The following questions about home inspections, the offer to purchase, and the home inspection contingency are frequently asked of the Legal Hotline.
A buyer wants an engineer to inspect the home. Is this allowed? Who can conduct the home inspection?
The WB-11 Residential Offer to Purchase requires the buyer to use a Wisconsin-registered home inspector and gives the buyer the option to name other inspectors for specific property features. Although engineers, architects or other inspectors may have the expertise to inspect certain aspects of a home, they cannot act in place of a registered home inspector and the buyer cannot use their reports as the basis for a notice of defects unless the home inspection contingency is modified to authorize those experts, instead of a registered home inspector, to inspect the home. Lines 97-102 of the WB-11 require the seller to provide access to inspectors only when the inspection is needed to implement or carry out a contingency in the offer.
An agent has received an offer that includes “entire premises” on lines 299-300. What does that change? What does the inspection cover? And what, if anything, should go in the blank line at 299-300?
The blank line should be completed when the buyer wants a “qualified independent inspector” to inspect some specific feature of the property such as the roof, chimney, pool, basement, trees, etc. The phrase “entire premises” has arguably the same meaning as “the property” — it includes everything within the bounds of the described property boundaries (structures, land, landscaping, amenities and all other improvements). The buyer must understand the scope of the home inspector’s inspection. If the home inspection will not include the entire property or premises, the blank line may be completed to allow for other qualified inspectors to inspect those features or components not included in the home inspection.
The agent may want to use the “Home Inspection Handout for Buyers” that is included in the August 2004 Legal Update, “Effective Home Inspections,” online at www.wra.org/LU0408, to familiarize the buyer with the items that are included and excluded in a standard inspection performed by a Wisconsin-registered home inspector. This document explains to buyers the legal requirements of inspectors and those areas they may be asked to inspect in addition.
If the buyer is not giving a notice of defects and is not requesting an amendment, does the buyer still have to give the seller a copy of the inspection report?
Yes. Lines 98-99 of the WB-11 Residential Offer to Purchase require the buyer to provide the seller (and listing broker if the property is listed) a copy of the home inspection report in a timely manner. This is true regardless of whether the buyer is going to give a notice of defects, try to amend the offer or proceed with the transaction.
The inspection contingency deadline is approaching and the inspector recommends further inspections by third-party experts. Is the deadline automatically extended for the experts’ follow-up inspections?
The inspection contingency deadline is not automatically extended for follow-up inspections in the standard home inspection contingency found in the DRL residential offer to purchase. The inspection and any follow-up inspections would need to be conducted within the time allotted unless the parties agreed to amend the offer to purchase. This emphasizes the importance of quickly scheduling and providing ample time for the home inspection. An immediate inspection and a longer inspection contingency gives the buyer more time to consider the content of the inspection report, renegotiate with the seller, obtain follow-up inspections and obtain bids or proposals for repairs.
At the time the offer is negotiated, a buyer may include a trigger mechanism for notifying the seller if the home inspector recommends follow-up inspections. The broker may wish to include language such as, “In the event Buyer’s home inspector recommends professional follow-up inspections, the time for completion of the home inspection contingency shall then be extended by ____ days, and a notice of defects may include defects identified in the follow-up reports, provided copies of those reports accompany the notice.”
Does negotiation of an amendment extend the deadline for providing the notice of defects?
No. Once the home inspection is completed, buyers may begin to negotiate with the seller. This does not change the timeline for delivery of a notice of defects or a home inspection contingency waiver. The contingency will be waived if the buyer does not deliver a notice listing the defects to which the buyer objects, along with a copy of the home inspection report, to the seller by the stated deadline.
Can the buyer dictate the standards, methods and/or materials to be used by the seller should the seller elect to “cure” the defects?
The standard language used in the home inspection contingency provides that if the buyer gives a notice of defects and the seller elects to cure, the seller will cure in a good and workmanlike manner. A buyer requesting a certain contractor, materials or method of repair would need to do so in a proposed amendment, which is effective only if the seller agrees. A notice cannot be used to mandate how a seller goes about making repairs.
Can a buyer’s home inspection report from a prior offer, that did not close, be given to a new buyer? What can the new buyer do with the report?
Wis. Stat. § 709.035 requires sellers to amend the Real Estate Condition Report (RECR), prior to the acceptance of a contract, when they obtain new information or become aware of any condition that would change a response on the RECR. That would be true if the first buyer’s home inspection report revealed new information about the property that the seller had not known. The seller may attach a copy of that report to the RECR as part of this amendment. The new buyer should be advised that the first buyer’s home inspection report is given to supply information only; the home inspector will not be liable to the new buyer for any errors or omissions. The new buyer should be urged to have his own home inspection if he wants the inspector to be liable to him for any mistakes.
The home inspection report reveals conditions that the buyer wants the seller to correct. Should the buyer use an amendment and/or a notice as the buyer works through the home inspection contingency?
It is the buyer’s decision whether to use an amendment and/or a notice. The broker must explain to the buyer what happens if the buyer gives a notice of defects, proposes an amendment or does nothing and proceeds with the transaction. Think of it in terms of a flow chart as the buyer considers how to proceed.
- Does the inspection report reveal defects?
- Does the seller have the right to cure?
- Is the buyer willing to take the property in its present condition?
- Is the buyer willing to lose the property?
- What is the deadline?
Defects reported and no right to cure. The buyer may:
- Proceed to closing.
- Give a notice of defects: the offer becomes null and void.
- Propose an amendment: the seller accepts, rejects or proposes his or her own amendment. If time llows, the buyer may still give a notice of defects — the offer becomes null and void.
Defects reported and right to cure. The buyer may:
- Proceed to closing.
- Give a notice of defects: the seller elects to cure or the offer becomes null and void.
- Propose an amendment: the seller accepts or rejects the buyer’s amendment or proposes his or her own amendment.
- If time allows, the buyer may still give a notice of defects — the seller elects to cure or the offer becomes null and void.
- Give a notice of defects and an amendment simultaneously.
The delivery of the notice of defects triggers the seller’s 10-day time frame to elect to cure the defects or allow the offer to become null and void. A buyer cannot withdraw the notice of defects without the seller’s consent. The amendment, accordingly, should contain not only the items the buyer wants the seller to repair, the repair techniques, the contractors to be used and any deadlines, but also a statement indicating that the parties agree to the withdrawal of the notice of defects. If the seller accepts the amendment, the notice of defects is eliminated and the seller has parameters to observe as the defects are cured.
Tracy Rucka is Staff Attorney & Kevin King is General Counsel for the WRA.