We live in a litigious business environment where people are often afraid of their own shadows and personal accountability is, at times, almost non-existent. A recent article about the downfall of a well-respected local contractor brought this issue to light, coupled with a series of experiences that I’ve had with home inspectors over the last couple of weeks. In combination, they compelled me to write this post.
Recently, a high profile contractor in the county was driven to bankruptcy by a series of lawsuits – someone who was often utilized within the Lamorinda real estate market for evaluations of drainage and foundation issues. A recent article in the CC Times reports on the “questionable home inspections” conducted by Brockman Engineering Contractors, his violation of a rarely enforced section of the California Business and Professions Code, and the law suits that wrecked financial disaster upon his business. In an environment where home owners, buyers, sellers, and members of the real estate community often find it extremely difficult to obtain honest and objective evaluations of drainage, retaining walls, and foundation issues, Brockman’s company was often utilized. This post has nothing to do with the merits of the law suit that brought down his business, rather the inherent hypocrisy and lack of regulation surrounding “home inspections”.
The California Business and Professions Code states that no matter what it is called, any evaluation of a property during its sale is an “inspection” and the person or firm may not bid on repair work within 12 months. This code section is rarely enforced and there are a multitude of licensed engineers with owned or affiliated construction firms who are in violation of this code on a daily basis. In fact, several of them send engineers out to do “inspections” while they are on an incentive compensation plan tied to the amount of construction business they bring into the firm. So much for the “objective, expert” home evaluation or for their consult being an “inspection”.
About 2 years ago we had a listing where the buyer’s agent brought in a local engineering construction company. They were retained to evaluate a small amount of dampness under a very limited area of a hillside home that showed no objective evidence of foundation degradation, rot, or any other issues in the “damp” area during its 20+ years since construction. The company’s engineer wrote up a “report” stating that the home needed approximately $60K in drainage work and foundation reinforcement. In most cases, that report would have caused the buyer to back out of the sale, and the “report” would have become a disclosure document that the seller would have needed to make available to future buyers.
Fortunately, I was able to convince the other agent to allow an independent, highly regarded geotechnical engineer to evaluate the situation and render a report without any economic incentive to find “problems”. The engineer found that the first “report” was riddled with errors. The recommended drainage work was poorly designed and didn’t address surface water; the home had a foundation consistent with the design from the time period when built, and there was no evidence of any performance issues; and even the foundation retrofit work recommended by the first firm was found to be improperly designed, incomplete, and at best, an optional consideration for the buyer. A second engineering and foundation contractor was brought in to bid the work recommended by the independent engineer, including the optional foundation retrofitting. The bid came in at LESS than half of the original firm’s bid and included a much larger scope of work! Unfortunately, the type of situation with the first firm happens all of the time to unsuspecting homeowners who are at the mercy of the inherent conflict of interest with contractors or their engineers doing “home inspections”.
We often hear of issues with licensed pest control companies who do the required “termite inspections” for home sellers, with an inherent conflict of interest built into the process. These companies get to bid the work that they are recommending, prior to their final evaluation and “certification” of the property being free of “Section 1″ issues — active rot or pest infestation. Differing from the situation described above, these companies are licensed by the state to do inspections, construction work, and certification. So… how did this happen when the situations above violate the Business and Professions Code? Ask the lobbyests for the pest control industry, or perhaps ask your elected state representatives.
Finally, this takes me to the “general home inspection” industry. These people range from extremely competent inspectors with general contracting and sometimes engineering experience, to those who essentially take an online test and receive some sort of industry “certification”. I just closed escrow on a purchase transaction where the listing agent had a “pre-inspection” done by a “certified” general home inspector. When the inspector representing my buyer client went under the house, he found a portion of the home’s front being held up by several “screw jacks” positioned on the outside foundation, at least one that was bent from the precarious load. This was not mentioned in the “pre-inspection” report. When the first inspector was asked why it wasn’t mentioned, he said that he “didn’t think it was a problem”. When I asked him why he chose to mention “uneven flagstone” on a garden pathway as a “potential trip hazard” and NOT mention screw jacks holding up part of the home’s perimeter, he was speechless. He had missed it, clear and simple, Nevertheless, he stood by his story and tried to cover his “rear” by writing a letter stating that it was not a concern. Our home inspector, a foundation contractor AND an engineer said it was a significant, but fixable problem.
This past week, the home inspector representing the buyer of one of our listings, stated that they should have a “drainage inspection”, and recommended that an HVAC and pest control company evaluate “evidence of rats” ENTERING the ductwork. The home is located on a totally level lot, and was found to be “bone dry” underneath, following one of the wettest winters in the last 50 years, yet the home inspector recommended a “drainage inspection”. Also, upon further questioning, it turned out that the home inspector “pushed the wrong button” on his tablet PC which caused the report comments about rats in the ductwork. Fortunately, the buyer’s agent selected a drainage contractor with a high level of integrity who did a verbal “report” stating that no drainage work was needed.
Bottom line, even with all of the “protections” of disclosures, inspections, “certified” home inspectors, licensed pest control companies, and “inspections” by contractors, there is no substitute for a dose of common sense and the selection of competent, honest experts in the home evaluation process.
