Friday, February 28, 2014

Buyers Should Always Hire Their Own Inspectors

Home inspections are the most common type of pre-closing inspection in residential real estate transactions. In the WB-11 Residential Offer To Purchase, the buyer's offer can be made contingent on a licensed home inspector completing an inspection that does not report any defects in the property. Assuming that the seller does not have the right to cure, the buyer may be able to back out of the purchase if the home inspector reports any defects - any conditions that would significantly reduce the value of the property, impair the health of its occupants, or reduce its expected life. Home inspections have helped buyers back out the purchase of properties with sinking foundations, sagging roofs, black mold, and other defects.  

Buyers select, contract with, and pay for their home inspector. If a home inspector fails to report on any defects, he may be liable to the buyer. Consequently, the home inspector has an incentive to do a thorough inspection for the buyer.

Properties not served by municipal water and sewer are often contingent on inspections of the well system and the private sanitary (septic) system. However, these contingencies are a different animal. The standard Addendum A To Residential Offer To Purchase normally requires the seller to select, contract with, and pay for well and septic system inspectors. These contingencies are deemed satisfied unless an inspector reports that one of these systems is disapproved for current use.

Trouble is, a lot of failed well and septic systems have not been disapproved for current use. Buyers want a well that doesn't run dry and a septic system that doesn't result in wastewater backing up in their sinks, toilets, and basements. The standard contingencies only address disapproval for current use.

Even worse, well and septic inspectors hired by the seller owe their loyalty to the seller; they may be inclined to say "move along people, nothing to see here!" While well and septic inspectors hired by the seller could be liable to the buyer, these inspectors have legal and factual defenses based on their lack of a contractual relationship with anyone other than the seller.

A new well can cost over $10,000, and a sanitary mound system can run you over $20,000. For that reason alone, buyers should make their offers contingent on well and septic system inspections completed by inspectors that they select, contract with, and pay for. These contingencies should only be deemed satisfied if and only if these inspectors do not report on any defects in these systems. Otherwise, the buyer risks purchasing a property with a legal well that only produces two gallons of water per minute and a legal septic system that occasionally fills the basement with wastewater.