Real estate licensees aren’t required to do a professional building inspection for your listings. But your state (for example, California) may require you to do a ‘visual inspection’. Here are some tips to help you fulfill these requirements and minimize your chances of a lawsuit.
What is a Visual Inspection?
A visual inspection involves a walkthrough of the property and taking note of any ‘red flags’, obvious defects and property damage. Typically, real estate licensees do the visual inspection on their own (or sometimes with a colleague). It should be done before the property is listed. It’s a chance to quickly identify any visible defects, barriers to open showings, or issues that could affect the sale of the property.
Take Your Time
Make sure you allow sufficient time for the visual inspection. It’s an important part of the home listing process which, if done badly, can lead to lawsuits. So it’s worth taking the time to do it right the first time. The time needed for a visual inspection will vary according to house size and age (typically new builds have less visible defects and maintenance issues than older-style homes).
Carefully inspect the exterior of the property and all internal rooms. You only need to inspect accessible areas of the home. You do not need to open cabinets or closets, inspect roofs, attics, or locked areas. You also don’t need to look under rugs or furniture. These things are beyond a visual inspection and not the role of the real estate professional. A building inspector engaged by a potential buyer will look in more detail at these things.
Red Flags to Watch Out For
Real estate licensees should be on the lookout for these red flags when undertaking a property inspection:
- Major visible damage anywhere in the property (interior or exterior)
- Broken windows or damaged screens
- Major stains on carpets, floors, walls or ceilings
- Unpleasant smells or odors (can be a sign of leaks or sewage problems)
- Signs of vermin
- Cracks, chips or other damage
- Home extensions that are *obviously not built to code.
- Obvious flooding or drainage issues
- Holes in guttering (you’re only looking for visible issues here and you’re not expected to climb a ladder to check anything)
- Cracked tiles on the roof (that are visible from the ground)
- Hot tub/spa/pool safety issues
- Hazards that have the potential to cause injury
- Uneven floors
- Excessive neighborhood noise (e.g., near an airport or factory)
*Obviously is the key point here. As a real estate professional, you’re not expected to assess if a building meets code. But, if you see an enclosed garage made into a living space with a fireplace – but no windows or ventilation, this might ring alarm bells and trigger further follow-ups with the seller.
Recordkeeping of Visual Inspections
Keep records of your visual inspections. Be careful to only describe what you see and don’t speculate about the underlying cause.
Avoid phrasing in your report such as:
- “Normal wear and tear”. You are not a builder or engineer and you can’t be sure what is normal wear and tear or otherwise.
- “Licensee recommends that the Buyer obtain a physical inspection”. That does nothing to show you have performed your own visual inspection.
Be as specific as possible in your report. Some states mandate how and where your visual inspection shall be recorded. For example, in California, the licensee must disclose information about their visual inspection in their Seller’s Transfer Disclosure Statement (TDS). Your local REALTORS® Association might also have forms available to help you document your visual inspections. The California Association of REALTORS® offers an AVID (Agent Visual Inspection & Disclosure form). This is very useful as it offers more space for visual inspection notes and it can be used even if the seller is exempt from completing a TDS.
Client Follow-up Records
It’s important to keep records of any actions you take as a result of your visual inspections. If you make further inquiries with the seller about whether their extension was built to code or if the basement leaks, document these conversations. Record the date, time and the person you spoke to and keep all information in the property file. Even better is getting this information in writing – email is a very effective way to document these discussions.
You never know when someone might launch a claim against you. Good recordkeeping will help you to quickly and easily respond to any requests for information that arise from legal inquiries.
Remember, visual inspection reports aren’t about highlighting a property’s features. You’re not doing this for marketing purposes. Only note the negative aspects of the home and the issues in your visual inspection report.
Sellers and real estate licensees have a responsibility to disclose any material facts and defects. Anything that can potentially affect the price of the property or a buyer’s decision to purchase must be disclosed. Honesty is the best policy and can help to avoid costly lawsuits.
Review Your Insurance
Do you have adequate real estate errors and omissions insurance coverage if a client lodges a claim against you? CRES offers tailored E&O Insurance with optional inclusions to suit your needs. As part of one of the largest insurance brokers in the world, we have unequaled access to more E&O options to cover your particular risks at the best price.
CRES E&O + ClaimPrevent® also provides everyday access to expert legal advice through our team of qualified attorneys. For further information about what CRES can offer, contact us today. Call 800-880-2747 for a confidential discussion.