Can You Sue An Inspector After A Report Filled With Errors Kills A Deal?

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. 

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

Should I Convert My Garage Into Living Space?

Dear Dave,

I own an older home, built in the 1980’s. I’m doing some upgrades this spring and am considering adding on to it. I recently saw a home that was a similar age and when they remodeled they turned the two car garage into a living room and opened up the adjoining wall into the house. Something like this might suit our needs perfectly. What are your thoughts on this? Is it good for potential resale or would I be better off leaving it as a small garage and not adding living space.  Thanks. I would appreciate the advice.

John - Grand Junction, CO

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John,

This one is a tough one. If you need extra living space, it does not get any more convenient or inexpensive than to convert the garage to a new living room or couple of bedrooms. Keep in mind that the conversion does come at the expense of valuable resale space, the garage. I am one of those who believe the garage is sacred space!  Where would one put his duck decoys, bikes (motor or pedal), ATV’s, kayaks, canoes, dog kennels, gun safes, hunting gear, tool boxes, work bench, etc.? I am sure you see my point. A garage, especially here in Western Colorado, is valuable space and hard to replace. Oh, and I nearly forgot, you might even have enough room to park your car!

For resale purposes I am of the belief that the conversion will generally cost you money and not increase your value. That being said, if you convert and add two bedrooms and go from a 3-bedroom home to a 5-bedroom home, you might find someone who has a large or blended family that has a specific need for the extra bedrooms. In this specific scenario I could see the possibilities of the conversion adding value. Outside of this specific situation I think the loss of the garage outweighs in cost and function the addition of added living space.

The last thing to consider is to go ahead and make the conversion, but do so in such a way that you will be able to easily convert it back when/if you sell in the future. By doing this you will have a cost effective addition and keep the flexibility to convert it back easily. This is a common practice and is easy to remedy when the time comes to sell.

As you can see, I am a fan of garages and believe that having a garage is an important and valuable feature. I will close with this, if a conversion will fit the needs of your family perfectly, then go ahead and do it and enjoy living there with the added living space. Converting and then converting back in the future will surely be less expensive than selling and buying. If the rest of the house fits your needs, just convert and do so in a way that leaves you the flexibility to easily convert back if needed. Hope this helps! 

Dave Kimbrough

The Kimbrough Team

Should We Shop Around For A Lender?

Dave,

Simple question: should I shop around for a lender? I’ve heard it’s good to interview a few different real estate agents before starting the home buying process. Is it the same thought for lenders or are they all pretty much the same across the board because of regulations, etc.?

Thanks man!
Gregg, Fruita

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Gregg,

Clearly you have read my column and realize I can be pretty verbose, but in this instance I think I can keep it fairly short! It is really pretty simple, no two lenders are the same and it is in your best interest to shop around and I am not necessarily talking about shopping around for the best interest rate!

Just like in real estate or any other profession, you want to find someone who works in lending full time! They should have years of experience and knowledge. Most importantly he or she should be up on all the latest lending requirements and programs and know what it will take for you to get a loan approved. I know everyone is human and can make mistakes, however it still amazes me at the sloppiness/last minute rush that some mortgage lenders put their clients through when it comes down to crunch time. I understand there is a load of paperwork that is required from the buyer when obtaining a loan and getting all that paperwork processed is a time consuming process that requires systems and processes to ensure proper handling. As with anything you have to ask questions! 

Some simple questions to find out more about your prospective lender might be:

• 1. What kind of experience do you and your team have? If they don’t have a team working with them, move on….There are too many details that can get overlooked.

• 2. Can I get references? If they don’t readily hand them over, move on.

• 3.How much time do you need to fund? If they hesitate or say more than 45-60 days, move on (30 -45 days is typical).

• 4.Can you guarantee an on time close? Most should not hesitate to give you a firm closing date. Remember you MUST be timely in document submission. Many times, it is not the lender, it’s the buyer who is dragging their feet and that causes a loan to either not close or delay closing.

• 5.What are my estimated closing costs and are there any other fees or costs I should know about? They should be able to provide you a good faith estimate of all your costs right up front.

Clearly you should find out about the interest rate and the closing costs each lender will charge. However, I will drop this little nugget on you…you will not care or be worried about your interest rate and closing costs if your loan hits a major snag 4 days prior to closing and you lose your dream home. Imagine having to scurry about looking for a short term rental or ponder moving in with the in-laws for a few months while you sort out your homelessness. NO THANK YOU! Experience matters! I know cost is always part of the equation, however knowledge, experience, track record and reputation are more important. Trust me, when a deal starts to go bad, you will throw cost out the window in trade for someone who knows their way around a difficult deal and can find a way to get it closed. Even more important is to find a lender that never lets you get near a situation like I described above. 

Like everything else, do your homework on your lender. No two lenders are created equal and some are better than others. That being said, we have some wonderful lenders in this town who do an excellent job and are really quality people! Another good way to evaluate a lender is by reading online reviews. 

So much for keeping it short! I guess there’s always next time. I hope this helped.

Dave Kimbrough
The Kimbrough Team