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Ethics, Real estate Agents and Liability

I recieved a phone call today from a prospective client who lives in New Jersey. I live in middle TN. He wanted to know my opinion of the quality of home construction in this area. We had a short discusion and this is what he reveled to me.

After signing his contract he started to hear things about the lack of building code inforcement in this area and the quality of construction so he started to get nervous. He called my office to scope out his options and not knowing that he had already signed his contract I walked him through the normal process of the home inspection and assured him that if there were any serious defects in the home that through his realtor he could continue to negociate with the seller to have things resolved or worst case senario he would get his ernest money back and he could keep on looking.

That's when he told me the agent he was working with was also the listing agent of the property and that his phone call to me was after the fact.

He had declined the right to a home inspection based completely on the advice of his real estate agent.

His real estate agent had informed him/advised him that the house was in good shape and that he didn't need to spend his money on a home inspection.

In addition to the massive liability that a real estate agent places on himself/herself by offering such advice as this, what about the ethical issues involved here.

If you are a real estate agent, really, I would like to know, what is your opinion of the approch and advice that this associate of yours offered to this client.

Do any of you have advice for your fellow agents that might be tempted to offer the same advice to clients of their own. What about the ethical issues? What is the correct attitude and approach of an informed and ethical real estate agent in reguard to the clients right to a professional home inspection?

Waiting to hear back, Paul

Posted by Paul A. Perry, Home Inspector - Crossville, TN on 07/09/2007 08:13 PM

Comments (9)

ethics, liability, real estate agents, clients, home inspections, advice

9 Comments on Ethics, Real estate Agents and Liability

JUL

2007

Oh, my goodness! I am absolutely appalled that this agent would do such a disservice to the buyer! I always... ALWAYS recommend a home inspection - even on new construction! My husband and I bought a new home once, and we were shocked to find out that there were damaged trusses after the inspector brought it to light. I'm chock full of stories just like this in the event that my buyers are hesitant about shelling out the money for a home inspector. Better safe than sorry... Every time!

As for the ethics of the situation - we have a responsibility to act in the best interests of our clients. In the event of representing two clients in the same transaction, we cannot choose to protect the interests of one at the expense of the second. It's a careful balancing act, but we owe fiduciary responsibility to both in that instance!

He needs to turn this particular agent in. This story is another reason I don't like dual agency-because the bad apples spoil it for all of the ethical agents out there. Inspections are necessary on ALL houses because all houses are built by humans, none of whom are perfect. I have some lovely inspection reports on file to share with folks who think they don't need one-esp for new construction.

Working in Real Estate isn't exactly all about making money. Heck, no job is all about making money, it is about doing both what you are supposed to do AND keep in mind how to help the people you work with (the customer or client or whomever). This guy was obviously in it for the money alone.

Thanks and good luck,

Sugar Land, Tx
Where Life is Sweet

It depends, Paul. If you are in a "Full Seller Disclosure" state, and you're dealing with a client who knows construction, it's really not all that difficult to make your own decision about whether you want to hire an inspector to tell you what you already know.

But the trouble with that is that even people who believe they know all about houses, are they going to take the time that an inspector would to thoroughly check out every outlet, corner of the attice, status of the appliances, etc. etc.

I used to think that inspections were up to the client. I've recently adopted a policy that inspections are SOP for my business and those who choose not to have a pro do an inspection will sign an indemnification and hold harmless agreement.

Even though I'm bright and my clients are bright, it's not worth it to risk something being wrong just to save $195.00. I've changed my tune on this recently because of issues that surfaced even though the buyer had chosen to waive his right to an inspection. Not a good plan, or as Ben used to say, "Don't be Penny wise but Pound Foolish".

It is a good idea to let the client get the home inspected. It not only protects the client but also the Realtor. If someone can afford to buy a $300k or 500k home, can they not afford 4-500 $$ to pay for inspection. Is it really good idea to save $$$ when you are spending $$$$$$$?

It could be this agent doesn't know any better. He's lacking basic training. I'm sure his Broker wouldn't agree with him. Yet it's the Broker who will also be brought into the lawsuit. The broker is the one I blame. S/he should train his agents properly.

We always, I repeat..always, recommend a home inspection. Of course, it is up to the customer/client to make the decision of whether or not to have it done, but it should always be recommended.

Here's another example of why it's so important for buyers to have their own representation. While it is possible that the agent in question really was just looking to save the client a couple hundred bucks that he didn't feel was necessary to spend, the appearance of impropriety is too strong to ignore. Perhaps he knows of defects in the home and wants to avoid an inspection that would bring those problems to the surface. In any case, a strong buyer's broker would most likely have prevented this from happening. Good post for discussion!

JUL

2007

Thank You to those who have responded!

I wish I could say that this is an isolated insident but in this area of TN it is not. After working in this area for three years now I would say that we are at about the 50 percent mark in the real estate agent tally. About half think like the respondents and the other half still down play the need for an inspection or work hard to prevent the inspection by telling their clients it would be a waste of their money.

When I first started in this area I would hear this line about three times a week, "My realtor said I don't need a home inspection since I'm buyin a new home and it comes with a one year builders warranty". This is particularly ironic since we have no code enforcement in this area. Are we not all supposed to be offering a service to our clients, working in their best interest? It is the client that spends the money for the home inspection after all and the vast majority of the time they recieve a huge return on that investment.

Does anyone have any suggestions on ways to comunicate, in a possitive way, the need for a change in attitude in the real estate comunity in this area? Thank's for your help, Paul

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