PRE-INSPECTION AGREEMENT

Statistics continue to suggest that the United States becomes more lawsuit-happy each year. The home inspection industry is no exception as inspectors continue to receive allegations of negligence and misrepresentation. Because potential lawsuits continue to threaten inspection businesses, it’s crucial that every home inspector get their pre-inspection agreement signed before each inspection.

For most of you, getting a contract signed is second nature. But are you getting it signed prior to the inspection 100 percent of the time? If not, you’re in jeopardy of losing both your insurance coverage and a potential lawsuit.

Why does the client have to sign before the inspection?

There are two primary reasons why pre-inspection agreements should be signed prior to the inspection: to provide more protection against claims and to preserve insurance coverage.

To protect against claims:

According to Professor Charles Fried of Harvard Law School, there are no federal laws explicitly stating that clients need to sign the inspection contract before the inspector performs the home inspection. Fried would, however, consider it wise for home inspectors to get agreements that include limitations to their liability signed to protect themselves from accusations not covered by their home inspection insurance.

“It’s always better to get it in writing,” Fried stated since the client and the inspector’s signatures can demonstrate to a court that both parties mutually understand and agree to the inspection’s terms.

In addition, industry trends reveal that contracts signed after the inspection are less likely to hold up in court.

“[There are few courts], to my knowledge, that will enforce an agreement that contains restrictive terms upon a client when a client engages in that [inspection] without knowledge of those restrictions,” said Adam McGary, owner of Capital Claims Management, LLC, which handles all InspectorPro claims and pre-claims.

In other words, an inspection contract can only contain things that diminish a client’s ability to sue for what they want and how they want—like a limitation of liability or an arbitration clause—if both parties—the inspector and the client—agree before the inspection. Otherwise, McGary explained, the court can argue the client never agreed to the inspection’s terms and throw the agreement out.

To preserve insurance coverage:

Since pre-inspection agreements can provide inspectors with their first line of defense, insurance carriers have become increasingly interested in how their insureds use pre-inspection agreements. You’ve seen that interest as you’ve filled out your applications to start or renew your insurance policy. Your provider asks, “Do you obtain a signed pre-inspection agreement from all of your clients?” The answer they’re looking for is a resounding yes.

“Not having a signed pre-inspection agreement can make it extremely difficult for the insurance company to defend your claim,” said InspectorPro Program Director Ryan Osborne. “No contract means no parameters, and the client can demand almost anything. The cost of such a suit has the potential to make an inspector uninsurable, which can put them out of business.”

Since it’s so difficult to limit liability without a contract, most carriers won’t cover claims arising from inspections lacking a signed pre-inspection agreement. Clients signing your contract before you release the inspection report doesn’t cut it. It’s important that all of your clients sign your contract before you inspect the property. That way, you stay compliant with your insurance policy and eligible for its coverage.

How a pre-inspection agreement plays out in real life

How exactly can pre-inspection agreements limit liability? We looked to past court cases to find examples.

In California court case Moreno v. Sanchez, the home buyers sued their home inspector for breach of contract, negligence, and negligent misrepresentation. The buyers had discovered dust and asbestos, an inoperable drain, defective windows, and wall cracking. They believed that the inspector should be responsible for the damage.

The inspector’s primary defense: his inspection agreement, which included a one-year statute of limitations that required claimants to file any complaints within one year of the inspection. Based on just one line of the inspector’s contract, the court dismissed charges.

“Generally, the reason you get a signed writing is because the contract the [client] signs is going to have a variety of terms in it that are beneficial to the home inspector to give them some light legal coverage,” said Mark Gergen, Professor of Tax Law and Policy at University of California, Berkeley.

While not required by the statute of frauds nor all 50 states, Gergen explained, signed contracts can be advantageous to inspectors because they provide some protection of inspection terms, like the standards of practice and the scope of the inspection.

In Moreno v. Sanchez, even if the statute of limitations clause hadn’t held up in court, the agreement would have provided additional defense. According to court documents, the contract “specified the home inspection was limited to a visual inspection” and “excluded, whether or not concealed, soil conditions and asbestos.”

How to get it signed—no matter what

While there are many significant reasons to obtain a pre-inspection agreement, inspectors have expressed concerns to us. Some say that last-minute inspections, out-of-state buyers, and contract-wary realtors can make it difficult to get a signature. We reached out to a handful of inspectors to see how they overcome challenges that make contracts difficult to sign. Read what techniques two of the inspectors we interviewed employ to get signatures consistently:

Travis McFarran of True Measure Home Inspections, LLC finds success by setting expectations with clients over the phone.

“‘You’re gonna get an email in a couple of hours with a link to an agreement,’” McFarran tells clients. “‘Please try to sign that agreement before the day of the inspection.’”

McFarren then gives clients plenty of opportunities to sign. Two hours after scheduling the inspection, his ISN software automatically sends the agreement to the client. Twenty-four hours prior to the inspection, ISN sends the client another email reminder with the agreement attached. Then two hours prior to the inspection, the client gets a text prompting them to sign the contract again.

John Maldonado of WIN Home Inspection Tracy, LLC, who also uses ISN, gets realtors’ support by illustrating how preparing prior to the inspection is a service—not a burden.

“I train my agents,” Maldonado said. “I explain why it’s easy for them and for the client. A lot of times, they don’t want to…. But after they do it, they realize how easy it is [to have clients electronically sign], and they don’t want to do it any other way.”

Maldonado’s agents submit the initial inspection and client information and follow-up with the clients. With the agents’ help, Maldonado consistently receives both a signed agreement and payment a week before the inspection. And for those who don’t sign electronically?

“I carry copies of all of my papers in the event of something like that happening,” Maldonado said. “I’ve never used them, but for any situations that can develop, I want to be ready.”

Jim Brown of Final Word Home Inspections, LLC, a 30 year company, https://finalwordinspections.com talks to the buyer and mentions to them that the Pre-Inspection Agreement must be signed before an inspection takes place.

” I send the client a copy of the agreement through email for them to sign, scan and send back. Some prefer electronic signature, some prefer to sign it at the inspection where they can ask me any question concerning the agreement. Either way, I do not do a home inspection without a signed agreement.

There are plenty of other ways to help clients sign. DocuSign and Adobe Sign allow users to upload documents and send them to clients for electronic signature. Some inspection franchises offer similar software to their franchisees. Old-fashioned email works but tends to be less effective since clients have to print to sign. Ultimately, there are plenty of avenues. Pick what works best for your business.

Make your pre-inspection agreement a priority

Remember Moreno v. Sanchez? According to court documents, when the buyers arrived to the home inspection, they didn’t want to sign the pre-inspection agreement. In fact, they asked the inspector to remove the statute of limitations clause from the agreement. Imagine how different the case would’ve been if the inspector had dismissed the clause or, worse, the entire contract.

Letting your contracts go unsigned isn’t worth the cost. Like the inspectors in this blog, you have the tools to get signed agreements every time. Make your pre-inspection agreement a priority. Protect your business and its insurance coverage. And don’t forget to comment below if you have tips for getting signatures every time. We all benefit from your insight.