In the first scenario, young first-time home buyers used all their financial resources to buy a house and, just months after purchasing their home, there was a major problem with the plumbing. Their plumber advised them that the faulty plumbing was not up to code, it had substandard materials, merely clamped to the exterior walls and buried only an inch or two deep across the yard, exposing the pipes to the desert temperatures. The Seller Property Disclosure Statement (“SPDS”) failed to disclose any plumbing problems, as the sellers repaired the plumbing themselves, and the buyers used the services of the home inspector that their real estate agent told them to use. The repairs exceed their finances. Is anyone liable?
In the second situation, other home buyers wanted to enclose their porch shortly after their purchase, but the inspector for their building permit advised them that the porch was so seriously out of code that they need to tear it down so they did not risk it falling on their children’s swing set. Their SPDS did not give any indication of problems and they, too, used the home inspector recommended by their real estate agent. This will cost thousands of dollars, as well as a portion of their home. Is anyone liable?
Both of these home buyers paid for home inspections before purchasing their homes. If a home inspection does not identify these problems, what good are they? And can you sue them for missing these serious problems?
Arizona statutes regulate home inspections, defined as follows:
“Home inspection” means a visual analysis for the purposes of providing a professional opinion of the building, any reasonably accessible installed components and the operation of the building’s systems, including the controls normally operated by the owner, for the following components of a residential building of four units or less:
(a) Heating system.
(b) Cooling system.
(c) Plumbing system.
(d) Electrical system.
(e) Structural components.
(f) Foundation.
(g) Roof covering.
(h) Exterior and interior components.
(i) Site aspects as they affect the building.
(j) Pursuant to rules adopted by the board, swimming pool and spa.
A.R.S. §32-101.B.17.
“Home inspection report” means a written report that is prepared for compensation, that is issued after a home inspection and that clearly describes and identifies the inspected systems, structures and components of a completed dwelling and any visible major defects found to be in need of immediate major repair and any recommendations for additional evaluation by appropriate persons. A.R.S. §32-101.B.18.
“Home inspector” means an individual who is certified pursuant to this chapter as a home inspector and who engages in the business of performing home inspections and writing home inspection reports. A.R.S. §32-101.B.19.
Arizona statutes and regulations require home inspectors to be of “good moral character and repute,” successfully complete 84 hours of training, meet competency standards, pass a written exam, comply with continuing education requirements, and provide financial assurance in the form of errors and omissions coverage or post a bond before any fees are charged for home inspections. A.R.S. §32-122.02 and Board of Technical Registration Rules of the Arizona Administrative Code Sections R4-30-101 et seq.
In addition to licensing, home inspectors may join a trade organization, the American Society of Home Inspectors, (“ASHI”), which, much like the Association of REALTORS®, holds the home inspectors to a higher standard than the regulators, as well as a code of ethics. http://www.homeinspector.org/
So with all these requirements, how did those home inspectors miss major plumbing and structural issues? Well, there are good and bad members of every industry. Since a home inspection is an important element in making such a significant purchase, home buyers should verify home inspectors’ licensing and other credentials. And maybe REALTORS® should give home buyers a list of a few reputable home inspectors rather than secure the services of one particular home inspector to prevent the backsplash of blame for the inspector’s oversight.
And why weren’t the home inspectors responsible to those poor home buyers? Home buyers need to read their home inspectors’ contracts. Even though the statute requires financial assurances of errors and omissions insurance or posting a bond, the contracts I have seen often exclude areas from their responsibility and/or limit the home inspector’s liability to the fee paid for the inspection. For example, the inspector for the first couple excluded exterior items from his contract, which made no sense as he did inspect and report about the gas line and the roof, but the contract provision protected his liability. The home inspector in the second situation limited his liability to the $400 fee for the inspection. It was not even worth a demand letter. Yet, the word of both of these inspectors was relied upon to make the largest purchase of these couples’ lives. What can a home buyer do? If the home inspector’s contract limits their areas of liability or limits their liability to the fee, negotiate the contract or find another home inspector!
In addition, a home inspector is not necessarily the only professional on whom to rely. The Residential Resale Real Estate Purchase Contract form of the Arizona Association of REALTORS®, includes a “Buyer Attachment” that urges buyers to hire inspectors specifically qualified in mold, roof, pest control, pools and heating/cooling. REALTORS® also may want to distribute to their home buyers the Buyer Advisory published by the Arizona Association of REALTORS® https://www.aaronline.com/wp-content/uploads/2016/03/Buyer-Advisory_09Mar2016.pdf
Furthermore, buyers should actually verify termite inspections, as I had one home buyer whose seller provided a fraudulent termite certification and the house was horribly infested, yet the home inspector did not discover the recent plaster and paint.
While the recommendation to investigate more and have inspections by additional professionals may cost a bit more time and money than hiring the one home inspector that someone else used, it may save the home buyer thousands of dollars in home repair, the buyer’s frustration and unexpected expense when they discover major problems with their newly purchased home and the potential for legal fees to all involved in the transaction.