Home Inspection | Really Needed?| Report Purpose and Application

In this seller’s market, is there still a need for a home inspection? What is the purpose of an inspection report and how can it be applied effectively? This post focuses on answers to these really god questions.

Market conditions are such that realtors are advising clients to not consider using the inspection report to re-negociate their offer. Rather, buyers are told to use the report for information purposes only. Really?

As both a professional engineer and a property inspector, I too would question the value of an inspection when the report is IFI (Issued for Information) only.

Realtors recommend an informational inspection report to their clients to protect themselves and hide behind the liability insurance of the inspector, since the majority of agents do not carry any errors and omissions or liability coverage.  In some cases the realtors choose to be blind to patent defects of a house and the inspection is used to ‘pass the buck’ for finding issues to a third party, the inspector.

Property costs have risen substantially in the last 5 to 10 years, and as a result so have the percentage-based realtor fees. On the other hand, home inspection fees have remained relatively flat over that same time period because of increased competition due to a low barrier to entry (in my opinion) and the inability or unwillingness of any national inspection organization to agree on a minimum fee structure. Yet inspector certification, annual continuing education and insurance costs have continued to increase year after year.

The inspection business has both a broken fee structure (too low) and if the report is strickly IFI then the purpose is also suspect. The fee structure is my issue. However the use of the inspection report as IFI only is just not acceptable and any agent who promotes this should be held to account. This is the issue I want to discuss further below.

If an agent has advised a client not to make the findings of the inspection report actionable, then I would advise the client to choose another agent. The purpose of realtors is to find the best deal for both parties. Limiting discussion on price reduces the agent’s workload but does nothing to improve the lot of the buyer.

The reason that an inspection report is valuable is precisely because major defects are identified. In my world, I consider defects valued at $1,500 to $2,000 as a minimum threshold for being included in a report. Let’s say there are 10 issues that tally $20,000 to $40,000 due to repairs, corrections or end of service life. This is not an unreasonable amount of deficiencies based on my experience. Then I would certainly consider the client to be justified to go back to their agent and insist on an adjustment to their offer.

By restricting the use of an inspection report to information only, the agent does a disservice to the client. I know what’s in it for the agent. But surely the buyer deserves the opportunity to make use of the information contained in the report to get the best negotiated deal possible.