Home inspectors want the business of the buyers in your residential real estate transactions. Chalk it up to healthy competitive spirit and free enterprise — who can blame them? But when they start to offer services that go beyond the parameters of a home inspection, the alarms begin to flash. When they offer services that go beyond the bounds of an inspection and stray into testing territory, let’s face it: there may be problems brewing on the horizon. That is, unless the agents in the transaction who are working with the buyers can head this off at the pass.
Home inspection companies can certainly offer other services besides home inspections, provided they are competent and properly credentialed. But the problem is that taking the square peg of testing services and trying to plug it into the round hole of the inspection contingency just does not work very well!
The inspection contingency is built for handling inspections. For example, the inspection contingency in the WB-11 Residential Offer to Purchase begins by declaring in no uncertain terms that, “This contingency only authorizes inspections, not testing (see lines 395-409).” Lines 395-409 lay it all out there and provide definitions of what, for the purposes of the offer, is meant by an inspection and by a test. The definition of inspection contemplates the proclivity of parties and licensees wanting to force that square peg into that round hole and makes a point of saying what an inspection is not. Specifically, an inspection does not include an appraisal or test other than testing for “leaking carbon monoxide, or testing for leaking LP gas or natural gas used as a fuel source, which are hereby authorized.” Testing, on the other hand, is defined as “the taking of samples of materials such as soils, water, air or building materials from the Property and the laboratory or other analysis of these materials.”
The offer makes a very clear distinction between an inspection and a test. Therefore, if the offer does not include a separate testing contingency, then the offer does not authorize the buyer to conduct any test on the seller’s property unless the offer is amended or the test is one of those enumerated within the definition of inspection.
Tips for agents working with buyers
Contractor referral sheet: Brokers who routinely use contractor and service provider sheets or provide them when buyers ask, “Who should I get to inspect the house,” can get ahead of the game by knowing what additional services their listed inspectors offer. The broker can caution the buyer if the inspector offers additional services that go beyond what is authorized in the inspection contingency in the offer to purchase. Note what testing services the home inspector may offer and point out that a testing contingency would be needed for the buyer to use the test results within the context of the offer without creating potential controversy and disputes with the seller. If you provide this information before the offer is written, it may reveal the buyer’s individual concerns and enable the agent to include the needed testing contingencies in the offer.
Include testing contingencies “just in case”: Contingencies may be included in an offer even though the buyer is not initially certain whether they will actually use them. Attorneys are familiar with the concept of “preserving the party’s rights.” In this instance, it may be smart for the drafting agent to preserve the buyer’s rights and include whatever testing contingencies might reasonably be useful. Often agents are reluctant to include contingencies for fear this may discourage the seller and lead the seller to accept another offer. The trick is to protect the buyers by preserving their right to test and at the same time protect the buyers by not overdoing the testing contingencies in the offer. The buyer and the agent must try to find the perfect balance.
Look for home inspectors before writing the offer: Try to convince the buyer to find a home inspector before the offer is written so that they can learn what additional services they might want to have and include the proper contingencies in the offer.
Include the testing contingencies the buyer needs: Make sure the buyer was given the chance, when the offer was drafted, to think about any testing they might want or need or that the circumstances might dictate. An offer for a rural property with a well should provide for a well water testing contingency. A buyer with medical conditions or special concerns may have reason to want certain tests.
Testing contingency criteria: A testing contingency should specify who will conduct the test and who will evaluate the test results, when and where the testing will be conducted, who will pay for the sampling and testing, what credentials must be held by the tester and the lab or other party who interprets and reports on the test results, what standards will trigger the buyer's ability to request remediation or terminate the offer, whether the seller will have the right to cure, and what standards are applied to the curative measures taken by the seller. Essentially, the contingency should address who, what, when, where, how, cost and what will happen if not.
What services do home inspection companies offer?
A quick online review shows that some Wisconsin inspection companies offer a range of additional services. Some services are testing while others may fall into the inspection category. Agents and parties should consider who is the best qualified contractor to conduct testing if the buyer wants some of this additional investigational work done.
Radon testing: The Wisconsin Department of Health (WDH) recommends that individuals certified in a Radon Proficiency Program for Residential Measurement be used for real estate transfers. See Testing for Radon in Real Estate Transactions at www.dhs.wisconsin.gov/radiation/radon/realestate.htm for excellent information and links. Also see “Let Them Inspect, Not Test: When radon seeps into the inspection contingency” in the June 2013 Wisconsin Real Estate Magazine at www.wra.org/WREM/Jun13/Inspection.
Mold and allergen testing: The WDH indicates that, “While testing can be useful in some cases such as for conducting health-related research or investigating fungal species-specific health effects, deciding what to do about mold should be based primarily on visual assessment, knowledge of the building structure, and the history of water damage in the building.” See Mold: Information for Wisconsin Residents at www.dhs.wisconsin.gov/eh/mold for valuable information and resources. Also see the June 2002 Legal Update, “Managing Mold Issues in a Real Estate Transaction” at www.wra.org/LU0206. Similarly see the WDH information concerning allergens at www.dhs.wisconsin.gov/eh/Air/fs/Allergens.htm.
Infrared scanning: Infrared images can capture thermal anomalies and thus can pinpoint water leaks in buildings and roofs, and heat loss from missing or deficient insulation, as well as electrical issues. For information about home energy audits, visit www.energystar.gov.
The extra testing services offered are the square pegs that do not fit into an inspection contingency. The offering of these services by home inspectors raises questions regarding qualifications, sampling without seller permission, proper testing methodologies, expertise necessary to interpret and evaluate test results, and specificity regarding what the seller may do to rectify the situation. A testing contingency is needed.
Other services such as infrared scanning may be poor fits for the inspection contingency because there is no guarantee that a Wisconsin-registered home inspector is qualified to properly use this technology. There are no specifications in the inspection contingency as far as what devices may be used, proper qualifications and training, correct scanning conditions and techniques, and interpretation of the scanning results. Because this is somewhat unusual, a separate provision in the offer may be best.
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.