How To Decrease Home Inspection Liability Claims

Despite significant effort, home inspectors struggle to educate new homeowners on the property they are interested in buying. Undeniably, homeowners have difficulty paying attention to the valuable information offered to them when they are overwhelmed with the many other responsibilities associated with their purchase.

Being so engrossed in the transaction, buyers often forget or don’t listen to what the home inspectors are trying to communicate. Even if you’ve put in honest effort in providing your clients with accurate and comprehensive information, much of it can go overlooked. In Dennis Robitaille’s experience, 95% of client issues were actually addressed in the inspection report, they just didn’t know what they were reading.

tax-468440_640The relevant information found in your inspection report won’t do the client much good sitting on a shelf collecting dust, and will be of little consolation when the owners have already had to deal with that avoidable maintenance issue. The client’s negative feelings regarding this sort of miscommunication can lead to a drain of your time and hit your reputation as well.

This can lead to some issues for your practice down the road if homeowners encounter issues with their new purchase that they weren’t previously aware of. Any experienced inspector can tell you, to work in this field is almost inviting lawsuits at some point or another. As the saying goes, “it’s not if you get sued, but when you get sued”.

Expert’s Advice on Limiting Your Liability

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The internet is littered with stories of homeowners filing against their inspectors and articles authored by small claims lawyers urging owners to file these sorts of lawsuits. Although it has become the norm for inspectors to carry errors and omissions insurance for their practice, the stress of this predatory environment drives many to be compulsive in keeping track of their work and meticulous in how they conduct business.

WorkingRE offers a mountain of suggestions from different industry experts for inspectors to avoid liability:

  • Have clients sign a pre-inspection agreement or contract with a limitation of liability clause
  • Have them sign this agreements ahead of time, before you arrive for the inspection
  • Communicate the scope and limitations of your service clearly both verbally and in writing
  • Stay up-to-date with the latest technologies and practices regarding mold testing, assessment, and remediation, as these standards and regulations are constantly changing
  • Approach every inspection knowing that third parties, such as agents and sellers, may also seek litigation
  • Purchase insurance with incidental coverage for cases where the unexpected happens
  • To that point, know your insurance policy inside and out. Understand what you’re paying for when shopping for insurance
  • The Golden Rule for avoiding liability – write what you see, say what you write, and don’t sugarcoat anything

Prevent Claims by Ensuring a Positive Experience for Clients

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Explore other parts of the web, and you’ll find that most inspectors have established their own practices with limiting liability in mind (this includes even recording audio of all their inspections and  transcribing phone conversations with clients, in case they need to be brought up in court). In their four-part series Resolving Complaints, Carson Dunlop stresses that every inspector handles complaints in fundamentally different ways, but every inspector should take steps to ensure their clients have positive experiences before they complain. If you increase the likelihood of your client being satisfied with their inspection, you decrease the likelihood that they file a claim later on.

We’ve summarized the majority of the advice below:

  1. Use the inspection booking process as an opportunity to ask questions about work the client needs performed, and be clear about issues that fall outside of your scope of business. Give suggestions of where they can find the answers or service providers they need, and communicate with them that a particular issues aren’t addressed by standard home inspections. For example, if a client would like their septic tank inspected kindly inform them that as a home inspector you do not work with septic tanks, and point them in the right direction to find a specialist.
  2. stairs-home-loft-lifestyle (1024x683)Invite your clients to the inspection. Use it as an opportunity to establish reasonable expectations for the work being performed, as well as to establish yourself as a professional and hardworking individual. Clients who do not attend inspections are more likely to be dissatisfied, largely because it limits the amount inspectors can communicate with their clients. Having those hours available to communicate verbally with a client is superior to written reports, since it allows you to make sure the buyer understands what you’re saying. Clarify or stress points that need more attention, or break complicated issues down to make the inspection report easier to interpret.
  3. Define the scope of your inspection in your contracts, and don’t contradict that scope through your words or actions. If you go outside of your contract’s scope of limitations, a court may find that you should have addressed other issues outside of what was previously agreed upon. A contract should set the expectations of the work you plan to perform, and can feature various clauses to limit your vulnerability (such as the previously mentioned limitation of liability clause). Have an attorney write or review your contracts to ensure proper wording.
  4. During the inspection there are several dos and don’ts to follow, some more common sense than others. Be consistent between your verbal and written observations: don’t downplay the significance of an issue in person just to harp on it in the report, this frustrates clients and can lead to the dismissal of the inspection report in court. If you find an issue you’re not an expert in, do proper research before making assumptions and get back to your client with reliable information. Speak in a non-technical manner so that you can be understood clearly, you will be appreciated if you are able to help your client understand their home better.
  5. writing-828911_1280Have clients fill out a pre-possession checklist to complete before buying the property, taking inventory of different visible defects and issues they find before moving in. In the event that a client complains about a stain, crack, bulge, or something of the sort which appeared after your transaction, the absence of said issue on the checklist shows that it must not have been visible during the inspection.
  6. Be sure not to oversell yourself through promotional materials. There’s a difference between claiming quality service and promising “complete peace of mind” or “a total solution”. Stay on the right side of that fine line, as those adverts may come back to haunt you in the courtroom.

The majority of these methods have one goal in mind: be clear about the work that you intend to perform the work you have performed. So often inspectors’ legal trouble derives from miscommunication between two parties and discrepancy in the expectations of the service provided. The number one way to reduce your liability as an inspector is to use every channel of communication you have access to to be as clear as possible.

The importance of keeping complaints low goes beyond just financial or legal concerns. According to Carson Dunlop, only 1% of dissatisfied customers will file a complaint with their inspector, but a dissatisfied customer will tell ten others about their negative experience while a satisfied customer will only tell two. The effect of an unhappy client who doesn’t complain can potentially be much graver than the effect a client who does complain. Especially with the internet as a resource to home buyers something as simple as a poor review on Yelp (justified or not) can drive these potential clients away from your service.

Inspections In The Age Of The Millennial Homeowner

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According to the NAR 2014 Profile of Buyers and Sellers, 24% of homeowners today are between the ages of 19 and 39, and 60% of them are planning on owning a home in the future. Additionally, 33% of buyers are purchasing their very first homes. These individuals know less about owning property than any demographic before them, and they’re married to the idea that a quick and easy solution to their problem is available on the internet. If you want to best educate and help new homeowners, then you need to find ways to connect with them through the digital platforms they now use for all areas of their life.

Coupling the new wave of buyers is a market of older homes. Currently 84% of homes being purchased are not new, meaning that the vast majority of buyers are purchasing properties where maintenance will be a bigger issue than in a recently built property. Proper guidance will be of paramount value to this inexperienced generation of owners in dealing with problems that are sure to arise. These individuals need you to be clear and concise when talking about their home.

person-woman-hotel-laptop-largeBut as we’ve established that style contradicts the detailed method in which home inspections should be performed. A thorough home inspection isn’t necessarily accessible to clients, but a more user-friendly report likely leaves out details that should have been included. It’s a dilemma many inspectors are forced to deal with after it’s too late.

To make things more difficult, inspectors receive pressure from real estate agents to help drive purchases through their funnel. Some contractors in more compromising situations facilitate agents’ transactions by downplaying the importance of conditions that warrant explicit disclosure. Even minor issues that should be communicated to the client can be seen as a derailment of a sale to an agent. There have been cases where agents seek litigation against inspectors because they made note of defects that delayed a purchase decision or ultimately drove potential buyers away. In interacting with multiple stakeholders, home inspectors find themselves engaged in a balancing act of sorts. Inspection reports can’t be too technical or overwhelming, yet they need to be detailed and thorough enough to be useful. Inspectors have an obligation to be explicit in all of their communications, yet some agents expect to downplay certain incriminating observations.

HomeBinder: A Tool to Nail the Balancing Act

Fortunately there are services available to aid in these efforts. Setting up a HomeBinder account for the properties you inspect addresses these issues from multiple fronts, taking a large report and breaking it down into timely, relevant communications that spread out over years instead of days.

HomeBinder simplifies your client’s experience by communicating with them when maintenance is required on their property. A homeowner that failed to heed your warning to pump their septic tank by the end of this coming fall will avoid disaster when they receive an automated HomeBinder email reminding of this maintenance requirement. This reminder email can be branded with your and/or your referring agents’ logo and signature to ensure you remain a positive image in your clients’ minds.

BinderGifHomeBinder also serves as a repository to store any paperwork associated with a property. By setting up and populating an account with inspection reports, checklists, insect radon reports, and more, you can easily provide your clients with a secure and accessible database for reference whenever they need. Superior to email and hard copies, investing five minutes in a Binder on the behalf of a client will guarantee they always have access to your reports whenever necessary.

This simplification of delivery aids in pushing individuals through agent’s purchase funnel, while helping the client avoid issues they may not otherwise deal with properly. Knowing a property comes packaged with its own care assistance program puts prospective buyers minds at ease, since they’re better equipped to take care of issues that will arise.

Providing convenience, reliability, and safety checks through HomeBinder improves the service you offer and helps maintain positive relationships with both your customers and local agents, minimizing liability on your end by making home buying and owning easier. To sign up for HomeBinder’s free trial, navigate to our Inspectors page and click the “Request Free Trial” button. All that is required is an email address and your name, no credit card,  no hassle.

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