PRYING EYES – Reviewing an inspection report prepared for, and paid by, another.

By James L. Goldsmith, Esquire

No, I don’t think it is a sin or even a violation of law for one buyer to see an inspection report prepared for another.  Inspection reports, usually paid for by the buyer, are conducted for transactions and sometimes what occurs in one transaction is relevant to another.  Inspectors do not want subsequent buyers to use the reports they prepared and will often claim that it is illegal for that other buyer to see or use it.  But I have not heard of one inspector seeking to enforce this claim and, frankly, I don’t think it holds much water.  The reason, of course, for making such a claim is that inspectors want to sell their services to that other buyer, and there is nothing wrong with trying to make a living!

As I look at it, the person who stands to lose the most when an inspection report prepared for one is relied upon by another, is that second buyer.  An example will help illustrate.  Suppose that a standard transaction failed because the buyer was not approved for a mortgage.  The buyer and seller sign a release and the buyer gets her deposit back.  Buyer #2 enters the picture and makes an offer that is accepted.  The terms also include a home inspection.  Through an exchange held between the listing agent and agent to buyer #2, buyer #2 learns that the first buyer had a home inspection performed and the report, just several weeks old, says that the home is in remarkably good condition.  Buyer #2 thinks about the cost of the home inspection, and of the fact that a qualified inspector has already been to the property, and asks whether he can review that recent report and perhaps cancel the inspection that he was going to have performed.  The listing agent is pleased with this decision because why risk a second inspection that may reveal a problem when there is already an inspection report that is nearly perfect.  So the buyer reviews the first inspection report, waives his own and merrily proceeds to settlement.

And what is the liability of the home inspector when, just weeks following settlement, a problem arises that should have been forecast by a properly performed inspection?  Had the buyer hired the home inspector, the buyer may have recourse.  The buyer would have to demonstrate through competent expert testimony that a reasonably prudent home inspector would have discovered the problem during the inspection.  But assuming that proof is available, the buyer who relies on a report prepared for another will likely be without recourse.  The distinction is somewhat obvious: buyer #2 had no relationship to the inspector, no contract with the inspector and, furthermore, the inspector had no reason to believe that any other party, at any other time, would be viewing or relying his/her report.

It is a good idea for a buyer to hire his own inspector, regardless of how limited the contractual warranty.  Not only do you get some measure of recourse, you also have a second set of eyes on the property.  Inspections are limited by their nature to the readily accessible and visible areas.  Not all inspectors identify the same tell-tales and clearly there is benefit to having more than one inspector view the property. 
Like any waiver of a home inspection, the buyer should be discouraged from relying on a previous inspection.  Ample forms abound by which the waiver can be clearly identified as the buyer’s and not yours.

Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2013 All Rights Reserved

Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR.  A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees.  He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission.  He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.