Pre-Listing Inspections

by James L. Goldsmith
April 2021

A home inspector client of mine told me his business is approximately 10% of what it had been prior to this unprecedented sellers’ market. Buyers know, believe or assume that in order to have an offer accepted they must waive financing and due diligence contingencies. So what happens down the road when these buyers find undisclosed defects? Do they have recourse?

Buyers who discover defects within a relatively short period of time following settlement, are likely to assume that the sellers had knowledge. Proving that a seller had actual knowledge of a material defect by the requisite degree of proof is not easy. Meeting the burden of proof and the expense of litigation will turn off a portion of these buyers. Some will consider an alternative target, the buyer agent!

I am already seeing these suits. Buyers are suing their agents claiming that as buyers they were “told” to waive inspections. Hopefully for the buyer agent, this was not the advice given.

Buyer agents are duty bound to discuss the present day hurdles to getting a home and the downside to buying a home in this market. It is also appropriate to suggest that buyers consider staying out of the market for the present time. Buyers don’t always remember the oral advice given and for some broker clients I put these admonitions in writing (another form) for the buyers to sign. Consider doing the same.

Consider also, you listing agents, having pre-listing inspections for the purpose of warding off claims against your sellers and you for undisclosed defects. Sellers can choose to repair conditions before listing or sell the property as is. But by providing a copy of the inspection report, the condition is revealed and risk of suit is reduced. Buyers must understand that they will have no recourse against the inspector should the inspector have missed anything material as they did not contract with the inspector. There is nevertheless a dramatically reduced risk of suit against the seller and the listing agent when pre-listing inspections are performed. And, with the likelihood of acquiring property with a major defect reduced, there is less risk to the buyer agent as well, making the pre-listed-inspected home an even better buy.

Mr. Goldsmith is an attorney with Mette, Evans & Woodside and serves as outside legal counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends Realtors® in disciplinary hearings conducted by the Real Estate Commission. Jim was one of the voices of the PAR Legal Hotline for the first 27 years following its inception in 1992.

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