By Lee Warren, Prospect Inspectors, Inc., Professional Inspector License #8411 and member of CCAR's Affiliate Committee
With the availability of houses for sale in such short supply, many buyers are turning to new home construction to find their new dream home. New homes can provide a buyer an opportunity to get exactly what they want in a home as it relates to layout and cosmetic details that they might not be able to acquire in a preowned home.
This current market has seen some drawbacks to the purchasing of new homes, however. Some builders are offering less commissions to buyer agents, canceling contracts with buyers to list the house at a higher price, and some are making it much more difficult to get a new home inspected.
Some builders are using a different tactic when it comes to a buyer wanting to have their home inspected. They may tell the buyers that they can have their inspection and not mention any contingencies at that time. They will get the buyer under contract, and all seems to go well. Then, when the buyer wants to have the inspection done, the builder representative tells the buyer that they simply need to have their inspector sign a form. Sounds simple enough, right?
What they don’t tell you is what is on that form. The form states a list of items that the inspector must agree to prior to being able to perform the inspection. Some are requiring that the inspector carry $2 million worth of insurance. The state requires inspectors to carry $100,000 in insurance. TREC did a study recently that showed that of several insurance carriers that supply insurance for inspectors, only one claim in the last 14 years actually got to the $100,000 limit. The requirement for $2 million is excessive and has no justification.
Another item on the form states that the inspector will not go on the roof and will not pull the cover on the electrical panel or other equipment, citing that by doing so would invalidate their warranty. Those items are required by TREC for inspectors to inspect.
The most substantial item on the list is that the inspector must waive their right to hold the builder liable, should the inspector get injured or die—even through the gross negligence of the builder.
A substantial number of licensees will not sign this form due to the liable position that it puts the inspector in. Therefore, no third-party inspection will be performed.
As a REALTOR®, make sure that you do your research on builders prior to having conversations with your clients about them. Ensure that they know the risks that they may take on.