Home inspection refund can fall short

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DEAR BARRY: After we bought our home, electrical violations and building settlement problems were discovered. And none of this was reported by our home inspector. When we called to complain, he offered us a refund of his inspection fee. Is this the way that home inspectors do business? –George

DEAR GEORGE: Home inspector liability is a recurrent issue with frustrated homebuyers. Complaints about undisclosed defects often arise, and some of these involve the infamous refund policy in many home inspection contracts.

This refund policy is a sensitive subject because it appears at first glance to be a naked avoidance of honest responsibility by home inspectors. In some (but not all) cases, that would be a fair indictment. But this is not a simple subject with a one-size-fits-all answer.

A balanced view of the problem requires an understanding of the home inspection business, the limits of the home inspection process, the common fear of litigation, and a sense of fair and ethical business practices. With that preamble in mind, here are the basic elements of the issue:

Lack of disclosure has many causes. Some are the fault of the home inspector; some are not. When unreported defects are visible, accessible, and within the scope of home inspection standards, professional negligence is often the problem.

When a home inspector is negligent, and when this negligence is financially damaging to homebuyers, one would expect some financial liability on the part of the inspector.

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But home inspection contracts often limit the inspector’s liability to a mere refund of the inspection fee, regardless of the circumstances and regardless of the damages caused by the inspector’s failure to disclose.

In some states, the courts have rejected the contractual clause that limits inspector liability to a simple refund. In other states, the refund clause has been upheld.

Refund clauses in home inspection contracts have good and bad applications. The good application is to oppose frivolous claims against home inspectors. For example, a defect that is discovered inside a wall during a home remodel could not have been discovered during a home inspection. …CONTINUED