Featuring America's Home Inspector: Nationally Syndicated Columnist, Barry Stone

Bankers Need Not Disclose

The House Detective by Barry Stone, Certified Home Inspector

Dear Barry: As a new Realtor, I have a question about disclosure. Today, I showed a bank-owned property to an investor. As we walked through the home, we observed obvious problems involving mold. There were black stains on some of the walls, the subarea was wet, and the place smelled from bleach. When I asked the listing agent about this, I was told that the home is being treated for mold but that there are no disclosure requirements for bank-owned property. This is puzzling. I understand that the banks are exempt from disclosure requirements because they are unfamiliar with homes they acquire through foreclosure. But shouldn’t they and their agents disclose conditions that are discovered once they are in possession of the property? Bill

Dear Bill: Your question gets right to the cutting edge of ethical responsibility. How do we define the ethics of professional conduct? Is it defined by state laws that exempt banks and their agents from disclosing what they know about a property, or is it a question of essential right or wrong, as we would teach it to our children? To most 10-year-olds, the answer would be obvious and unquestionable. As we get older, questions of moral conduct can be obscured by the fog of drifting legalities.

The specific requirements of real estate disclosure vary from state to state, but regardless of the fine print, any agent who is aware of a significant defect and withholds disclosure on the basis of a legal loophole is morally confused.

In the absence of ethical consensus, the best way to protect buyers of bank-owned property is to hire a qualified home inspector. Those who buy foreclosed homes often forego an inspection because the property is being sold as-is. They assume that since the seller (the bank) won’t fix anything, there is no need for an inspection. What they fail to understand is that the purpose of an inspection is not to compile a repair list for the seller: It is to be informed about what they are buying before they buy it.

Regardless of what the listing agent is willing to disclose, be sure to advise your client of the importance of a home inspection when buying property from a bank.

Dear Barry: We’re getting ready to sell our home but are worried about the large cracks in our patio. We think they were caused by tree roots, but the trees have been removed. My husband says the only way we can pass a home inspection is to replace the whole patio. I’m hoping there is a less expensive way to pass the inspection. What do you advise? Farzy

Dear Farzy: A home inspection is not a final exam that must be passed in order to sell a property. Its purpose is simply to provide disclosure of defects. Your husband is correct that large patio cracks can only be eliminated by replacing the patio, but homebuyers are mainly concerned about the condition of the house, not the pavement. As long as there are no major cracks in the building, the patio condition is a peripheral issue.

There are very few people who would decline to buy a home because of patio cracks. Otherwise, there would be a lot of unmarketable homes. My advice is to list the patio cracks on your disclosure statement and sell the property as is.

Bank repossession for red tagged water heater

The House Detective by Barry Stone, Certified Home Inspector

Dear Barry: We purchased a home that was repossessed by the bank, and we hired a home inspector to check it out. After moving in, the gas company red-tagged the water heater because of improper exhaust venting. The gasman said this should have been disclosed by our home inspector, and according to our plumber, a new vent pipe will cost $629. Is the home inspector liable for this costly repair? Lillian

Dear Lillian: Without knowing the specifics of the vent violation, I cannot comment on whether the home inspector should have disclosed it. The most surprising aspect of your situation, however, is the incredible cost for a new vent pipe. For $629, you could have a new water heater installed.

As for the home inspector’s liability: If you have not already replaced the vent pipe, you should notify your inspector about the problem and request that it be reinspected. That call should have been made as soon as the gas company pointed out the problem. Many home inspection contracts specify that the inspector must be given the opportunity to view the defect before it is repaired. Otherwise, the home inspector may be relieved of liability.

If the vent pipe has already been replaced, you have two separate issues: 1) You may have been grossly overcharged for the repairs; and 2) The home inspector may no longer be liable. If the repairs have not yet been done, call the home inspector and get two more bids for the cost of repairs. The House Detective