Inspections can be a crucial part of a real estate transaction. As such, the WRA Legal Hotline fields questions about inspections daily. Consumers and licensees alike wonder which inspections are allowed, when does a party share an inspection report, and who is allowed to share an inspection report, among other inquiries. The following discussion reviews some of the most common questions the WRA receives regarding inspections and the inspection contingency. 

Types of inspections  

What are the different types of inspections?

The three inspections in the WB-11 Residential Offer to Purchase are as follows:

1. Home inspections: Lines 194-195 provide the offer is contingent upon a Wisconsin home inspector performing a home inspection of the property that discloses no defects.
2. Component inspections: Lines 196-199 provide: “This Offer is further contingent upon a qualified independent inspector or independent qualified third party performing an inspection of ________ (list any Property component(s) to be separately inspected, e.g., swimming pool, roof, foundation, chimney, etc.) which discloses no defects.”
   
   The parenthetical prompt after the blank line reminds drafting licensees of the purpose of the long blank line in the contingency. This blank line is for the buyer to state the specific property components or items the buyer would prefer to have inspected by a specialist or that require expertise beyond that of a registered home inspector, for example, a furnace, chimney, swimming pool, roof or foundation. The component inspections are to be performed by a qualified independent inspector or independent qualified third party.
3. Follow-up inspections: Home inspectors recommend follow-up inspections on a regular basis. Lines 200-202 of the WB-11 accommodate this practice by stating the buyer may have follow-up inspections recommended in a written report resulting from an authorized inspection, provided they occur prior to the deadline. In other words, a buyer may have a follow-up inspection if a written inspection report from the home inspector or a component inspector recommends that additional inspections be performed.

Is a sewer scope considered an inspection or a test? If it is an inspection, is it a part of the home inspection, or does it need to be listed in the offer as a component inspection?

With regard to a sewer scope, most often the argument is made that it is not testing because it’s just sending a camera down to look at the sewer line; in essence, it is a visual inspection. Wisconsin-registered home inspectors can offer to observe more property components, such as the sewer lateral, beyond those components that must be observed per home inspector regulations. 

The WB-11 Residential Offer to Purchase includes authority for three types of inspections: the home inspection, component inspection and authorized follow-up inspections. Although there is nothing explicit about the scope of a sewer lateral, lines 179-184 of the WB-11 Residential Offer to Purchase indicate: 

"An ‘inspection’ is defined as an observation of the Property which does not include an appraisal or testing of the Property, 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. A ‘test’ 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. 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. Buyer and licensees may be present at all inspections and testing.”

Arguably, a scope is not a test unless the scope takes samples from the property and there is a laboratory analysis or other analysis of the materials. However, since the WB-11 Residential Offer to Purchase does not definitively provide one way or the other if the scope is permitted under the home inspection, sometimes there is contention between the parties as to whether a sewer scope is permitted. Therefore, the ideal practice is to provide specifically for the scope in the offer when drafting or by amendment.

If a third-party inspector performs the scope, listing the sewer laterals in the component section will avoid any ambiguity and allow the third-party inspector access to conduct the scope. 

Alternately, the fact the sewer laterals are not listed does not preclude the buyer from asserting that by virtue of the offer language, the sewer scope is an inspection that can be conducted by a Wisconsin-registered home inspector.

Learn more about the inspection contingency in the offer to purchase by searching the WRA’s Legal Hottips library by visiting www.wra.org/HottipSearch, selecting “offer to purchase,” and then selecting “inspection contingency.” Also see the inspection contingency information on pages 6-7 of the September 2019 Legal Update, “WB-11 Residential Offer to Purchase — 2020 Edition — Part 1,” at www.wra.org/LU1909. 

Paying for the inspection 

Who pays for the inspection and any follow-up inspection?

Per line 203 of the WB-11 Residential Offer to Purchase, the buyer is responsible for ordering the inspection and is responsible for the cost of any inspection. 

“For informational purposes only”  

An accepted offer to purchase includes an inspection contingency with the right to cure. However, language in the offer says the home inspection is “for informational purposes only.” The buyer sent the seller a notice of defects, but the seller believes that the buyer is not allowed to object to any defects because the inspection was “for informational purposes only.” Is the notice of defects valid?

The language regarding “for informational purposes only” may lead to ambiguity. Although there is a standard home inspection contingency in the offer to purchase, unless that contingency is clearly modified, it would allow a buyer to submit a notice of defects depending on inspection results. Ideally, the offer would have been negotiated to reflect a meeting of the minds. 

Does the phrase “for informational purposes only” mean the buyer does not intend to issue a notice of defects, regardless of what the home inspector finds? If that is the buyer’s goal, rather than including an inspection contingency, the buyer might instead use the additional provisions to include language authorizing the buyer to have a home inspection conducted by a Wisconsin-registered home inspector by a certain date and that the inspection is for information only. The buyer might further include language that the seller’s authorization for the “information only” home inspection does not constitute an inspection contingency. 

If the seller intended for the buyer to be obligated to close no matter what appeared in the inspection report, then why allow an inspection at all? The offer could have been countered to strike the standard inspection contingency and any testing contingencies. If the seller did 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. But then a notice of defects would allow the buyer to get out of the offer, and that does not seem to be the seller’s intent either, and the provision in additional provisions suggested above might have been what the seller had in mind.

If the offer was 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.

See “The Home Inspection in a Competitive Market,” in the May 2021 Wisconsin Real Estate Magazine at www.wra.org/WREM/May21/Inspection. Read more about contract drafting in the January 2021 Wisconsin Real Estate Magazine article, “The Best of the Legal Hotline: “For Informational Purposes Only” at www.wra.org/WREM/Jan21/Hotline. 

Inspection reports  

The listing agent asked for a copy of the home inspection report, but the buyer’s agent believes a buyer is only obligated to give the seller a copy of the inspection report if the buyer asks for repairs or objects to defects. Is the buyer automatically required to provide the seller with a copy of the inspection report after the inspection is completed?

Lines 190-191 of the WB-11 Residential Offer to Purchase provide, “Buyer agrees to promptly provide copies of all inspection and testing reports to Seller.” Therefore, the buyer should provide the seller with a copy of the inspection report, even if the buyer is not asking for repairs or objecting to defects. 

Buyer 1 backed out of a transaction, and a new prospective buyer, Buyer 2, is interested in the property. Can the listing agent share Buyer 1’s prior inspection report with Buyer 2? 

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 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.

A licensee may provide a copy of the first buyer’s inspection report if it has been attached by the seller to the Real Estate Condition Report (RECR) or an amendment to the RECR. 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.

If a buyer is provided a copy of another party’s home inspection report, the buyer should be advised that the prior inspection report is given to provide information only. The statutes regulating home inspectors indicate the home inspector will not be liable to subsequent buyers for any errors or omissions contained in another party’s inspection report. Subsequent buyers may be advised to have their own home inspection performed if they want the home inspector to be liable to them for any oversights. See Wis. Stat. § 440.977 at docs.legis.wisconsin.gov/statutes/statutes/440/xi/977.

Additionally, if the buyers choose to include an inspection contingency in their offer, the 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, per lines 210-211 of the WB-11 Residential Offer to Purchase.

For more information about home inspections and notices of defects, see the September 2022 Wisconsin Real Estate Magazine article, “The Best of the Legal Hotline: Home Inspections,” at www.wra.org/WREM/Sep22/Hotline and the WRA’s inspection flowchart at www.wra.org/InspectionFlowchart.