The best policy is a fresh report for each new buyer

Question: I’ve had a recurrent problem in my home-inspection business. A buyer hires me to inspect a home. After reviewing the report, he decides not to buy. A few days later, a real estate agent calls to say a new buyer wants to see a copy of the report. It is my understanding that the original buyer is the legal owner of the report, so I routinely refuse to provide a copy to other buyers. Some agents have been angry about this, and that has not been good for my business. What should I do?

Answer: Refusing to provide old reports to new buyers is a common practice. For inspectors who wish to provide friendly service to clients and agents, it is an uncomfortable policy to enforce and unappreciated by those requesting the reports. Regardless of the legality and advisability of withholding reports from second buyers, there are two sound reasons for adopting this practice.

Buyers tend to view a report for which they have paid as their personal possession, since their money financed the inspection. In cases where reports have been given to second buyers, first buyers have sometimes become irate, and some have even demanded refunds of inspection fees.

This has encouraged inspectors to withhold report copies from second buyers, and many attorneys who represent home inspectors have supported that position. Whether this is consistent with the letter of the law varies from state to state and has been interpreted differently by various courts.

The other reason to withhold copies has more to do with inspector liability than with ownership of the report. The buyer who pays for the report must sign an agreement, acknowledging the scope and limitations of the inspection and accepting those terms as a precondition to it. Specifically defined in the contract are limitations on the inspector’s financial liability, with lists of conditions that are included or omitted from the inspection.

Buyers who read and sign the contract are informed of these conditions and affirm them by affixing their signatures. But this is not the case with a second buyer who is simply handed a copy.

The second buyer, contemplating a major real estate investment, is basing the purchase decision upon the findings of the home inspector. If those findings are determined later to be incorrect or incomplete, that buyer could hold the inspector liable for damages, even though there was no financial or contractual relationship with the inspector, no fee was paid and no acknowledgment was made regarding the terms of the inspection.

Some inspectors have found a solution. Instead of giving or withholding the report, the inspector meets the second buyer at the property and conducts a full review of the original report. Defects are rechecked to see whether they remain.

In exchange, the inspector receives a signed contract for a reduced price – possibly half the original fee. The buyer gets a full explanation of the property’s condition, the inspector agrees to stand behind the findings in the report, and the transaction is able to proceed.

Will insurer blow fuse over wiring?

Question: When old homes are sold, do insurance companies sometimes require that the wiring be replaced as a condition for issuing a homeowner’s policy? My home is about 40 to 50 years old, and I’m concerned about having to rewire it when I sell.

Answer: Insurance companies typically do not require major electrical upgrades on homes that are 40 to 50 years old. Some companies may refuse to insure older homes that have fused electrical systems rather than circuit breakers, or houses that have knob and tube wiring or substandard service capacity, but your home is not old enough for such conditions to be a concern.

If you encounter an insurer who wants you to upgrade, shop around for another.

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