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Defect, Inspection and Disclosure

Inspecting the Issues Involving Inspectors

In today’s litigious environment, inspectors are an integral part of every real estate transaction.  These individuals can provide essential information which will assist your clients’ proper evaluation of whether they should purchase a particular property.  In addition, to the extent you are entitled to rely on their expertise, you are provided with a layer of insulation against a potential claim.

As you approach each transaction, especially if you represent the buyers, you will be faced with questions as to which types of inspections are appropriate.  As always, there are conflicting factors in examining this issue.  On the one hand, there is the issue of how much it would cost to have every conceivable type of inspection.  On the other hand, inspections, if properly performed, should provide you and the buyers with expert information concerning the condition of the property.  This, in turn, reduces the risk the buyers will make an imprudent acquisition.  In addition, it will reduce the risk you will face a claim with respect to that transaction.

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Using Experts

A common issue for you relates to the use of experts. This is of particular importance as it often impacts your risk of a lawsuit, as well as the prognosis for a successful defense if there is  a lawsuit. The following are a handful of key considerations with respect to your use of experts.

1.  Perhaps the most important thing is to make sure any expert you may recommend has errors and omissions insurance. First, it gives a pretty good indication regarding that experts professionalism. Second, if there is an error with the services rendered by that expert, then they will have the resources to cure the problem. Otherwise, there is a greater risk a disgruntled client will pursue you since you have the proverbial "deep pocket."

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Top 10 Mistakes Made on the TDS

1.    The Agent fails to recognize the critical importance of providing a thorough TDS.  This includes a failure to properly educate the Seller of such importance.  It also includes the failure of the Agent to perform a thorough visual inspection of all accessible areas of the subject property.

2.    The Agent fails to have the sellers fully complete the Seller Property Questionnaire (C.A.R. form SPQ).

3.    The Agent delivers the TDS too late, resulting in the Buyer being able to rescind the transaction.

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