Pennsylvania Association of Realtors Tightens the Home Inspection Trap
Real estate contract documents are created to serve as a neutral starting point in a real estate deal. Why the Pennsylvania Association of Realtors Standard Forms Committee would want to make changes that may upset the balance is beyond me.
Back in October 2014, I wrote an article entitled "Don't Get Caught in the Home Inspection Trap." The article explained the process and practices undertaken relative to home inspections associated with a residential real estate transaction. The article focused on a condition of the sales agreement that requires the buyer to provide inspection reports to the seller if requested or with a written corrective proposal.
The practice, or the trap, as I put it, is once the seller receives the inspection reports they are obligated to disclose findings or, what could be considered, material defects as stated in the report. If the seller declines to abide by all buyer corrective proposal requests that buyer could terminate the agreement of sale and the seller would have to sell the home to someone else and disclose all material defects if any, listed in the report or amend the Seller Property Disclosure Statement to include any like findings. The unwitting seller is left in a kind of trap and either has to give in to the buyer's requests or deal with the contents of inspection report, no matter how vague, and figure out what a material defect may or may not be and how to handle all that before selling the home to someone else. One could see how the inspection report could be used as a weapon of negotiation.
The Trap Gets Tighter
Recently the Pennsylvania Association of Realtors Standard Forms Committee decided to make some changes to how inspection reports are handled. As stated by the Standard Forms Manager for the Pennsylvania Association of Realtors, "The buyer must provide all inspection reports to the seller following inspections. The contract will now specify that inspections reports must be provided in their entirety and all circumstances following inspections. Whether the buyer accepts the property, terminates the agreement, or wishes to negotiate a change to the agreement, all inspection reports must be provided to the seller."
In my opinion, the whole idea behind mandating that the buyers purchased home inspection reports MUST be submitted to a seller and the seller MUST accept them is a bit far-reaching. The entire practice of forced information wreaks as mistrust of all sellers. It has a "What are you trying to hide" feeling and, I believe, creates an imbalance in the standard agreement. Remember, perception matters!
Consider this; sometimes a home seller does a pre-listing home inspection using an inspector they hire and pay. Buyers often do not accept the inspections performed on behalf of the seller. Why? Many homebuyers do not trust the "Seller Hired Inspector" and choose to have their home inspection done by someone they hire to work for them. They are often present at these inspections and can influence the outcome. I understand how a buyer may feel and how they would want someone they hired to evaluate the home on their behalf. That said, why would we force the buyer's home inspections on the unwitting seller who did not pay for, choose, or hire the buyer's inspector(s)? Do we not afford the seller the same discretion?
To further complicate matters home inspectors are not licensed by the state of Pennsylvania. In 2017 PA House Bill 1001 was passed. The bill would establish statewide standards for the profession and the home inspection report. That bill has stalled. Why would we put such a high handling priority on reports from home inspectors that are not licensed with the state but make delivery of the reports they create for their buyer clients a mandatory part of the state agreement? I believe in home inspectors and think they provide a tremendous service and hope the state offers them licensure. Licensing could create a more uniform way of reporting on a property.
Further Reading ~ Opinions, and Options
Pennsylvania Property Disclosure law states that every residential sale must include a Seller Property Disclosure, excepting bank sales (wonder how they got around that, lobbyists). In the case of an executor, administrator or the like, who may have no relevant knowledge of a property they are selling, they have the option to leave all answers blank but still have to sign and submit. A pre-list home inspection would go a long way in this scenario. With no property disclosure information, it is even more likely the buyer will do their own inspection and, as the contract states, dump all inspection reports on the executor no matter what the outcome of the transaction. Instead of the report being from the inspector representing the seller, it will be from the inspector representing the buyer.
Licensed home inspectors would be a good thing. I believe that having home buyers and sellers work directly with state licensed home inspectors who understand the state disclosures and supporting documentation would go a long way in keeping real estate agents out of the inspection advice business. In my humble opinion, agents get too far down the liability rabbit hole when dealing with the home inspection and contracting advice stuff. You would not want your chiropractor negotiating a liver transplant even though they are both in the medical field. Just the same, you may not want your real estate sales agent navigating what to ask for relating to home repairs that involve major contracting components of the home.
The buyer and their representing inspector can deliver a clear and concise reply stating clearly what the buyer desires the seller to do, no reports needed at all. Of course, the seller would still have the option to receive any reports related to any requested work, in writing, as an option ONLY! If a licensed home inspector also represented the seller, that inspector could navigate that part of the deal much the same as a mortgage broker deals with the financing part of the transaction.
No complaint should go without a solution. What if...
The Listing Contract could have a section where the seller could opt to have a pre-list home inspection completed prior to the home being offered for sale or waive that right. If the seller opted to do the inspection, the home inspection company could work with the seller in preparing the Seller Property Disclosure as a service. If the seller chooses not to have the inspection completed they would submit their Disclosure Statement much the way it is presently done. This practice may lead to many more pre-list home inspections which I think is a good thing for the industry at large.
My temporary solution would be to advise the seller of the potential issue of the home inspection as I outline in this article. The seller could consider a purchase contract that has the understanding that; the buyer or buyer's agent shall not deliver ant inspection reports to the seller or seller's agent at any time unless formally requested by the seller, in writing. Failure of the buyer to comply with this condition will be considered a default of the terms of the Agreement. This paragraph supersedes the agreement language outlined in paragraph 13 of the Agreement.
Please note, I am not an attorney, and the previously suggested language should be considered an example only. Consider consulting an attorney when adding any language to an Agreement for the sale of real estate.
In the end, most people simply want to be treated fairly and honestly. The perception that sellers are looking to deceive homebuyers relative to the condition of their home is often nonsense. The Pennsylvania Association of Realtors Standard Forms Committee, in their infinite wisdom, somehow feels they must try to put an end to any seller disclosure deception by making everyone swap home inspections. I think the new language could lead to more sellers not allowing the would-be buyer to perform any inspections of their home. The sellers may fear the buyer's report and that their home may be forever stigmatized and its value negatively affected. Unfortunately, the sellers not allowing home inspections would likely be an injustice to all involved and result in fewer home sales overall.
I always contend that no matter what the real estate industry throws at us having an educated, well-trained Realtor, with plenty of experience is the best remedy for any real estate situation.
Knowledge is Power!
Jeffrey C. Hogue