This phrase, although often used, can lead to ambiguity, confusion and misunderstandings in real estate transactions regarding inspections and inspection reports. Clear communication and understanding about the offer to purchase, home inspector limitations of liability, and access to property can help to better manage party and broker expectations. The WRA Legal Hotline has fielded several inquiries regarding the confusion that results from the use of the “for informational purposes only” phrase. Read on to find out more. 

Given the competition for the home, the buyer’s offer did not include an Inspection Contingency. The agent working with the buyer now tried to schedule an inspection, stating the reason for the inspection as “informational purposes only.” How should the listing broker respond? 

The inspector should not be granted access to the property unless the parties agree to amend the offer. Per the inspection and testing provisions, the seller has only agreed to allow access per lines 182-184 of the WB-11 Residential Offer to Purchase, which provide:

Seller agrees to allow Buyer’s inspectors, testers and appraisers reasonable access to the Property upon advance notice, if necessary to satisfy the contingencies in this Offer.

Claiming the inspection is “for informational purposes only” is shortsighted when inevitably the report will identify defects. The risk lies in access without a fully formed agreement about how the parties will respond if and when the inspector’s report includes defects. Per both license law and the REALTOR^® Code of Ethics, licensees are to put the agreement of the parties in writing. Therefore, the buyer may instruct the initiation of an amendment. The amendment may attempt to add an Inspection Contingency or, alternately, authorize access for an inspector to conduct an inspection while clearly indicating no opportunity to give a Notice of Defects. Keep in mind the buyer or the buyer’s lender may want repairs and/or adjustments to the price, or may attempt to terminate the offer based on the newly discovered information. Therefore, before agreeing to any amendment, the parties should clearly understand the risks and implications and negotiate accordingly. The seller is well within their rights to refuse any such amendment. 

The seller hired an inspection company to conduct a pre-listing inspection. Before making the offer, the buyer received a copy of the inspection report and was told it was for informational purposes only. What should the buyer do with the information in the inspection report? 

If the home inspection report is provided, the agent should caution the buyer that the seller was the one who engaged the home inspector. Under Wis. Stat. § 440.997(2), the home inspector will not be liable to subsequent purchasers for any errors or omissions contained in the original report. Buyers should be urged to have their own home inspection if they want the inspector to be liable to the buyer for any mistakes. 

Buyers should understand they may not issue a Notice of Defects for items the nature and extent of which the buyer was aware prior to the offer. This is based on lines 210-211 of the Inspection Contingency in the WB-11 Residential Offer to Purchase. The buyer may become aware of conditions in multiple ways: the buyer’s inspection or observation at a showing, the seller’s real estate condition report (RECR), the seller-provided inspection report or a material adverse fact disclosure by a licensee. 

Regardless of the source of information, the buyer would negotiate the terms of the offer based on the buyer’s knowledge. For example, the buyer may account for the information in determining price. Alternately, the buyer may negotiate for the seller to repair, replace or otherwise fix the identified conditions. The Inspection Contingency could be used to have a component inspection of any of the identified issues. However, keep in mind the buyer can only issue a Notice of Defects if the condition is not as described in the report, the RECR or material adverse fact disclosure by a licensee. 

The seller’s counter-offer referred to the Inspection Contingency with the statement “home inspection and testing contingencies are for informational purposes only for buyer.” If the buyer accepts this offer, would the buyer still be able to submit a Notice of Defects and get out of the offer and receive earnest money back?

The language regarding “for informational purposes only for buyer” may lead to ambiguity. Given there is a standard Home Inspection Contingency in the offer to purchase, the contingency, unless clearly modified, would allow a buyer to submit a Notice of Defects depending on inspection results. The prudent response for the cooperating broker is to reach out to the listing broker to determine why the language was included in the counter-offer and discuss the seller’s intent behind the language. Once known, the buyer and seller may negotiate an offer clearly reflecting a meeting of the minds.

For example, if the seller intended for the buyer to be obligated to close no matter what showed up in the inspection report, then why allow an inspection at all? The offer could be countered to strike the standard Inspection Contingency and any testing contingencies. If the seller does not intend to cure any defects, then an inspection with no right to cure may be more appropriate if the buyer wants to know the condition of the property before being bound to close. 
If the offer is not countered to clarify this, litigation may result regarding the apparent ambiguity. Courts generally interpret a contract just as it was written. If there appears to be ambiguity in the contract, the court may look elsewhere to determine the parties’ intent. Another standard rule of contracts is that ambiguities are generally construed against the drafter. To avoid the need for any possible litigation, countering the offer for clear and unambiguous language is preferable.

The seller gave a copy of the buyer’s inspection report to the second buyer “for informational purposes only.” Is this allowed?

A seller may choose to provide a potential buyer with a previous buyer’s inspection report. However, the potential buyer should understand that the previous buyer’s inspection report is only for informational purposes. If the buyer wishes to have the right to an inspection, the buyer must still have their own inspection and thus must check the Inspection Contingency in their offer. For further insight into the use of inspection reports, read “Uncovering the Truth: The Inspection Report When the Deal Falls Apart” in the February 2014 Wisconsin Real Estate Magazine at www.wra.org/WREM/Feb14/UncoveringTheTruth.

Inspection Report Reminders

Is the buyer required to give a copy of the inspection report or testing reports to the seller, even if the buyer does not issue a Notice of Defects? 

Yes. WB-11 Residential Offer to Purchase lines 190-191 state that “Buyer agrees to promptly provide copies of all inspections and testing reports to Seller.” 

Can the seller provide copies of inspection or testing reports to future buyers? 

Yes. Unless otherwise agreed to by the seller and the primary buyer, the seller is not prohibited from providing copies of the buyer’s inspection reports to other prospective purchasers. The seller is under no obligation to the home inspector to keep the report private. Note, however, the listing agent should avoid providing a copy of the report to guard against any possible confidentiality concerns under Wis. Stat. § 452.133(1)(d) because the report may be considered confidential, unless the agent has the consent of all parties to the first transaction. 

Tracy Rucka is Director of Professional Standards and Practices for the WRA.