There are two certainties in the real estate business today: real estate transactions are becoming more complex, and lawsuits are becoming a regular occurrence. One key area that is becoming more and more common in claims against real estate professionals is misrepresentation of a property’s physical condition.

Many agents believe that a property disclosure form will successfully communicate any potential problems a property has. This is not always the case. A property disclosure form is somewhat restrictive - it can only disclose what the seller actually knows about the property. This is where a home inspection can be a significant risk reducer. A general home inspection will catch the defects that are often missed during a final walk-through. These are items that would have been obvious to the trained eye of a professional home inspector.

"In many instances, a new homeowner files a lawsuit against their agent and the seller, claiming that their new home has a serious defect," says Bill Ross, Director of Technical Training for AmeriSpec in Memphis, Tennessee. "A thorough inspection would have made the new homeowner aware of any visible and accessible defects within the home and a satisfactory solution could have been negotiated prior to closing. Home inspections minimize post-closing hassles, improper disclosure accusations, and are beneficial to all parties involved in the transaction."

"Agents and buyers are often unaware of the limits and scope of the inspection process," Ross continues. "We are trained to look for red flags that let us know of potential problems but they aren’t always visible."

Douglas Clark, Risk Management Administrator for ServiceMaster Consumer Services, agrees that a home inspection is an invaluable tool in a real estate transaction.

"A home inspection helps everyone in the deal. It’s not just for the buyer, the seller or the agent - an inspection helps hold the entire deal together. The biggest expense in many people’s lives is their home. The last thing they need after the expense of purchasing a new home and moving are the additional costs of replacing a major system or appliance. A thorough, professional home inspection can decrease the risk of such unexpected breakdowns. This will tell buyers what kind of condition the house is in prior to closing and will prevent them from getting any surprises after they have closed on the home."

Some companies also offer a pre-listing inspection along with recommendations on property enhancements. These inspections and recommendations are often a significant advantage during the sales process. Homes that get listing inspections are on usually on the market ½ as many days as those that do not. It helps your client to have as many advantages as possible in today’s competitive real estate market.

After your client understands the value of a home inspection, the next step is finding a good home inspection company to recommend. Here are some important steps to follow when selecting a professional home inspection company:

Check the company’s reputation:

Question how long they’ve been in business, and whether home inspections are their only business.

Consider using a national company:

Unlike local companies, national companies have nationwide representation and a reputation for standing behind their work. National companies also focus on long-term customer relationships and require rigorous training for their personnel.

Ask about their inspection report:

A comprehensive inspection report should include over 400 items throughout the home, covering the categories of structure, mechanical systems, and safety. The findings should be presented in a complete, easy-to-read manner.

Make sure the company has insurance:

Just in case something is missed during the inspection, make sure the company you chose has insurance and the means to correct the problem in case something does go wrong after the sale. Also, verify that the company offers negligent referral coverage that indemnifies you should they miss something during the inspection.

So get sold on home inspections, and watch your transactions go more smoothly, with less negotiation, and fewer post-closing issues.

Published: November 19, 1998

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Dave Crawford is the Senior Vice President of Real Estate Sales for American Home Shield. He is also President of the National Home Warranty Association. He can be reached at (901) 537-8000.