Barry Stone - House Detective

Tuesday, October 16, 2007

Dear Barry,

We bought our first home during the frenzied real estate boom of 2004. It was a seller's market, so we agreed to an as-is purchase. Our real estate agent told us that a home inspection had already been done for a previous buyer who had backed out of the deal. To save money, she suggested that we forego hiring our own inspector. Because she is a personal friend, we trusted her and signed a form that waived our right to an inspection. This, as it turned out, was a big mistake. Shortly after moving in, we began to have recurrent plumbing leaks. When we contacted the seller, he admitted knowing about these problems but not disclosing them because he had repaired the pipes himself and didn't think they would leak again. We finally hired a plumber who opened the bathroom wall and found the seller's substandard repair work that will now cost $1,200 to fix. We also encountered air-conditioning problems, with a repair estimate of $3,800. When we called the seller about this, he said that our waiver of a home inspection relieved him of the obligation to disclose. How do you advise handling this mess? --Brenda

Dear Brenda,

As you say, declining a home inspection was a big mistake. In fact, it is never wise or prudent to forego a home inspection, regardless of the circumstances. Even when there is a report from a previous transaction, you have no assurance that the inspector who made that report was qualified, experienced or thorough. Unfortunately, too many real estate agents are uninformed in this regard and often give the same faulty advice that you received from your agent. As a personal friend, her counsel may have been well intended, but she needs to learn from this occurrence that such advice should never be given to any buyer.

The seller's position is indefensible. He has clearly violated the ethical standards of real estate disclosure -- a matter of law in most states. He states that he was aware of specific defects with the plumbing and air-conditioning systems but chose to withhold that information. His denial of responsibility on the basis of a declined home inspection is totally groundless. His obligation to disclose known defects is an entirely separate issue from any inspections that did or did not take place. Home inspections do not absolve sellers from their requirement to provide full disclosure to buyers.

Your first step in addressing this mess is to realize that there are more undisclosed defects than you have yet discovered (whether few or many is not yet known). The only way to get the full picture is to hire a home inspector of your own -- someone with many years of experience and a reputation for detailed disclosure. Once you have a comprehensive report of property conditions, you'll be prepared for the next stage of communications with the seller. Given his unwillingness to cooperate in a fair and equitable manner, a letter from your attorney might be needed to awaken his serious attention.

To write to Barry Stone, please visit him on the Web atwww.housedetective.com.

Disclosure Process Has Defects of Its Own

By Barry Stone
Saturday, February 24, 2007

Q: DEAR BARRY: I have bought homes in several states, and I find the practice of real estate disclosure to be an unethical mess.

In some states, disclosure is mandatory for sellers and agents, while in others the laws are full of loopholes. Sellers rarely know what defects to disclose, and the agents wouldn't recognize a defect if it was labeled.

But the real slap in the face is from agents who recommend incompetent home inspectors. I never know the true condition of a home until I move in.

If I then complain about the lack of disclosure, the sellers claim that they didn't know, the agents pass the legal buck to the home inspector, and the inspector recites a list of disclaimers in the inspection contract. Disclosure, it seems, is a sad joke, but everyone is safe behind the letter of the law.

This may be a rhetorical question, but whatever happened to disclosing defects simply because it's the right thing to do? -- Harold

A: DEAR HAROLD: There are two types of problems with defect disclosure, as you have pointed out. The first is that many sellers, agents or home inspectors can't or don't provide adequate disclosure. The second is that some fail to recognize the ethical importance of disclosure.

Sellers in most states must provide a written statement of known defects. These disclosure statements rarely contain pertinent information because homeowners seldom see and probably wouldn't recognize most defects, such as improper wiring in a breaker panel or a chimney defect in the attic. Sellers who are serious about disclosure should hire qualified home inspectors for presale inspections.

Real estate agents in most states are required to disclose what they know. How well they comply with that requirement varies.

The litmus test of disclosure ethics involves the home inspectors to whom agents refer their trusting clients. Agents become familiar with the abilities of local inspectors. They know which inspectors are more or less thorough. These impressions are widely discussed in real estate offices. For truly ethical agents, only the most thorough inspectors will do. To the ethically disabled, the most thorough inspectors are known as "deal killers."

Home inspectors vary widely in their abilities to discover and disclose defects. That's because home inspection is a learn-as-you-go business. It is not possible to be qualified at defect discovery without having been a full-time inspector for several years.

This means that new inspectors learn their trade at the expense of the first customers. After several hundred substandard inspections, new inspectors begin to catch on. After a few thousand, they're truly competent.

Buyers can obtain adequate disclosure if they understand these realities. When you buy, don't expect much in the way of disclosure from sellers or agents. They probably don't have much to disclose and may or may not be committed to disclosure.

Instead, try to find a home inspector who is truly qualified: someone who has many years of experience, who has inspected thousands of properties, and who has a reputation for detailed, uncompromised thoroughness. A top home inspector will provide the disclosure you're seeking, and for once, you'll know what you're buying before you buy it.

Barry Stone is a professional home inspector. If you have questions or comments, contact him through his Web site, www.housedetective.com, or send mail to 1776 Jami Lee Ct., Suite 218, San Luis Obispo, Calif. 93401.

Greedy Real Estate Agents - But real estate agents' greedy behavior could backfire

Tuesday, February 06, 2007

Dear Barry,
There's a home inspection subject you've touched on from time to time but have never fully addressed: the problem of Realtors who won't recommend the best home inspectors. I've inspected homes in the Midwest for more than 15 years and have performed more than 7,000 inspections. My reputation for thoroughness is widely known among local real estate agents, but this has not been good for my business. Instead of referring me to their clients, most agents have labeled me as a "deal killer." The inspectors they prefer are not nearly as experienced or qualified and tend to miss many of the defects that I routinely include in my reports. The home buyers and investors who read your column need to know about this unethical practice. So how about taking it on? --John

Dear John,
You raise the most controversial of all home inspection topics, the one that stirs ire among veteran inspectors and that draws defensive reactions from real estate professionals everywhere.

The very idea that agents are the primary source of home inspector referrals is a clear and obvious conflict of interest. Yet most home buyers never seem to give this a thought. They simply hire the agent's favorite inspector, without asking if this is the best one available.

The dilemma for agents and brokers is obvious: They make money when transactions are closed. Transactions close when buyers are satisfied with the condition of the property. The best home inspectors find more of the conditions that raise dissatisfaction. Less-experienced inspectors don't disclose as many of these conditions, posing less risk to the agent's income. For many agents, the temptation to recommend a less-thorough inspector is too great to resist. When temptation prevails, the lesser inspector becomes the agent's choice, while the thorough inspector is written off as a "deal killer."

But what exactly is a deal killer? The name itself suggests someone who routinely causes deals to fall through. That would be a fair description of an inspector who reports nonexistent problems or who describes defects in an alarmist fashion. But inspectors of that kind are rare. The deal-killer epithet is more commonly applied to those with the greatest ability to discover problems in a home.

Once an inspector has been branded with the DK label, the disrepute spreads like cheap gossip through the grapevine of local agents. When new agents join a real estate office, they are advised by the veteran agents not to use Inspector X, due to his deal-killer status. Eventually, no one who does business with that real estate company has the benefit of the best inspectors available.

Some agents whitewash this exclusionary process with a clever slight-of-hand. Rather than recommend a particular inspector, they produce a list of local inspectors and advise buyers to make their own selection. If undisclosed problems are discovered after the sale, the agent can deny having chosen the inspector. By sheer coincidence, however, the agent's preferred inspector is conveniently placed at the top of the list, hints are dropped as to which inspector is the best choice, and so called "deal killers," in most cases, are absent from such lists or are added for good measure at the bottom.

Is this the common practice of all agents? Absolutely not. Is it the practice of many? Absolutely. So what is the solution? Essentially, there are two answers: one for agents and one for home buyers.

Agents should realize that they are not in the business of selling property. If that were the case, their title would be "salesperson," not "agent." The proper job description of agents is "representing the best interest of clients." The highest expression of true representation is to provide total, complete and unabridged disclosure. When a buyer asks an agent to recommend a home inspector, the actual question, regardless of how it is stated, is "Who is the best home inspector available?" Agents who recommend someone they do not regard as the best are not representing the client's interests and are thereby guilty of misrepresentation. If the ethical commitment to a client is not sufficient motivation to recommend a quality inspector, agents should consider the matter of personal liability. Every defect that is overlooked by a marginal inspector is a potential lawsuit at some time in the future, and such suits are commonly filed against agents who compromise the interests of their clients.

Finally, when you buy a home, practice due diligence. Trust others for suggestions. Trust yourself for decisions and choices. Your agent may be one of the truly honest professionals who recommend only the most-thorough home inspectors. But you don't know that for sure. So compare the qualifications of inspectors. Ask who are the most-thorough, most-experienced, most-qualified home inspectors in the area. You might even come straight out and say, "I want the one they call 'Deal Killer.' "

To write to Barry Stone, please visit him on the Web at www.housedetective.com.