Liability of providing MoveInCertified.com vs a regular inspection.

Specific Inspection Topics Seller Inspections & MoveInCertified
1

No comparison, not even close.

In both situations the inspector writes the exact same report.

The only 5 major differences are:

  1. With MIC, some other party certifies that there are no major systems in need of repair and no known safety hazards. Had the inspector failed to report on systems in need of major repair or known safety hazards on a regular inspection, he’d be responsible anyway. MIC just relieves some of this responsibility by making the seller certify that he doesn’t know something about his house that he should disclose. MIC carries far less liability than a regular inspection.

  2. With MIC, there is more time between the time of inspection and the time the buyer moves into the home. Sometimes more than a year. Inspection reports are only good on the day of the inspection, and so the more time between the day of the inspection and the day the buyer moves in, the less liability for the inspector. MIC carries far less liability than a regular inspection.

  3. With MIC, the inspector is working for the party moving *out *of the house, not into the house. There is obviously much less liability working for the seller who is moving *out *of the house that was inspected than the buyer who is moving into the house. MIC carries far less liability than a regular inspection.

  4. With MIC, the seller helps the inspector alerting him/her to defects that the inspector may not have found on his own in 3 hours. On a regular inspection the seller is often not home and his/her assistance isn’t available at all. MIC carries far less liability than a regular inspection.

  5. With MIC, the buyer is not your client at all. And to the extent a that a buyer might be able to argue that he/she could somehow rely on a report when they weren’t even the client’s inspector (no duty), that liability is still much less than a regular home inspection where the buyer CAN CERTAINLY rely on the inspector’s report as the buyer IS the inspector’s client. MIC carries far less liability than a regular inspection.

Anyway, if anyone tells you that MIC carries more liability than a regular inspection they are incorrect by what I calculate to be a factor of 20 to 25. MIC about 1/20th to 1/25th the liability of a regular inspection.

And finally, there is risk in performing all inspections! Liability per inspection is not the correct factor to analyze or compare. Liability per dollar of profit is (one of the reasons I argue that it is better to do fewer inspections at higher fees). Since MIC generates so many more inspections (has huge added marketing value) via prospective buyers and agents getting to view a real sample of the product the inspector produces (the report) and the likelihood of getting the inspection from the seller on the home he/she is buying (moving to), one must consider that the liability of an MIC inspection is not only less than a regular inspection, but that liability is distributed over more profit dollars further reducing the liability per dollar of profit.

2

Nick,

Who certifies what?

3

Jim asks:

The seller certifies that he isn’t witholding information that he should disclose or lying about anything major.

This from www.MoveInCertified.com:

Put another way, rather than the inspector being on the hook to the buyer (his client) for everything he writes or doesn’t write in the report (which actually includes major systems in need of immediate repair or replacement and know safety hazards anyway)… the seller is on the hook to the buyer (not a client of the inspector) for certifying that he/she isn’t hiding anything or lying about anything that he/she knows.

MIC puts people and time between the inspector and the possibly aggrieved party.

4

Let’s play a game called “Pick your Liability”

Door # 1 (regular inspection):

“I just moved into my home and the inspector I hired did not tell me that the roof needed to be replaced!”

Door # 2 (MIC):

“I moved into this home last year and I think that the inspector that the seller hired did not tell him that his roof needed to be replaced.”

Guess what door I’m pickin’…* :cool:*

5

Most items missed by inspectors are obvious as “old existing problems” when the second inspector finds them. The first inspector has a huge liability to the seller if these are missed.

Through no intentions of my own, I heard of a few inspectors that have gotten into hot water after I did an inspection following their “prelisting” inspection.

Examples:
Busted trusses that were obviously busted during original construction.
Floor system rot around porches, decks and plumbing.
Improper and damaged electrical wiring.
Improperly installed condensation drainage systems
Improperly built floor system
Improper roof framing and bracing
Open plumbing vent stubbed into attic
Improper deck construction
Very corroded copper piping.
Wet and moldy crawlspace.

6

So your telling me Nick I’m relieved of all liability once I hand over the report to the seller? Or are you saying both the seller and the home inspector share’s responsibility?

Bill

7

Bruce, regarding your post #5, please explain how “the liability to the seller if these items are missed” is greater than the liability to the buyer on a regular inspection if these items are missed. Why wouldn’t it be less liability? The seller is moving out of the inspected home.

Thanks.

8

The seller will still be in the home when the buyer brings his inspector.

If the buyers inspector finds items that the first inspector missed, the deal could be killed or the seller would have to possibly pay top dollar for repairs or give backs when he could have had time to repair those himself had the first inspector reported those items. The seller could and should be very upset that he spent good money for information and did not get what he wanted.

Many inspectors do quick prelisting inspections and just do not realize the huge liability involved when someone will be “checking” their work very soon thereafter. Inspectors abilities range from D to A+ just like any other line of work out there. If the B, C or D inspector goes in first and the “A” or A+ inspector comes in later, many problems will come to light.

When there is no prelisting or MIC inspection and the buyer has an inspection where his inspector misses certain items, these items may not even come to light until that buyer sells the house many years later. The liability may still be there but much harder to collect on 5-10 years later.

Anyone doing a prelisting or MIC type inspection had better be very good (A+) and also be very very good at reporting. Even if that leaning pier or girder damage does not look all that bad to you, it had better be in the report!

9

Oh. Let me prove you wrong with a proof by extremes, a worst case scenerio:

Let’s say you tell your client (the seller) that his roof is new when in fact it has to be totally replaced. Pretty worst case scenario, huh? Along comes the buyer’s inspector (a competitor who hates you) and says “WTF? The first inspector is a goofball. This roof needs to be replaced!”

Now, had you been doing a regular inspection for the buyer and had you told the buyer the roof was new when in fact it had to be replaced, and he/she buys the home… guess what? Not only would you be liable, but the damages would have been a new roof! ($30,000).

However, in the MIC scenario, the buyer’s inspector catches it while the buyer can still ask for a new roof or credit or walk or whatever… so even though you are just as liable, and even though you have just as much egg on your face for calling it incorrectly… guess what your damages are? ZERO, ZIP, NADA. The second inspector caught it for you in time.

In any legal case there is a liability phase and a damages phase.

So again, even in a worst case scenario, it is better to be WRONG and pay nothing than to be WRONG and pay $30,000.

Thank that competing inspector who hates you… he saved your butt.

10

The seller can turn in the slack inspector to the state and get his licensed pulled. He can also sue because his brother, the roofer was in town during the first inspection and would have done the job for cheap, now he has to hire the only available roofer who is very expensive to keep the deal alive.

Damages? yes.

11

How does the seller (who suffered no damages) turning in the slack inspector, have a better chance at getting the inspector’s licensed pulled than the chances of getting the licensed pulled by a buyer (who would have suffered big damages)?

How can the seller sue the inspector for the bad roof? The inspector didn’t cause the property damage… he only missed it. The seller is in no worse shape with his bad roof than before his inspector incorrectly told him his bad roof was new. He still owns the same bad roof. The seller has suffered no damages and can’t sue for a new roof. Guess who could have sued? The buyer could have on a regular inspection had he/she bought the house thinking they had a new roof. Again, far less liability with MIC than with a regular inspection.

With regard to having time to get bids and find a reasonably priced contractor to fix anything… that time is extended by the seller having an inspection done. Wait till the 11th hour when the buyer does an inspection and the seller could be stuck with a very expensive contractor demanded by the buyer.

MIC has no holes in it.

12

For those of you who don’t understand my second paragraph in post #11, winning damages requires one to prove what is called “causation.”

An inspector doing an MIC and incorrectly reporting a bad roof as new, was NOT the causation of the roof going bad. The seller’s roof wasn’t damaged by the inspector. The seller’s roof isn’t any worse than it was before the inspector inspected it. The second inspector caught the mistake before the buyer bought the house and so the buyer hasn’t suffered any damages either. The buyer refusing to buy a home with a bad roof may be a bummer for the seller, but that bummer wasn’t caused by the inspector. The roof was already bad before the inspector arrived. Anyway, a case without causation or damages… isn’t.

13

What is Nick trying to say that your client (the seller) cannot sue more than what he has lost. If worst comes to worse, you will just need to pay the inspection fee back.
The main advantage to a MIC is the advertising ability. I have gotten as many as three additional inspections from buyers looking at a house and decided they want another on instead. I would get more but if the seller has the house priced correctly, mine MIC houses have been selling one to five days of putting the sign in the yard. You can not beat getting paid to advertise your own business.
MIC works, just convincing a Realtor to try it is hard. But once they try it, they like it.

14

Your argument omits the fact that anyone can be sued by anybody for anything, at any time. The fact that I have a winning case may or may not ever be introduced at the settlement hearing…as we have recently observed with the case Mr. Kelley allowed us to monitor in Arizona.

A seller who relies upon your report for his disclosure…and is sued (or otherwise sanctioned) for non-disclosure of an item you missed…is going to bring you into the suit, no matter how many “winning cards” you have in your hand.

So…liability is not less for a pre-listing inspection than any other. I guess the question is, is liability greater for this type of inspection than others due to the likelihood of a second follow-up inspection uncovering an undisclosed defect.

15

If the seller signs a seller disclosure, at least in Missouri, the disclosure is not worth the paper it is written on. I have seen several of my clients try to sue the seller over obvious lying on the disclosure. Lawyers just laugh it off. Remember the MAR had lawyers write these seller disclosures. Why would they want them to hold up in court?

16

If the buyer walks away, the seller can claim a loss. Anyone can sue anyone for any reason. MIC is no different than anything else, liability is a given when dealing with people and their most valuable asset.

The biggest obstacle’s to pre-listing inspections are:

  1. The seller is done with the house, they don’t want to spend any money on it. Many sellers don’t think much is really wrong with their house. Others know of problems and hope the buyer has a lame inspector.

  2. Sellers really hope to travel down the same path as the agents, straight to the closing table with few obstacles, once they know of problems, they must disclose them. The whole process has always been about placing buyers under time constraints (pressure) and hope they don’t take the time to rethink things. Springing the buyer’s inspection report on them while they are under this pressure sells more houses than any other technique. Sellers know this, and agents know this, its all part of the wonderful world of real estate. Some smart buyers kill the deal while under this pressure created for them. Would it be stupid to put money down on a car and spend days negotiating before starting the engine? Yes it would, the way real estate is marketed is stupid but it is necesary to create that pressure on the buyer due to the large numbers involved. Pre-listing inspections should be required by law and any patty cake inspector caught doing quick easy ones should have his license pulled. A buyers inspection would still be needed also for obvious reasons.

17

Up until now, as you say, the disclosures are laughable and not taken seriously by anyone.

But in this case…we have a sign in the yard specifying that the property is “Move-In Certified” with a professional third party evaluation attached to the owner’s claim.

18

Would it not help the seller then, because the inspector did not know of this defect either?

19

I guess I should clarify the case where the buyers inspector finds more wrong than the MIC inspector, if the 2nd inspector uses an IR camera or other tool such as a gas detector not used by the first one it would be another subject.

20

James Braun writes:

Which demonstrates the added profit in an MIC inspection.

Remember, lowering liability is NOT what really what we are trying to achieve. Lowering liability per dollar of profit is.

For fun, let’s say that each inspection we do comes with $25 worth of risk. Do 100 inspections and you probably have to write a check for $2500. It may be to a client or it may be to an E&O insurance company (depending on how you manage risk), but part of the cost of every inspection is $25 in risk costs.

You can change (up or down) the $25 amount if you like, I’m just using it as an example. Now MIC’s risk cost is less (I say it is about $1), but let’s just assume that I’m wrong… that working for the seller instead of the buyer doesn’t reduce risk, that time between the inspection and the buyer moving in doesn’t reduce risk, that having no duty to the buyer because he isn’t your client doesn’t reduce risk, and so on. I think it does, but just for fun we’ll say it doesn’t and the risk cost associated with an MIC inspection is no less than a regular inspection. OK so far?

Now then, it is pretty clear that the profit increased by all the target marketing that comes with an MIC inspection at least triples its profitability. Actually, if you were to pay me a million dollars and say “Nick, get a copy of my sample report in the hands of 25 prospective buyers in my area, each about to hire a home inspector.”… I’d say that I need more money to succeed. MIC does just this. Now I’m not saying that an MIC inspection is worth a million dollars, but it is probably worth 4 or 5 times a regular inspection when you account for the added marketing value. Just landing the seller’s other inspection on the house he/she is buying gets you 2 for 1 (cuts your marketing cost per inspection in half because you got 2 jobs out of it).

Anyway, let’s be super conservative and say that the risk cost of an MIC inspection is the same for a regular inspection (it isn’t, it’s less) but the profit is double. That means that your true liability (risk cost per dollar of profit) is halved to $12.50.

At very worst, you’ve cut your risk per dollar of profit in half!

Actually, by my math, where you cut your liablity per inspection to 1/20th and you quadruple your profit, you’ve actully cut your risk cost per dollar of profit to 1/80th of that of a regular inspection.