BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Agents Ordering Inspections for Clients
Q: I am a buyer’s agent. My buyer wanted to order a home inspection, pest inspection, roof inspection and a sewer lateral inspection. He was going to be out of town and asked me to order the inspections and reports. I did so and asked the invoices be sent to escrow. Three of the inspectors were willing to do that, but the third insisted on submitting the bill immediately, which he did by sending the invoice to me in my name, even though I told the inspector that it was for my buyer.
Ten days later my buyer cancelled the contract after the seller delivered some disclosures that the buyer did not like. The seller agreed to a cancellation, and now both parties have signed escrow instructions cancelling the contract and returning all of buyer’s deposit to buyer. Now, my buyer is refusing to pay these invoices stating he would not have ordered the inspections if he had known of the seller’s disclosures up front. Seller says it is not her responsibility either.
Because I was the one who ordered the reports, all four inspectors want me to pay. Can they do that? Shouldn’t the escrow company have paid the invoices out of buyer’s deposit before returning the balance to buyer?
A: This is an all-too-common occurrence. In the absence of a clear direction as to who is going to be responsible for the costs of any inspections ordered by the agent for their client (either seller or buyer), the inspector may well try to collect from the agent who made the call; and may even go so far as to file a Small Claims Court action to recover the fee. Escrow companies are obligated to follow the instructions of the sellers and buyers, who are the parties to the escrow – so they may not be much help to you here.
PRACTICE TIPS:
1. If you are going to order inspections for your client, have your client sign the attached “Authorization for Agent to Order Inspections and Reports.”
2. If your client then chooses to have additional inspections, have the client sign an additional Authorization.
3. If your client chooses to NOT have an inspection which your client had previously authorized, then confirm that cancellation in writing. (The concern here would be that later the client may claim that they wanted a particular inspection, that you failed to order it, and that inspection would have disclosed the defect which is now the subject of the client’s claim.)
4. Be sure to discuss with your client that, although you will actually be the one contacting the inspection company and scheduling the inspection, it is your client’s responsibility for the payment. Setting the right expectations up front can prevent problems.
DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
(Insert Broker Name)
AUTHORIZATION TO AGENT TO
ORDER INSPECTIONS AND REPORTS
Property: ____________________________________________________________
Agent Name: ________________________________
I am the (Check One) □ Seller □ Buyer of the Property.
I hereby authorize the above-named Agent to order the following inspections and reports on the Property in my name.
Type of Inspection Inspector, Contractor, Etc.
______________________ __________________________________________
______________________ __________________________________________
______________________ __________________________________________
______________________ __________________________________________
I further agree to be responsible for the payment of the fees for those inspections and reports, and will make those payments upon receipt of the invoice. It may be possible for some of those fees to be paid through, and at the time of, close of escrow. In such case I authorize the escrow company to pay any such invoices from my proceeds if I am the Seller, and from monies to be paid by me into escrow if I am the Buyer. However, for any invoices which are presented to escrow and which are not paid through escrow, I nevertheless agree to be responsible for, and to promptly pay when due, all such invoices.
Date: ______________, 201_ _____________________________________
Signature
Date: ______________, 201_ _____________________________________
Signature