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.

Safety Concerns in Electrical Panel

The House Detective by Barry Stone, Certified Home Inspector

Dear Barry: We recently purchased a home. During the negotiations, we asked the sellers to replace the electrical panel due to safety concerns disclosed by our home inspector. The sellers agreed to have this work done. On the day that the escrow closed, the escrow officer told us that the new panel had been installed without a permit. After moving in, we applied for our own permit at the building department. But the new panel did not pass inspection. We emailed copies of the failed inspection notice to the sellers, their agent, and our agent, but no one has responded. What should we do? Niki

Dear Niki: According to the National Electrical Code and the International Residential Code, it is illegal to perform electrical installations without a permit. It was the responsibility of the sellers to have this work done according to safety code requirements and with the approval of the local building department. Likewise, it was the responsibility of the agents to inform you of the status of the work before the close of escrow, not after.

If the sellers and agents are unwilling to address your concerns, a wake-up letter from a real estate attorney may be needed. Certified mail on legal stationary tends to be more stimulating than common email. Of similar effect would an ethics complaint at the local Board of Realtors office.

Can I learn to self inspect my home?

The House Detective by Barry Stone, Certified Home Inspector

Dear Barry: I’ve considered taking a home inspection course to learn more about defects in houses, to assist me as a real estate investor. Would this be beneficial? Steven

Dear Steven: The additional knowledge will adefinitely help you to do preliminary evaluations when shopping for an investment property. But when you find a property you like and enter a purchase contract, don’t let your own inspection substitute for an in-depth evaluation by a qualified, experienced home inspector.