Escrow Reports

Is there something different about inspection reports for an escrow?  If you ask most inspectors they will tell you yes.  In truth, they are no different than any other report.  The Structural Pest Control Board of California doesn’t make a distinction.  However, there is something that sets the escrow inspection apart, liability and lots of it.  The reason for more liability is that property buyers are looking at the report as a professional opinion about the condition of the property even if you are not hired to complete any work.

Example:  Let’s say a Realtor contacts a termite company for a free inspection on their listing of an older home.  The termite company sends out an inspector that rushes through the inspection and he misses that fact that part of the house is an un-permitted add on and there is no concrete in the foundation.  Just wood sitting on the ground.  An investor buys the home with cash and bypasses lending requirements.  His offer on the house is based on the termite companies report of findings and estimated cost of corrective measures.  While renovating the home for flipping, the new owner discovers the foundation problem and suddenly finds out that he needs to install a foundation and get the city involved in his quick flip.  His profit has just vanished and he may loose money by the time he corrects all the problems and sells the property.  In this case, you can bet the new owner will be coming back to the termite company to fix the foundation problem for free.  In this case, it doesn’t matter that the termite company never charged a dime for their report and was never hired to do any corrective work.  The structural pest control board will hold the termite company responsible for what they missed with a poor inspection and so will most courts.

Termite companies don’t even realize the level of liability they undertake every time they issue a termite report for an escrow until they get hit with a huge bill from a buyer and go through the process of trying to fight with an unhappy property owner and the Structural Pest Control Board about their liability.  In Southern California the majority of termite companies give escrow inspections for free to try and stay competitive.  It would be wise to charge for escrow inspections and take the time needed to do a thorough and professional report.

Comments are closed.