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January 2014

Home Inspection Law

What you don't know can hurt you

By NWREporter

January 2014

Bill RobsonWhen the truck rolls up
You and your buyer are excitedly waiting in the driveway. The inspector strolls up and meets you, tool bag in hand. After an introduction to your client, an inspection agreement form appears, the client signs and the inspection begins. This process has been going on for years, most of the time with little drama. Have you ever asked yourself what, if any, liability you have signed yourself up for each time an inspection takes place? Are you aware of the new Washington State laws regarding residential inspections? Has your inspector explained to you and your clients the Washington State Inspection Standards of Practices? If you answered no to these questions, rest assured, you are not alone. This article will help explain some of the basic knowledge every Real Estate Broker should understand about the inspection process.

Washington State Inspection Law - A Primer
Not that long ago, the real estate inspection business was an unregulated industry and enforcement of the scant rules in place were few and far between. Side deals, under the table payments, and ineffective and unprofessional inspections were not that hard to find. Many inspectors were also contractors (or had deals with them), and the inspection report to the client often was provided simultaneously with a business card offering 20% off the work required. Qualifications for an inspector's license were minimal at best. Legal liability, when the inevitable happened, was apportioned to whoever had the worst lawyer.

In an effort to correct these and many more issues, in 2008 Washington State began the process of turning the real estate inspection industry into a licensed, regulated, professional business. Penalties that sting were implemented. A state Inspection board was created to draft and enforce laws. Strict educational and testing requirements for licensing were put in place. Once a license was obtained, continuing education was required to help ensure only professionals would be retained. By 2009 the basic framework for this new improved industry was in place. Each subsequent year, updates to the regulations were added to refine the industry and reinforce the laws.

Now that the legal standards are established, it's important for Brokers to be aware of the legal responsibilities set forth.

I am a Broker not a Lawyer
Granted. Understanding Residential Inspection law should not be the direct responsibility of the real estate broker. However, when the house collapses under the first snowfall and the lawsuits start flying, ignorance will not be bliss. For that reason, it will be of benefit to every broker that works with inspectors to understand the basics of the requirements, and to understand how to select a professional inspector. Doing so, will help shield the broker from the great majority of the issues that may arise.

Reduce Your Liability and get Better Inspections #1
Yes, both of these goals can be achieved. Let's review some simple actions you can take to ensure a quality inspection for your client, and reduce your liability all at the same time. Your first line of defense - hire an inspector that understands the law, and acts in accordance of it. How can you be sure that is the case?

Six Things Every Broker Should Know About the Inspector
How well you know that inspector in the truck may be the difference between a poor experience and being liable for all of his (or her) mistakes. So let's review the 6 things every broker should know about that inspector and their practices.

  1. Does your inspector have a valid Washington State license? This seems like a fairly obvious question, but have you asked for and recorded your inspector's license number? By law, the inspector must include the license number in any advertising, on his Inspection agreements, and in the reports generated. So ask for it. Does the inspector know the license number? If so he is comfortable with it and is used to sharing it. After you have the license number, check with the state to ensure the license is still valid. Some licenses are lapsed or even under probation. This state site provides a lookup site for inspector licenses: http://www.dol.wa.gov/business/homeinspectors/hiconsumers.html
  2. Does your inspector have current insurance for both E+O and General Liability? Are the limits high enough? There is nothing wrong with asking for a certificate of insurance. If the inspector has valid insurance he will be happy to share this information. If this discussion seems hard to have, consider what happens if the house burns down and the inspector you recommended does not have proper insurance.
  3. Does your inspector identify or provide services for items found in the inspection that are specifically prohibited by Washington law? There are many areas an inspector cannot identify or work on without the appropriate license, such as: WDO pests, asbestos abatement, mold removal, radon remediation, and environmental issues. If the inspector does identify such things without having the appropriate license, this is an indication that the laws are not understood by the inspector or worse, are being ignored. Losing deals by misidentification of pests, or having a buyer discover, after moving in, that the white wrapping on the pipes is asbestos after all, can be expensive lessons.  
  4. Does your inspector offer continuing services after the inspection had been completed? If your inspector does offer to do work, or recommends work to colleagues, after an inspection, you are opening yourself up to a liability bombshell. Washington law says: "Not for one year after completion of the inspection repair, replace, or upgrade for compensation components or systems on any building inspected - this section applies to the inspector's firm and other employees or principals of that firm or affiliated firms. Not provide compensation, inducement, or reward directly or indirectly, to any person or entity other than the client, for the referral of business, inclusion on a list of recommended inspectors or preferred providers or participate in similar arrangements."
  5. Does your inspector provide and retain proper documentation? A valid pre-inspection agreement should be filled out and signed on every inspection. Reports should be fully inclusive and should be reviewed with the client or their agent representative before the inspection service is concluded. All inspection documentation is required to be retained for a period of 3 years after the inspection.
  6. Does your inspector value and maintain the confidentiality requirements as outlined by state law? All information about the inspection, written and verbal is limited to ONLY the client unless they specifically authorize the dissemination of the information to others. This includes their own agent. This authorization by the client must be in writing and should be clearly identified in the pre-inspection agreement.

Reduce Your Liability and get Better Inspections #2
To reduce your liability it is important to understand what the state says must be included in an inspection, and what must not be included in an inspection. Read the Inspection Standards of Practices http://apps.leg.wa.gov/WAC/default.aspx?cite=308-408C for yourself. You do not need to be an expert, nor do you need to keep up with revisions. However, by taking 15 minutes and reading through the standards you will understand the basics. If you have any questions about the inspector's qualifications, you will then have a base of knowledge from which to draw.

Reduce Your Liability and get Better Inspections #3
Make sure your client attends the inspection. This is not always convenient of course, but should be arraigned if at all possible. Questions and concerns can be readily addressed by the inspector if the client is there in person, and most importantly, misunderstandings can be drastically reduced if the client is on-site. Most lawsuits come about because of misunderstandings, so make sure your client has none. If your client cannot attend the inspection, make sure the inspector is willing to meet later, or at least answer any questions on the phone the client may have.

Reduce Your Liability and get Better Inspections #4
Make sure your client understands what the inspection service will and won't provide. A driveway presentation by the inspector should always take place before any inspection is performed. The inspector should be willing to take all the time needed to explain what will be done and what is prohibited. The client should feel free to ask questions and they should only sign the inspection agreement when comfortable to do so. Misunderstandings are far easier to correct before the inspection begins than a month later when they have moved in.

Reduce Your Liability and get Better Inspections #5
Verify that your inspection agreement is a valid, legal document. Have you ever read the agreements your clients have signed? Agreements drafted by reputable organizations such as ASHI or NAHI are easy to recognize and have been crafted by reputable lawyers. Home grown agreements may contain anything, and may not stand up in court. Know what you or your client is signing.

When the truck rolls away
You and your buyer are now excitedly talking in the driveway. The inspector has answered all your questions and has left you both with a thorough, well written report. The client understands what items need to be addressed soon and what items can wait. With a proper understanding of his dream home, the client is comfortable going forward with the purchase. That's the goal for all parties involved.

Taking the time in advance to acquire an understanding of some basic inspection regulations and selecting a knowledgeable, professional inspector will give you the best chance of having that experience each and every time.

Bill Robson is the owner of Clyde's Residential Inspections http://www.clydesinspections.com