Home Inspector Sued By the Seller?

Can an inspector be sued for just about anything? The answer is- maybe.

It’s a fact of life that a home inspector is likely to find some issues with the house he or she is inspecting – even new construction has problems! If it’s a home inspector’s job to report issues to buyers so they can make an informed decision before purchasing, when are they liable for just doing their job? Can an inspector be responsible for how a buyer reacts to the findings in the report if they decide not to buy? One seller in Connecticut thinks they should be. The seller, who is also a Realtor, has sued a home inspector in small claims court because the buyers lost interest in purchasing a house after reading the inspection report. This leaves experienced home inspectors scratching their heads wondering when they may be liable and how to protect themselves.

Two issues seem to be at play: the accuracy of the report and who has standing to sue.

Regarding the first issue, liability probably depends on the quality of the report provided, most agree. “I think an inspector may be liable if the findings are in error,” says Lawrence Transue, a Pennsylvania home inspector. “If that is the case I believe the seller has a legitimate gripe and possible grounds for a suit,” says Transue. Transue says an exaggeration or mistake would mean that the buyer’s decision to walk away stemmed from the home inspector and not any problems in the home, leaving the home inspector with a difficult position to defend in court. On the other hand, if the report is accurate and the seller is just displeased about the buyer not purchasing the home, home inspectors generally agree that the lawsuit or complaint is frivolous. “I have had several sellers file complaints on me over the years,” says Jim Starkey, a Texas home inspector. “The sellers were angry that the buyer walked. They accused me of making false statements about the house which caused the deal to fall through, but when you read what I wrote and see the pictures of the defects, it was very obvious I did my job and they were totally clueless. These cases were all judged in my favor and that was the end of that,” says Starkey.

Covering Your Assets
Many home inspectors keep scrupulous records of their inspections in order to avoid being sued. They recommend never advising clients towards or against buying the house – only presenting the facts and letting them make their own decisions. If the client is with you during the home inspection, you can use a voice recorder or camera to record the inspection, as some home inspectors do. “I carry a voice recorder in my shirt pocket,” explains Steve Ott, an inspector from Ontaria, Canada, “and record every word I say during an inspection and file them all. If someone comes back to me in the future and says I said such and such, I can go listen to the entire inspection.”

Being able to stop a complaint or lawsuit before it snowballs is a strategic option. If the client isn’t with you, be sure to keep records of conversations you have had with them. Save emails, and transcribe phone calls if you are concerned. When you are inspecting the home, take pictures of any problems you may find. Record-keeping pays off when you need it.

But what if a suit occurs anyway? “I'd firmly stand my ground,” says David Tucker, owner of The Inspector Inc. “If the lawsuit wasn’t retracted, I would hire a lawyer to first send the seller a ‘demand letter’ for retraction, then I would file a counter-suit in the county court,” says Tucker. Others advise petitioning to move the case to a higher court, or simply waiting out the case in small claims court.

“The seller is not the inspector's client and has no contractual agreement with the inspector. The seller's ‘contract’ is with the buyer,” says Tucker. ”Don’t let yourself be intimidated, and remember that you are accountable to the person who paid for the inspection– not the Realtor or the seller.” But in some states, third parties who do not directly engage the inspector, can sue. You should consult a local attorney.

Non-Client Can Sue
Regarding whether a third party such as a seller or agent has standing to sue, Todd Stevens, experienced home inspector trial lawyer and past President of the San Diego Bar Association, says it depends on the specific laws in each state. Stevens says the legal term at issue is privity, which posits that only parties to a contract should be able to sue to enforce their rights or seek damages. "In some states, privity is required to file a lawsuit like this. However, in other states like California, privity is not required. My advice to any home inspector in this situation, even if you believe the law is on your side in your state, is to take the threat of a lawsuit seriously and not ignore it," says Stevens. Even if the seller isn't able to sue you based on your contractual obligations to them, there still may be other ways for them to pull you into a lawsuit.

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Joseph Denneler, another lawyer experienced in home inspector claims, concurs that the ability of a third party to bring a suit varies by state. "It depends on the particular state law. Generally in a contract-based relationship a stranger to the contract has no standing to sue for non-performance or for flawed performance. However, I have defended several third-party suits in New Jersey where inspectors were sued by someone with whom they had no relationship at all. Judges are not apt to dismiss claims even though there is clearly a legal flaw in the proposition. Every time I raise this argument I get a curiously blank stare from the judges," says Denneler.

It turns out that whether or not a claim is considered frivolous is also defined by state law. "In [this] example, most states would not find that claim to be frivolous if it can be argued that the claimant is trying to change the law or proffer a new type of claim that the law doesn’t currently recognize," says Denneler.

Michael Casey, principal at Casey O'Malley Associates, says that situations where the seller sues the home inspector are very rare. "The seller suing the inspector because of the deal falling out is rare. In my experience of over 600 inspector claims, only one was of this type. We responded that the home inspector complied with the Standard of Care and reported material defects as required by published Standards of Practice, thus fulfilling his/her professional obligation. This particular claim went away," says Casey.

The other type of claim that might arise from a seller is an indemnity claim, Casey explains. "I have seen some cross claims against inspectors by sellers for indemnity when they are sued by the buyers, and the inspector is not named in the original action (usually because the condition was in the report, but not properly repaired or nothing was done). These in my opinion are rare, but must be defended like any other claim," says Casey.

Veterans agree that the best thing to do is whatever you’re comfortable with. If it goes to court and you choose to fight it, present the best case you can for yourself, armed with the facts and confidence that you have done the right thing.