Even for responsible homebuyers, the path to home ownership is an arduous one. You work hard and build up your savings. You do careful research on neighborhoods, real estate attorneys, title insurance firms, and lenders. You hire a home inspector to make sure that nothing is seriously wrong with the beautiful house that you are considering. The home inspector performs an inspection and issues a report saying that the house is basically sound, with all its major parts and systems in working order. You confidently pull the trigger and purchase the home.
A month later, you start to notice a strange smell in the basement. It turns out, there is an extensive water leak, causing mold. You hire an engineer, at great expense, who surveys the home, and notifies you that the the leak is one of several major structural deficiencies. The original home inspection missed all of these.
As a homeowner, do you have any chance of recovery from your home inspector to cover the cost of such repairs?
Before even reaching the issue of claims against the home inspector, you should consider claims against the home seller. If you purchased a newly constructed home, you may have legal claims for defects against the home builder. If you purchased an existing home, different states have different rules and regulations governing suits against sellers for undisclosed, known defects.
Generally, sellers can face liability if they fail to disclose a material defect with the home that they knew about at the time of sale. A material defect is not chipped paint in the garage; rather, a material defect is something like an extensive termite problem or a collapsing roof. The key, however, is that the seller must have known about these material defects at the time of sale, and failed to disclose them to you. As the buyer, you would need to show that the seller actually knew about these defects, which is not always easy. Read more from Nolo about Suing the Home Seller.
In addition to any claims against the seller for potentially fraudulent concealment of a known defect, does a buyer have any potential claims against his or her own home inspector? Typically, a buyer will contract with a certified inspector—commonly an engineer or construction expert who works for a home inspection or engineering firm—to perform a thorough inspection of the home well before the closing. The inspection might include, for example, the home’s structure, foundation, electrical system, water system, and windows.
If the inspector’s report showed a relatively clean bill of health (apart from the inevitable minor repair issues), you’re likely to have believed that report and proceeded with the sale, or negotiated to have some items repaired, rather than seeking out second or third opinions.
But what if your inspector missed a crucial defect in the home? He or she gave you a positive report, you bought the home, and two months later, the basement floods from cracked pipes?
There are multiple legal theories upon which you could sue the inspector.
For example, you might have a claim for negligence or professional malpractice, if the inspector deviated from the professional standard of care in the course of the inspection. Negligence is generally defined as the failure to act as a reasonable person in the same shoes would have acted, where damages result from the behavior. The best way to prove that your inspector was negligent is to show that reasonable inspectors, in his or her place, would have discovered the defects in the home.
How can you prove this? Consider finding a second (or even third) inspector to get multiple opinions. If you have two experts who examine your home and write reports stating that the original expert should have discovered a particular defect in the pipe, this would certainly be compelling evidence against the original expert. Also be sure to take photos of the area before starting any clean-up efforts, both to show the extent of the damage and to provide any clues about whether old problems might have been visible during the inspection itself.
You might also have a cause of action for breach of contract, particularly if you had a written contract with the inspector in which he or she agreed to perform certain specific types of review, which in fact, were never actually performed. For example, the contract might have required the inspector to perform certain specific tests on the pipes. In this case, the breach of the contract could lead to consequential damages; that is, damages that were reasonably foreseeable from the breach. That might, for example, be the cost of repairing the damage from the burst pipe.
An important note of caution before you run to court: Many home inspectors will limit their liability within the contract the home buyer signed with them, using what's called an exculpatory clause. For example, the contract may explicitly limit any liability resulting from the report to simply the price of the contract (i.e., the amount of money you paid to the inspection firm).
Obviously, this amount of money is likely insignificant compared to what you will have to pay to cure various structural or mechanical defects now found in your home. Nevertheless, that sort of limitation on liability could severely reduce your chances of recovery in a court of law.
More broadly, the contract may disclaim liability for areas the inspector couldn't see or access. So if the home seller had built flooring in the basement which made seeing underneath it impossible, the inspector may have simply noted on the report that he or she couldn't see further, leaving you to follow up and bear responsibility.
If you believe you may have claims against your inspector, it may be worth your time to sit down with an attorney and review the contract you signed with your inspector. Your attorney will be able to help you analyze any limitations on liability within the contract document under your state’s law.
Even if your inspector has an exculpatory clause that would limit liability, he or she probably does not want to deal with an expensive lawsuit; particularly since lawsuits are publicly filed. Moreover, a public litigation and unhappy customer will likely be worse for business over the long run than a quick settlement.
The inspector's firm may have insurance to cover minor settlements. A confidential negotiation or mediation might be the best mechanism to achieve a settlement of your claims against your inspector.