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The follow-up inspection - who chooses?
By James L. Goldsmith, Esquire
If an agreement of sale is contingent on the outcome of an inspection, who gets to pick the inspector, buyer or seller? I hear a hundred percent of you saying "buyer" and that is what I would say too. The answer is supported by the inspections' paragraph of PAR's Standard Agreement which uses language such as "Buyer may obtain an inspection. . ." or "Buyer may engage the services of a surveyor, title abstract, or other qualified professional to . . ." and the like. And it makes perfectly good sense to have the buyer choose the inspector upon whom the buyer will rely in deciding whether to move forward with the purchase.
There is a less evident reason. When the buyer contracts with the inspector, the buyer may have a remedy or claim if the inspector fails to perform to standards. The remedies may not be available to a buyer who has no contract with the inspector, which might be the case if that inspector is selected by seller.
In any event, conventional practice has the buyer selecting the home inspector. And of course, the buyer agent can help in that process (the cautions for doing so have been the subject of other articles and are beyond the scope of this one). There seems to be less convention, however, when it comes to selecting an inspector who will perform a follow-up inspection.
What do I mean by "follow-up" inspection? Follow-up inspections occur for a variety of reasons. When wood infestation is discovered, the buyer can seek a follow-up inspection from a contractor, inspector or engineer limited to ascertaining whether the infestation has caused any structural damage. Follow-up inspections may occur when a home inspector identifies an issue beyond his expertise and time permits a further inspection (note: the Standard Agreement does not limit the buyer to one home inspection provided that all such inspections occur within the window of time provided by the contingency).
In some transactions, a follow-up inspection is made part of a corrective proposal. For example, the parties may agree that the seller will make certain repairs before settlement and that when completed, the repairs will be evaluated by an inspector to determine that they were correctly performed. It is this type of follow-up inspection that causes the most trouble and is the subject of several lawsuits in which I am defending buyer agents.
The facts of one suit are particularly illuminating. The agreement was contingent upon a wood infestation inspection that revealed evidence of inactive infestation. In this case, the mortgage lender wanted a certification that the past infestation did not leave the property structurally compromised. The buyer agent was relatively new and did not know whom to engage. The listing agent, therefore, agreed that he would obtain a certification that would satisfy the buyer's lender.
The listing agent contacted a home inspector who provided a short note indicating that the prior infestation did not compromise the structural integrity of the property. This satisfied the lender and the transaction closed. After settlement, substantial structural problems were found
The buyer not only sued the inspector who certified the structural integrity, but also the buyer agent for failing to take control of the inspection process and for failing to hire a structural engineer who would be better qualified to undertake the evaluation.
It is hard to justify giving responsibility for inspections and property evaluations to the seller's side of the transaction. Had the buyer selected the inspector, the buyer would only have recourse against that inspector for having done an inadequate job. Because the buyer was not involved in the selection, the buyer can claim that the buyer agent was negligent in failing to protect his interests and that the seller and listing agent hid the defect by selecting an inspector who was not qualified under the circumstances.
Sellers and listing agents should also seek to avoid taking responsibility for the selection of the inspector. To state the obvious, should the inspector fail to detect what should have been detected, then the buyer's ire will be directed not only to inspector, but also the seller and listing agent for their role in a perceived cover-up.
Much emphasis is placed on the inspection process, but, in my opinion, too little emphasis is placed on the qualification of the inspector. Home inspectors are not licensed in Pennsylvania, but are required to carry certain, limited, qualifications. Licensed architects and engineers have degrees and are indeed certified by the Commonwealth of Pennsylvania. They bring another level of scrutiny, which may be appropriate when an initial home inspection reveals the need for a follow-up evaluation. Much information is provided about the inspection process in the agreement on one of the notices pages. This information should be reviewed by the buyer.
Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2013
All Rights Reserved
Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.
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