Are Inspectors Liable if an Inspection Report Has Errors?

Dear Dave,

We have our home under contract and the buyers ordered a home inspection. The home inspection report contains four substantial errors in the areas of heating, cooling, plumbing and sewer system. The inspector misidentified a sprinkler valve as a sewer service cap and reported a possible "active sewer leak" in that area which is nowhere near the sewer line. The inspector may have scared the buyers out of this purchase through these errors, time will tell. 

I was surprised to find that home inspectors are not licensed through the state of Colorado which seems ridiculous considering one unlicensed man's opinion can derail a deal for the seller's agent, buyer’s agent, sellers and buyers. Do inspectors typically buy Errors & Omissions insurance and what has your experience been with sellers suing the inspector after a report filled with errors kills a deal?

Thanks,

Shawn, Loma

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Shawn,

Ugh…I hate this for you! I hate it when things like this happen to unsuspecting and undeserving people.  The picture you are painting here is certainly an ugly one, however a painting that I have seen far too often on varying levels. First, I am sorry about your circumstances and I truly do feel for you and your family. It is likely that your first question was “how is this possible?” and after that answer settled in, feelings of total frustration, disbelief and outrage! Let me start by saying that inspectors are people too and mistakes are just part of being human! That being said, it certainly does not excuse them or make them any more forgivable when the errors appear to be as egregious as these might have been.

Home inspectors are not licensed by the state and are not governed by the state or required to have any amount of standardized or required training. Colorado is one of 20 states that has not adopted ANY licensing requirements. I must admit that most of the local home inspectors do a great job, but I believe they often lose sight of what they are really doing and why they are really there. Believe me, I feel your pain…I personally believe that where home inspectors get themselves in trouble is the same with all of us…they speak before they stop and think something through. Often times they provide an answer or draw a conclusion without really knowing and that is where big problems can start.

“Home buyers trust their home inspectors and trust is a very powerful thing!”

There is a life lesson in this and that is that if you don’t know something, don’t say something that may or may not be true. Explain that you don’t know, but will find out! Sometimes you run across things that you don’t know or are not sure of, and instead of blurting out an answer, you should dig a little deeper to gain full understanding before speaking or drawing a conclusion. We all know that it’s hard to take back words or correct an incorrect report. When it gets to that point, many times the damage has been done. An even bigger issue involved here is trust!

Home buyers trust their home inspectors and trust is a very powerful thing! When you said that the inspector may have scared the buyers off, unfortunately I am confident the home inspector is clueless about his unknown super power: trust. Listen, when a home inspector says it, it MUST be true, at least in the eyes of the buyer. Many times, especially in young home buyers, what an inspector says is treated like the gospel. I believe most home inspectors do not have any idea how much home buyer’s trust what they say and when it is wrong, it can have cataclysmic consequences on a home purchase and everybody suffers.  

I do not believe most, if any, home inspectors carry E & O insurance and, in fact, I believe it is a common practice that the maximum amount of liability for most home inspection contracts is the price of the home inspection. That means that if you paid $400 for the home inspection, the home inspector’s maximum liability would be $400! Lastly, I do not have any experience with sellers suing a home inspector for a faulty report, although I have had many who wanted to. Unfortunately, sometimes mistakes are made and from time to time it can have a significant negative impact that can cause a deal to crumble.

Shawn, I am sorry about your situation and I am hopeful things will work out. Remember, things really do work out for a reason, even if you don’t know the reason. Control what you can control and trust that the rest is meant to be! : ) I know, easier said than done!

Dave Kimbrough
The Kimbrough Team

Do we need an inspection on a new construction home?

Dave,

My wife and I are currently building a house and wonder if we need to get a home inspection even though the home will be new? We don’t want to spend money if it isn’t necessary, but also want to make sure we go through every process correctly. If we do need an inspection, at what point in the building process should we have it done?

Thanks, Josh—Grand Junction

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Josh,

Yes. It is my recommendation that you always get an inspection (especially if the home you are purchasing is NOT new), but I will say that if there is one scenario where it might be o.k. to skip the home inspection it would be in the case of new construction. You have to remember that any new home has been inspected over and over and those inspections have also been inspected. To put it mildly any new construction project has been meticulously inspected from the foundation up and this ensures that each new building has been built to local building codes and is structurally sound and mechanically safe. These inspections catch most mistakes along the way and thus limit the real effectiveness of a new home inspection for anything but minor/cosmetic items. 

A home inspection will cost somewhere between $300 - $450 and my experience is that very few substantive items are discovered on new construction home inspections. Generally items that are discovered are VERY minor, but there have been times where something more significant was found and needed to be corrected. I will also point out that virtually every one of those more significant items would have presented themselves in short order without the home inspection.  From a timing perspective, you should consider the home inspection sometime around the CO, Certificate of Occupancy. If you use this time frame, you can be confident that the home will be mostly complete and all that is left will be mostly cosmetic issues. This is also a good time to do the inspection as any items identified can just be added to the builders punch list to complete prior to close. Although there are no guarantees with getting any home inspection, they do provide some surface level peace of mind. Also remember that every builder will provide at least a 1 year home warranty for your entire home and most of them are willing to help even after that one year if the problem proves to be a material or workmanship issue. 

Ultimately what an inspection on a new home provides is some insurance that there are no major problems with the quality of construction, workmanship or mechanical systems. You have to ask yourself if the peace of mind is worth the cost? I can say that I have not seen a home inspector yet that is as qualified as the general contractor you hired to build your home and the inspections your home goes through prior to getting its certificate of occupancy have been extensive and complete. It is a call you must make, but it is completely understandable if you skip the home inspector on a brand new home!  Hope this helps and hope you had a wonderful Thanksgiving!

Dave Kimbrough
The Kimbrough Team