With the revised home inspection statutes now effective as of June 1, now is the perfect time to revisit good protocols when working with home inspectors.
Inspection or testing? The offer contains an inspection contingency but no contingency for radon testing. At the inspection, can the home inspector suggest the buyer have a radon test?
Suggest radon testing, yes; conduct the test, no. An amendment to the offer would be required to authorize testing if a radon testing contingency was not initially negotiated in the offer. When the buyer hires a home inspector, they should be clear about what services the home inspector will and will not provide. The buyer should advise the inspector about the scope of services requested based on the terms of the offer because the activity is authorized by the seller based on the terms of the offer. The current WB offer now contains an optional radon testing contingency. Unless a radon testing contingency was included in the offer to purchase or an addendum, the seller does not grant the buyer or the buyer’s home inspector the authority to test for radon. If testing is not authorized in the offer to purchase, the inspector should not be permitted to conduct a radon test. Arguably, unauthorized testing constitutes trespass.
Working cooperatively with the home inspector should minimize the potential for unauthorized testing. If the inspector disregards the terms of the offer, reaching out to the inspector or the firm may result in a cooperative solution. If, however, the inspector disregards the terms of the contract, it may be appropriate to contact the Wisconsin Department of Safety and Professional Services (DSPS) because the DSPS issues credentials for Wisconsin inspectors and regulates the inspector’s practice. If there is a claim the inspector is not following Wisconsin law or an administrative code rule, a consumer or a licensee may file a complaint with the DSPS. The applicable statutes and administrative code rules relating to home inspectors are available at dsps.wi.gov/Pages/RulesStatutes/HomeInspectors.aspx.
When can a buyer have follow-up inspections, and who pays for them?
The Inspection Contingency in the WB-11 offer is a three-pronged contingency that allows for:
- A home inspection of the property conducted by a Wisconsin-registered home inspector.
- A component inspection of any listed component conducted by a qualified independent inspector or an independent qualified third party.
- A follow-up inspection recommended in the reports of one of the aforementioned inspections.
Per line 203, unless amended, the buyer is responsible for the costs of follow-up inspections.
For the first prong, unless amended, the seller has only authorized the home inspection conducted by a Wisconsin-registered inspector. No other inspectors should be granted access. If the buyer were to deliver an inspection report prepared by a non-Wisconsin-registered inspector, the seller could, in essence, disregard it as an unauthorized inspection.
For the second prong, for each component listed, a qualified independent inspector or independent qualified third party would be required.
The third prong allows the buyer follow-up inspections recommended in a written report resulting from an authorized inspection, provided the follow-up inspections occur prior to the contingency deadline. The follow-up inspections are to be done by a qualified independent inspector or independent qualified third party.
Per the third prong, the seller has already agreed to have the buyer’s follow-up inspections so long as the inspections are done in the timeline of the Inspection Contingency.
The licensee may remind the buyer the pre-closing walk-through is not an opportunity to conduct inspections; instead, it is to assure the property condition is as negotiated in the transaction.
How might the buyer proceed with writing an offer without testing or inspection contingencies?
When the drafting agent is working with the buyer drafting the offer, it is prudent to discuss the pros and cons of inspections and testing. When drafting an offer, the buyer will consider the Inspection Contingency contained in the WB-11 residential offer. See “The Home Inspection in a Competitive Market,” in the May 2021 Wisconsin Real Estate Magazine at www.wra.org/WREM/May21/HomeInspection.
The listing agent received a request for access to the property. The home inspector is not personally known to the listing agent. How to proceed?
Before granting access to the property, it is appropriate to confirm the home inspector is properly credentialed with the Wisconsin Department of Safety and Professional Services (DSPS). In the WB-11, the home inspection section of the Inspection Contingency only authorizes a Wisconsin-registered inspector to conduct the inspection. To assure the inspector is properly credentialed, the cooperating broker, listing broker or seller may request the name of the home inspector and then use the DSPS licensee lookup webpage at app.wi.gov/licensesearch to confirm the credential.
What can the seller do with the home inspection report when the first buyer paid for the home inspection?
Per line of 190 of the 2021 WB-11, the buyer is required to give the seller a copy of the inspection report, regardless of whether the buyer gives the seller a notice or amendment or not:
“Buyer agrees to promptly provide copies of all inspection and testing reports to Seller.”
The obligation to provide the report is a condition of the offer regardless of whether the first buyer paid for the report. Once the seller has a copy, there is nothing in the law or in the offer prohibiting the seller’s use of the report and the information contained therein.
If the first transaction fails, Wis. Stat. § 709.035 requires a seller to amend the Real Estate Condition Report (RECR) prior to the acceptance of a contract if the seller obtains information or becomes aware of any condition that would change a response on the RECR. The seller may choose to attach a copy of an inspection report or test results to the RECR amendment or a revised RECR to accomplish disclosure for future transactions.
Note, the seller is not required to amend a RECR after the acceptance of an offer. If a seller amends the RECR and discloses defects after the offer is accepted, the buyer would have the right to rescind the offer per Wis. Stat. § 709.05(2)(a)(2).
If the seller does not amend the RECR for the benefit of future buyers, the licensee in the transaction has a duty to disclose material adverse facts to the parties, in writing and in a timely manner. A licensee may provide a copy of the first buyer’s inspection report if it has been attached by the seller to the RECR or RECR amendment. If the seller has not attached the first buyer’s inspection report to the RECR, then to guard against any possible confidentiality concerns, the conservative approach says the licensee would not unilaterally provide a second buyer with the first buyer’s inspection report without consent of all parties to the first transaction.
What should a broker say to a buyer who receives a copy of an inspection report from a previous transaction before the buyer submits their offer?
If the buyer is provided a copy of a report from a previous home inspection, for example, a seller pre-listing inspection or a previously conducted inspection for another buyer, the new buyer should be advised that the report is given to provide information only. The statutes regulating home inspectors provide that the home inspector will not be liable to subsequent buyers for any errors or omissions contained in the first buyer’s inspection report. The new buyer may be advised to hire their own home inspector to conduct an inspection if they want the home inspector to be liable for any oversights. Moreover, depending on the timing, the condition of the property may have changed.
Additionally, the buyer will need to take into consideration the content of the prior inspection report as it applies to the Inspection Contingency contained in the offer. The buyer may not issue a Notice of Defects regarding any property condition, the nature and extent of which was known by the buyer prior to the offer. Therefore, if there are defects listed in the prior inspection report, the buyer may wish to draft their offer to provide for the seller to repair or replace defects or offer a purchase price taking into account the described conditions.
Tracy Rucka is Director of Professional Standards and Practices for the WRA.