A competent seller’s agent will aggressively recommend the seller retain a home inspector before they market the property. The inspector hired will conduct a physical examination of the property to determine the condition of its component parts. On the home inspector’s completion of their examination, a home inspection report (HIR) will be prepared on their observations and findings, which is forwarded to the seller’s agent.

A home inspector often detects and reports property defects overlooked by the seller and not observed during a visual inspection by the seller’s agent. Significant defects which remain undisclosed at the time the buyer goes under contract tend to surface during escrow or after closing as claims against the seller’s broker for deceit. A home inspector troubleshoots for defects not observed or observable to the seller’s agent’s eye. [Calif. Business and Professions Code §7195]

To greatly reduce the potential of buyer claims and eliminate to the extent possible the risk of negligent property improvement disclosures, the HIR is coupled with preparation of the seller’s Transfer Disclosure Statement (TDS). Both are presented to buyers before the seller accepts an offer.

A home inspector’s qualifications

Any individual who holds themselves out as being in the business of conducting a home inspection and preparing a home inspection report on a one-to-four unit residential property is a home inspector. No licensing scheme exists to set the minimum standard of competency or qualifications necessary to enter the home inspection profession. [Calif. Business and Professions Code §7195(d)]

However, some real estate service providers typically conduct home inspections, such as:

  • general contractors;
  • structural pest control operators;
  • architects; and
  • registered engineers.

Home inspectors occasionally do not hold any type of license relating to construction, such as a person who is a construction worker or building department employee. However, they are required to conduct an inspection of a property with the same “degree of care” a reasonably prudent home inspector would exercise to locate material defects during their physical examination of the property and report their findings. [Bus & P §7196]

Hiring a home inspector

Sellers and seller’s agents are encouraged by legislative policy to obtain and rely on the content of an HIR to prepare their TDS for delivery to prospective buyers.

The buyer’s reliance on an HIR at the time a purchase agreement is entered into relieves the seller and their agent of any liability for property defects they did not know about or were not observable during the mandatory visual inspection conducted by the seller’s agent.

However, for the seller’s agent to avoid liability in the preparation the TDS by relying on an HIR, the seller’s agent needs to select a competent home inspector to inspect and prepare the HIR. Thus, the seller’s agent needs to exercise ordinary care when selecting the home inspector.

The inspection and report

A home inspection is a physical examination conducted on-site by a home inspector. The inspection of a one-to-four unit residential property is performed for a noncontingent fee.

The purpose of the physical examination of the premises is to identify material defects in the condition of the structure and its systems and components. Material defects are conditions which affect the property’s:

  • market value;
  • desirability as a dwelling;
  • habitability from the elements; and
  • safety from injury in its use as a dwelling.

Defects are material if they adversely affect the price a reasonably prudent and informed buyer would pay for the property when entering into a purchase agreement. As the report may affect value, the investigation and delivery of the home inspection report to a prospective buyer is legislated to precede a prospective buyer’s offer to purchase. [Bus & P C §7195(b)]

The home inspection is a non-invasive examination of the mechanical, electrical and plumbing systems of the dwelling, as well as the components of the structure, such as the roof, ceilings, walls, floors and foundations.

Non-invasive indicates no intrusion into the roof, walls, foundation or soil by dismantling or taking apart the structure which would disturb components or cause repairs to be made to remove the effects of the intrusion.

The home inspection report is the written report prepared by the home inspector which sets forth the findings while conducting the physical examination of the property. The report identifies each system and component of the structure inspected, describes any material defects the home inspector found or suspects, makes recommendations about the conditions observed and suggests any further evaluation needed to be undertaken by other experts. [Bus & P C §7195(c)]

Mandatory inspection by the seller’s broker

A seller’s agent (or seller’s broker) is obligated to personally carry out a competent usual inspection of the property. The seller’s disclosures and defects noted in the HIR are entered on the TDS and reviewed by the seller’s agent for discrepancies. The seller’s agent then adds any information about their knowledge of material defects which have gone undisclosed by the seller (or the home inspector).

A buyer has two years from the close of escrow to pursue the seller’s broker and agent to recover losses caused by the broker’s or agent’s negligent failure to disclose observable and known defects affecting the property’s physical condition and value. Undisclosed and unknown defects permitting recovery are those observable by a reasonably competent broker during a visual on-site inspection. A seller’s agent is expected to be as competent as their broker in an inspection. [CC §2079.4]

However, the buyer will be unable to recover their losses form the seller’s broker if the seller’s broker or agent inspected the property and would not have observed the defect and did not actually know it existed. [CC §1102.4(a)]

Following their mandatory visual inspection, the seller’s broker or agent needs to make disclosures on the seller’s TDS in full reliance on specific items covered in a home inspector’s report the seller obtained on the property. If the HIR is relied on after the seller’s agent property inspection when preparing the TDS and the TDS is later contested by the buyer as incorrect or inadequate in a claim on the broker, the broker and their agent are entitled to indemnification – held harmless – from the home inspection company issuing the report. [Leko  v. Cornerstone Building Inspection Service (2001) 86 CA4th 1109]

As the buyer’s agent, remember that home inspection requests and reports are between your buyer and the inspector. Consult, assist and recommend – but leave the selecting to your buyer when you order out that home inspection – even if your buyer is a speculator.

This article was originally published in August 2013 and has been updated.