A recent Vermont Supreme Court decision reminds me, and should remind other real estate agents in Vermont, to make sure that I provide several inspector and contractor recommendations to my buyers and sellers, and to suggest to my buyers and sellers that they review the contractor terms of service. The case is
Glassford v. The BrickKicker, and the Supreme Court found that the BrickKicker contract was an unconscionable contract because it limited damages to "actual damages, or equal to the inspection fee, whichever is less," in this case $285; but also required that the party seeking damages submit to binding arbitration and required the party to pay an initial arbitration fee of $1,350, with the possibility for additional arbitration fees.
Clearly paying at least $1,350 to recoup no more than $285 is unreasonable, and the court found the contract substantially unconscionable. Additionally, the court found several elements of the contract that were procedurally unconscionable such as a signature line on the front of the contract so that customers could sign without actually reading it.
Citing a NJ case,
Herner v. HouseMaster of America, which found "unconscionable commercial practice and inherent conflict where record demonstrated that realtor referred buyers to home inspecting service that depended heavily on such referrals and thus had stong incentive to facitilate sales," the VT court found "limiting the liability to the inspection fee does not provide a realistic incentive to act diligently...particularly given the countervailing incentive to please the referring realtor by soft-pedaling the inspection and allowing the sale to go forward."
The plaintiff's attorney in the Herner v. HouseMaster took time to indicate the relationship between the agents' desire to see a deal go through, the correlation between the degree to which home inspector will "nitpick" at problems in a house and the referrals the home inspector receives from real estate agents. In fact HouseMaster of America did have a written policy to state both good and bad characteristics of a house for individual buyers but focus on problems for relocation companies. Like the court, I find it unpersuasive that a home inspector should spin a home inspection report more or less positively if the customer is an individual or a corporation.
In neither the Vermont case nor the NJ case did the court find any fault in the real estate agent, but in both cases the courts suggested that the relationship between inspector and Realtor can be too cozy at time. Realtors need to provide good recommendations for good inspectors to their buyers and sellers while remaining divorced from the consequences of the inspector's inspection reports. Realtors will rarely provide a single inspector recommendation but instead will provide buyers and sellers three or more recommendations. While there are many good inspectors, my website currently lists four (it was five) that I recommend. I have not, however, read the contracts of any of the inspectors I recommend, and it may be time to recommend that buyers review several contracts before agreeing to one of them.
Learn more about home inspectors at the
National Association of Home Inspectors and
American Society of Home Inspectors.