a home inspection, allegedly by real estate attorneys. Agents who say that they have received such advice are never able to articulate its rationale. You are not any less likely to be named in a suit by hiding during the inspection and the reasons for attending the inspection are quite compelling. First, your presence is a clear indication of your professionalism and concern for your client’s interests. Secondly, it affords an opportunity to help your client remember aspects of the inspection rather than focusing on cosmetic aspects such as furniture placement. There is time for those discussions after the inspector has gone over the report. The most important aspects and repairs should be addressed first. It’s very simple actually…..you get what you pay for so help your client make the most out of the inspection.

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