NC License 1069

The Conflict (Paragraph 12b)

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Legal Notice

 

Issue: 73 Date: September 28, 2002

The Conflict
"We may not be kicking at the same goal"

A few weeks ago I received a letter from a local Realtor suggesting that I address the following issue. I won't quote the whole letter here, but will attempt to give you the general idea:

May I suggest a topic that would help clarify a subject troublesome to many buyers and sellers? The Offer to Purchase language of paragraph 12, and the conflicting impression given by some inspection reports is capable of giving even the most even tempered Realtors a case of twisted bowels. My experience is that some buyers are seeking a maneuver out of a signed and accepted contract, or searching for leverage to make a seller complete repairs, some of which are not remotely connected to the contract. 

Have you ever watched your children playing soccer? What is it like when two teams attempt to kick at opposing goals? Is there a very good chance that someone is going to get hurt? I have purposely not spent time in this newsletter dealing with the paragraph 12 conflict, and it is without a doubt a conflict. The reason I haven't spent time with it is that the conflict has a very simple and reasonable solution which the opposing sides refuse to agree on. This is my personal opinion on the issue and I will not mince words with the subject. Please read it to the end before passing your opinion on my response. 

Here are the facts as I see them. Paragraph 12 of the Offer to Purchase and Contract is from another time which I will call PRHI. PRHI is Pre Regulated Home Inspection. The language of paragraph 12 is all about protecting the seller and agent as is clearly evidenced by 12. (e) "Acceptance: CLOSING SHALL CONSTITUTE ACCEPTANCE OF EACH OF THE SYSTEMS, ITEMS AND CONDITIONS LISTED ABOVE IN ITS THEN EXISTING CONDITION UNLESS PROVISION IS OTHERWISE MADE IN WRITING." What does this say? Let me attempt to phrase it as I understand what it says: The buyer is accepting the home as is and is fully assuming the responsibility for existing conditions. The seller's and Realtors responsibilities, except those relating to gross negligence or potential disclosure issues, are over. This very issue is what home inspections are all about. The buyers must somehow protect their interest, and the home inspection is how it is now done. What makes this even more confusing is that both the listing and buyers agent are only compensated for their efforts if the deal closes. I don't care how much effort you use to get around the subject, both Realtors are working for and paid by the seller. Who is truly representing the best interest of the buyer? Add to this conflict that in most cases the buyers agent controls the selection of the Home Inspector. 

Now, don't take this wrong, there are many exceptions to what I am about to say and many are Realtors who give out my name but you must agree that the attitude of many Realtors is: The inspector is an unnecessary, immovable object around which I must circumvent. Just take a little time and remember some of the comments you have heard about home inspectors. 

Between paragraph 12 (b) & (d) of the OFFER TO PURCHASE AND CONTRACT is the crux of the conflict between Home Inspectors and Realtors. The following statements clearly spell out the Realtors position on inspection issues: "shall be performing the function for which intended and shall not be in need of immediate repair ...... any items not covered by (b)(i), b(ii), b(ii) and (c) above are excluded from repair negotiations under this contract."

The crucial words are "performing ... function ... intended," "immediate repair," "excluded."

To put this in plan language as Home Inspectors most often hear it from sellers and Realtors:

If it ain't broke, it doesn't need fixing.
It was like that when I bought this house and I have lived here for twenty-three years.
Is it really necessary to raise that issue?
This roof doesn't leak!
This plumbing doesn't leak!
This basement doesn't leak!
That fuel tank has been here since this house was built and it's never been a problem.
The builder doesn't include screens.
No one hass ever fell off of this retaining wall!
If it's not in the building code, I will not do it.
That crack has always been there.
There is nothing wrong with this hardboard siding.

The Realtors (both) and the seller are operating from their perception of the home and the contract. The home inspector is not operating per the buyer and sellers contract. The home inspectors stated purpose is "education ... to provide the buyer with a better understanding of the physical condition of their home so they can make a more informed decision." Remember that the buyer desires to find and be informed of everything. This is the buyers perception of what he is paying the home inspector to accomplish. The seller's and Realtor's goal is to close the deal. The home inspectors goal is to educate the buyer and goes far beyond "functioning as intended" and in need of "immediate repair." The goals are and always will be in conflict. 

Here are the dilemmas: 

Some houses do not deserve to be sold at, or anywhere near the asking or contract price. 

Who does the inspector work for?

Agents steer much business in the direction of the inspector.

Bad news must be the fault of the one who delivers it. 


You may be assured, with very few exceptions, that every home on the market this day, including every newly constructed home, has an issue with more than one of the items listed in the contract. You may be further assured with few exceptions, that the cost of dealing with these issues will be greater than the average cost of a home inspection. 

The following clause will be found in the author's home inspection report:

(Note: This inspection has been conducted pursuant to the contract with the client(s) and the standards of practice of the "North Carolina Home Inspector Licensing Board." No claim is made that this report meets the requirements of Paragraph 12 of the North Carolina Real Estate Contract form. It is the responsibility of the client(s) and their agent to determine how this report might relate to the Real Estate Contract.)

In the client's eyes, the Realtor must find the perfect home, at the perfect price. The home inspector must verify that the home found is perfect.

The Realtor's fiduciary responsibility must be to meet the needs of the client, however he or she must close properties in order to survive. Irrelevant of any Realtor's ethical standing or commitment to the needs of the Buyer or Seller, every Realtor is influenced consciously or subconsciously by the desire to close the deal. Closing the deal constitutes more than success, it is the Realtor's very existence, and in most cases, that of their families. Simply stated, "If the deal doesn't close, I don't eat." This is a heavy burden to bear.

On the other hand the home inspectors fiduciary responsibility must be totally, without additional consideration, the interest of the buyer. The home inspectors responsibility is to observe and report the condition of the property with neutrality, accuracy and fairness. A home inspectors report must be delivered in such a manner as to clearly set forth the relevant issues to parties who, for the most part, have no experience or understanding of such matters. The attitude of the home inspector must be "Closing is irrelevant without the total enlightenment of the Buyer." This process must be provided in such a manner as not to overly inflame the Realtor whom, by default, is the catalyst by which most home inspectors are employed. The home inspector must schedule the next inspection in order to survive. Irrelevant of the home inspectors ethical standing or commitment to the needs of the Buyer, every home inspector is influenced consciously or subconsciously by the desire to schedule the next inspection. Getting the inspection constitutes more than success, it is a home inspectors very existence, and in most cases, that of their families. Simply stated, "No inspections, I don't eat." This is a heavy burden to bear.


This is the dilemma!
We all must eat and the needs of the client must be met!
Herein lies the point of flammability.
How is the flame to be extinguished?

The solution is simple and to an ethical person should be clearly evident. The proper goal of both Realtor and home inspector is the same. The goal is not to "close the deal" or to "get the next inspection," it is to meet the need of their client(s).

The problem comes from the impression that it is possible to find the "perfect" home. As was stated above: "In the clients eyes, the Realtor must find the perfect home, at the perfect price, and the home inspector must verify that the home is perfect." This is not possible, no "perfect" home exist. Homes are like people, none are perfect, but some come closer than others.

The task of the Realtor must be to find the acceptable home. The task of the home inspector is to verify that the home found is acceptable. The task should not be one of conflict, but of teamwork. We must kick at the same goal! This is not a competition!

So, all of that being said, what does this have to do with paragraph 12? Remember that paragraph 12 is PRHI (Pre Regulated Home Inspection) and as such is skewed toward protecting the interest of the seller and agents. We are in a new age. Home inspections are quickly becoming and will continue to be an essential component for sellers, buyers and Realtors in North Carolina. The days of "buyer beware" where fewer than one in ten homes sold were inspected are reversing to become "seller/agent beware." Buyers are no longer willing to gamble on hidden problems, unexpected repair costs or potential major disasters. Today's smart consumer demands better information for the largest long-term investment of their life. It is time those responsible for paragraph 12 wake up and resolve the conflict by bringing paragraph 12 into the present where home inspections are now regulated by law in our state. Here is the answer to quote home inspector Bruce Rudd in a position paper written some time ago:

"The 12b language was written to the best of the ability of its authors at a time when there was no guiding standard as a model. That time has passed. North Carolina statutes (Chapter 143, Article 9F) now include Home Inspection Guidelines which should logically be adopted as the new language for Section 12b. Why would the N.C. Bar Association and the N. C. Association of Realtors want to use a Standard other than that found in the N.C. General Statutes?"

"While Home Inspection Reports may be causing more difficult negotiations between the parties, there is no credible evidence that the Home Inspection Reports are causing confusion or misunderstanding. This is a very important distinction. More difficult negotiations are the natural result of better informed buyers and sellers; and, better information for buyers and sellers is the very goal of the governing bodies and the two governed professions. The increase in difficult negotiations does not show that the public is confused; rather it shows that the public is better informed and that the system is already working."

It is my understanding that this issue has been before the NC Association of Realtors Forms Committee and the NC Bar Association without resolution. I understand that (although I don't have good verification of this) the NC Bar Association would not permit reference in the Offer to Purchase and Contract of any document over which they had no control, and could be changed at any time. I guess the attorneys in our state can't deal with a document which on the last occasion took two years to change. I am sure, based on my past experiences with the profession, that they could not possibly deal with any important issue within a two year time frame. Get real! Things change and we must change to meet the new challenges. The Home Inspectors and Realtors in this state have had to rise to meet the challenge, it's time the NC Bar Association does the same. The Realtors/Bar Associations 12(b) is a pre-home inspectors licensing clause and should be updated to conform to the home inspection licensing requirements. 

Now, feel free to express your opinions, but lets get this issue resolved and stop bitching about it.

Thought for the week

"I've learned.... That opportunities are never lost;
someone will take the ones you miss." Andy Rooney

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