I've read a couple posts on this site, and a few others, about real estate agents getting sued by their client because a home inspector missed something substantial and it was the agent that referred the inspector to their client. I've read that because of this many agents will adhere to the philosophy of referring a minimum of three inspectors/vendors to avoid this type of litigation. First of all, if you think one of your inspectors might miss something, you probably shouldn't be referring him at all. Secondly, you should find a good quality inspector that also has this in his pre-inspection agreement:
11. HOLD HARMLESS AGREEMENT: CLIENT agrees to hold any and all real estate agents involved in the purchase of the property to be inspected harmless and keep them exonerated from all loss, damage, liability or expense occasioned or claimed by reasons of acts or neglects of the INSPECTOR or his employees or visitors or of independent contractors engaged or paid by INSPECTOR for the purpose of inspecting the subject home.
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Certified Tacoma Home Inspector
Hi Kevin great information. I refer people to one inspector that I know does a great job. I would rather have to deal with issues that are real in the house than to deal with clients after the sale.
With your permission I will copy the information and forward to my inspector. He might already have something like that in the report but I don't remember.
Sincerley,
Bill
Kevin, you're spot on. I'm a Realtor/Broker now, but I practiced real estate law for 20 years, and it is nonsense to pick three names out of the air when you know darn well who the good inspector is. There's no additional legal liability to doing that. It's just an urban myth that there is. And to refer to three when there is one good one is an incredible disservice to your client. Forget political correctness and mythical liabilities. Do what is right and loyal for your client. I write a lot about professionalism or lack thereof on my other blog, Sequim and Port Angeles Real Estate.
Bill-Copy away! I'm here to help.
Chuck-Thanks! I'll be sure to check out your blog.
Hey, Chuck.
All I can say is, "Wow!"
When my Partner went into real estate several years ago, he asked me if he could refer his Clients to me. I asked him, "Do you think I'm the best inspector in San Diego County?" to which you already know his response. The only thing we have to do is disclose to our Clients that we have a financial interest in each other. So far no one has told me to go fly a kite.
Hey, Kevin.
The only problem with your hold harmless clause is that the inspection agreement is between the inspector (Party A) and the buyer (Party B). The real estate agent (Party C) is not a party to the contract. So in many states Party A cannot have Party B sign a contract saying that Party B will hold harmless Party C unless Party C also signs the contract. That never happens, and you'll never find a real estate agent who is going to become a party to the inspection agreement unless he is actually Party B and buying the place for himself.
I believe the proper way to hold Realtors harmless is for the inspector to have a Realtor indemnity clause in his business insurance policies.
Inspectors considering a hold harmless clause should consult with an attorney in their city, county, or state to determine how local laws treat such a clause that one party is not an actual party to.
Excellent information. Our California Residential Purchase Contract includes a clause releasing agents from that liability, but the multiple referral idea is a great one.
Cameron Novak, Broker
The Homefinding CenterTM
Corona, California
Sierra Del Oro Real Estate Agents
Th ebest way for the agent to avoid liability is to find the best service provider, whether it is for repairs, home inspection, appraisal, or a chimney sweep, and refer those people to their clients. This practice of giving a list to the client for them to choose has the potential of them choosing wrong. You may not be held liable, but what is the goal? to avoid liability, or to help your client?
Russel-Thanks for the advice. I agree, one should always consult with their attorney before making contractual changes concerning their business.
Andrew-I agree completely.
Wow, thanks, that was an important tip!
I feel that I am not doing my duties to a client if I send them just a list of names, I have an inspector I trust. I ask them first do you have an inspector in mind? Then if they say no I say you can choose whomever you want, and I can give you the name of the inspector I use when I buy or sell a house as well. They always ask for mine, I also give them a hand out that tells them what type of questions to ask an inspector when choosing one. In this way I feel I have done them a real service, but not forced them to use only one person, I've armed them with knowledge to make a good choice.
Anna,
I would say you've got the best system of dealing with this. Your clients are looking to you for advice, and that's what you are doing. You advise them how to make a choice, and you also tell them about your good experiences with a certain inspector. They can then make an informed decision. Way to go!
I also like Anna's system. Only rarely have I been overruled, so to speak, and in those few instances it was because someone in their family was a general contractor or a home inspector.
I have a list of Personal Referrals that I can provide to my Clients. In order to get on my list, I have to have used them myself at least three times, and been satisfied with the quality of their work, their prices, and their bedside manners, or I must have received 10 recommendations from others about that company or person.
I also maintain a "Never-Use-While-I'm-Alive" list. You don't want to be on it because I don't mind telling people who those companies are (Circuit City and aprosite.com; the others are all now out of business--duh!--or were bought by someone else).
Here in Jacksonville, there are a lot of agents not refering ANY inspectors, and just turning their clients loose on the internet or phone book. I did a job yesterday for a client who's agent fits this description. The agent told the client to end the first inspection early. I was told that the first inspector made this comment "Aluminum wiring is illegal." The agent expalined that this is why she doesn't refer any home inspectors.
One of the things that I do have is a referal indemnity clause in my E&O insurance to cover agentws that refer me.
John,
I can see that comments like that might scare a Realtor, but just turning your client loose with the phone book isn't a good answer either, in my opinion. I've been working with a couple of good Realtors who seem to be happy with my work, listen to the issues with the house, and get them taken care of. It's refreshing to see a professional who is obviously concerned for the client - they realize the importance of a good inspection, and don't take it personally when an issue comes up. They explain it to the client, educate the client, and in the end, everyone is better off.
BTW, do you advertise or make known that you have the referral coverage in your E&O? I do, if asked. I have found a few Realtors relax a little when they hear that.
Thanks for stopping by John! That should be THE reason she should refer one inspector. Then she doesn't have to worry about hearing crazy comments like that. She would then know that the inspector she uses is educated, qualified and won't scare her clients away.
That's a summarily broad statement, "Aluminum wiring is illegal." We use a lot of aluminum wiring down in my neighborhood. I guess it's not illegal out here yet. LOL