FAQs for Real Estate Agent and Home Inspector Teams Part 2: Liability Concerns
By Alyssa Cink
Last Updated November 9, 2023
Ask any home inspector, and they’ll likely have a story about that one realtor. They’ll tell you about the real estate agent who prioritized the sale over the buyer’s wellbeing. The agent might’ve asked to glaze over the worst structural concerns, painting the house in a “favorable” light. Perhaps the agent accused her of killing a deal, or threatened to blacklist him for writing a thorough, high-quality report. In any case, the realtor has enough red flags to make the moon look like Mars.
Real estate agents and home inspectors don’t always get along. That’s why, when you find the agents who value your reporting and want happy, safe clients all around, those relationships are worth the investment.
In this two-part series, we want to help inspectors like you feel confident working and communicating with agents. Our previous article addressed the industry’s frequently asked questions about forging these relationships. Here, in the last installment, we’re tackling the liability concerns: Supra real estate keys, sharing home inspection reports, realtors signing your agreements, and more.
What liability concerns do I face when accessing the property without the realtor?
Some states permit home inspectors to use digital keys and scheduling services (like Supra, ShowingTime, and BrokerBay) to access properties independently. Though they haven’t caught on everywhere, many real estate agents and home inspectors prefer independent access to the home. Still, you may wonder: Does using them open me up to additional liability?
It shouldn’t have a major impact on your errors and omissions (E&O) risk. However, there are a few general liability (GL) risks to consider.
Supra real estate keys, like any other electronic access tool, record every time they’re used and every person who uses them. The end result is a digital footprint that could help or hurt you in a claim.
For example, imagine you lock up the property and leave at 3:00 PM. At 6:00 PM, the seller calls to ask about the expensive vase you knocked over. The electronic key or scheduling service would’ve recorded that you locked up at 3:00 PM, and the listing agent arrived at 4:00 PM, meaning you were not the last person to enter the home. In these cases, the digital footprint can back up your defense.
Meanwhile, if you neglect to lock up the house correctly, leading to a GL property damage or injury claim, the same service will have a digital record of you forgetting to lock up.
When you start using these tools, inspect with the same precautions you would with a realtor present. Take extra care to lock up the home and protect it from damage. Finally, because electronic access tools record when you’ve arrived and left, your report should reflect the same start and/or end times.
Use our free checklist to create a smoother post-inspection routine and prevent GL claims. You can download it here.
Can realtors sign my pre-inspection agreement?
Yes!
Your contract represents an agreement between you and the client soliciting your services. However, as long as they assume limited power of attorney, the realtor may sign on the client’s behalf.
Also called a letter of attorney or warrant of attorney, a limited power of attorney does not change the client. The buyer or seller will still be your client. But the difference is, any pre-inspection agreement the authorized agent signs will have the same authority as if the client signed it directly.
Why is this important? We’ve seen cases where the authorized agent signed for the client. Then, that buyer or seller tried to escape the contract’s terms by claiming they never officially signed and agreed to them. With a limited power of attorney, real estate agents and home inspectors have more options.
Before allowing the realtor to sign on the client’s behalf, consider asking them two things: one, if they’re authorized; and two, if the client gave them permission. We also suggest asking the realtor to put “Authorized Agent” below their signature. Finally, after the authorized agent signs your pre-inspection agreement, send a copy to the client.
Additionally, check that your insurance company allows authorized agents to sign. If you’re with us at InspectorPro, it’s permitted. But if you work with another provider, check your policy or ask your broker about authorized agents.
For examples of court cases that defend the realtor’s authority, see our article about authorized agents.
Does sharing reports with realtors open me up to liability?
Generally, yes. No matter how strong your real estate agent and home inspector team is, we discourage sharing reports with anyone who isn’t the client.
Our reasoning is twofold: First, your inspection client owns the report. It’s their property, not the realtor’s.
Second, if the agent has access to the report, and the buyer’s home purchase falls through, the agent might share the client’s report with someone else. That person, in turn, might assume that the older report (and the findings you reported therein) are accurate months or years later. If they decide to buy the house based on the outdated, inaccurate findings, and something goes wrong with the property down the road, they’ll most likely blame the inspector who wrote it: You.
Ultimately, it’s best for clients, real estate agents, and home inspectors all-around if you don’t share reports. We go into greater depth about home inspectors’ responsibilities with old reports (plus the dangers of sharing them) here.
How can I protect the realtors who refer me?
You’re in a litigious line of work. You aren’t the only one worried about claims from your inspection findings; the agents who refer you for those inspections worry about their own liability, too.
Thankfully, you can ease their concerns with referring party indemnification.
What is referring party indemnification for realtors? Here’s how it works. Imagine a client accuses you of missing mold in their new home. They sue not only you, their inspector, but also the realtor who referred you for their home inspection. Referring party indemnification would provide coverage to you and the referring realtor. To do this, your policy defines the agent (along with other third party referral sources) as a “limited additional insured.”
Note that it does not cover any lawsuits for their duties as a realtor. It only involves claims arising from a home inspection, if they referred you to the client.
Ideally, referring party indemnification is something you’ll never need to use. In the meantime, you can always use it for extra leverage and marketability in your real estate agent and home inspector relationship.
Resources to Protect the Entire Team
Whether you’re looking for third party indemnification or ways to better manage your risk as a home inspector, we have you (and your real estate agent and home inspector team) covered.
At InspectorPro, we specialize in combating the risks and claims unique to your industry. We also strive to provide every home inspector with resources to keep you and your business safe. From case studies and safety articles to our exclusive pre-inspection agreements (free to all currently insured inspectors), we’re a one-stop-shop for knowledge and coverage, alike.
Looking for more articles like this? See related posts below. Or, keep scrolling for our newsletter signup at the bottom of this page. We release dedicated newsletters on the first and fifteenth of every month, and we’re always looking for new inspectors to interview for upcoming content.
