Softening Housing Market Impact and How to Reduce Exposure to Claims/Litigation

Please note that this article is merely a general discussion of topical matters involving the home inspector profession and should not be construed as legal advice of any kind. Further, as laws differ from state to state and because the law related to the home inspection industry changes regularly, please consult with an attorney in the proper jurisdiction to obtain legal advice on any particular matter.

While it is always a suitable time to highlight new trends and issues raised by claims initiated against home inspectors, we would like to recognize an effect the downturn in residential real estate transactions has had on home inspectors and to suggest measures home inspectors can take to better protect their interests.

Compared to last year at this time, residential real estate transactions have declined approximately 11 percent as a national average. Although sales have more recently been increasing, it appears that homeowners have yet to accept their homes having lesser value than what the market is currently able to support. This dissonance — or disillusion — appears to be influencing homeowners to try to recapture what they perceive as lost value. For those who have recently purchased homes and have since seen the appraisal value of their home on a continuous decline, a common perception is that there must be something wrong with the home and that those involved in the sale of the home are to blame. In this situation, the property sellers, real estate agents and home inspectors can become a likely target for the homeowners.

Typical allegations made against home inspectors are that not enough was inspected or disclosed during the
inspection, or that the conditions or defects disclosed were not sufficiently detailed. Even if defects were disclosed, the claimants often allege that they were disclosed in a manner so as to “push” the real estate transaction to consummation.

What to Do?

While there are obvious difficulties in defending inspection reports with boilerplate disclosures, we recommend inspectors protect their interests by reporting conditions in great detail. For instance, instead of simply indicating on a checklist “satisfactory,” “marginal” or “poor” — which by the nature of a home inspection is subjective—we recommend that inspectors describe the conditions, as fully as possible, in an effort to give the client an idea of how the inspector views “satisfactory” or “poor.”

Similarly, to protect inspectors from allegations of insufficient details in the report, we recommend inspectors use scientific or objective measures in their home inspections. As an example, if paneling is covering some of the basement walls, the inspection report should disclose which walls are covered and which are not covered. The report should note that the covered walls are concealed and that any conditions that might exist on the concealed parts of the foundation are not within the scope of the home inspection. As another example, we suggest that if there are cracks in the foundation, the inspector should measure or estimate as accurately as possible the lengths and widths of the cracks and include this information in the inspection report. Identifying the location of the cracks, such as “northwest corner, under the master bath, running along the east wall,” will assist in confirming at a later time that the inspection identified the cracks that the claimant later alleges were not disclosed. 

There are a number of good examples that reflect the importance of detail. For instance, we recently handled a matter where the inspector used a checklist and boilerplate disclosures. Even when reviewing this inspection report in a fair and objective light, the report appeared sloppy and created an undeniable impression that the home inspection was performed hastily and without care. While the inspector maintained that various defective conditions were discussed (verbally) with the claimant during the walk-through inspection, the inspector was left without any solid defenses because the conditions were not disclosed in the inspection report. Had the inspector taken a few extra minutes to disclose the defects in the report, the claim would likely have been resolved for a small fraction of the amount that was paid.

In an alternative example, we also recently handled a claim where the inspector made specific disclosures of numerous defects in a home. The claimant later alleged that the inspector failed to disclose the exact conditions that were fully described in the report. Given this scenario, an impression was created that the claimant was desperate and reaching for “deep-pockets” just for the sake of reaching. The details in the inspection report provided the opportunity to strongly reject the client’s claims. The claim was not pursued.

A detailed account of the conditions in a home is a home inspector’s best defense when a desperate homeowner tries to recapture lost value through a claim.

We hope that these scenarios provide valuable lessons for all inspectors, thereby reducing their exposure to claims and litigation. While not all claims and litigation can be avoided, each inspector should appreciate that it is possible to sidestep certain obvious pitfalls.