 |
|
|
|
|
|
|
|
|
|
|
|
|
|
 |
|
||||||||||||
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
||||
 |
 |
 |
|
||||||||||
 |
 |
 |
|
||||||||||
 |
 |
 |
 |
 |
|
||||||||
 |
|
||||||||||||
Rules govern broker's role in inspections
Following a few guidelines will keep you on the right side of the rules. by J. Richard Hargis
Rules,
rules, rules! They are everywhere.
They
originate from statutes, ethics, customs, and practices. Some are longstanding
and never subject to change, while some are refined or modified to create
new rules.
Real estate brokers and agents confront rules in their brokerage activities at every turn. And no area of real estate brokerage is more rule sensitive than property inspections. The property inspection process is an integral part of the typical real estate transaction.
Over the last many years, there have developed certain rules and customary practices which govern the role of brokers and agents in the inspection process. Most of the rules have remained constant with little change or modification. However, the growing acceptance and utilization of buyer agency in the real estate buying process has created a few cogs in the wheels of the usual and customary practices typically followed by brokers for inspections. Specifically, brokers who represent buyers regularly find it hard to undo old habits and rules.
Keep
inspections and brokerage separate
One rule every real estate broker and agent knows is that no person may conduct
or perform a real estate inspection in Texas unless licensed as a real estate
inspector or otherwise authorized by law to perform inspections (e.g., professional
engineers). This is a statutory rule requiring that a person must possess
a proper license to perform real estate inspections. The statute also provides
that an inspector may not act in the dual capacity of inspector and real estate
broker or salesperson in a transaction. Thus, a broker who also holds an inspector’s
license cannot offer or provide both services in the same transaction.
All of this is to say that Texas law views real estate brokerage and real estate inspections as separate and distinct disciplines. As a result, real estate inspector licensees are neither authorized nor qualified to engage in real estate brokerage. Similarly real estate licensees are neither authorized nor qualified to perform real estate inspections.
Follow
the statutes, rules, and the Code of Ethics
In addition
to statutes, the NAR Code of Ethics and the rules of the Texas Real Estate
Commission (TREC) provide guidance on the role of the broker in property inspections.
It is clear from the Code of Ethics and TREC Canons of Professional Ethics
that REALTORS® and real estate licensees should not engage
or offer services to their customers or clients for which they have no competency
and are outside the scope of their licensor.
For example, REALTORS® cannot practice law, and they cannot perform real estate inspections. In effect, the ethical rules which govern REALTORS®/real estate licensees provide that a broker must not act like or even suggest that the broker possesses any special skills, knowledge, or expertise in the area of real estate inspections.
It is understandable that these statutory and ethical rules can be misconstrued by the broker’s clients and customers for the reason that brokers are perceived to have considerable experience with inspections as part of the typical real estate transaction. And while a broker may have experience with inspections (and even strongly held opinions about certain inspectors), that does not mean that the broker is qualified or competent to evaluate the sufficiency or adequacy of an inspection. In fact, they are not. This fact must be communicated by brokers to their customers and clients to ensure adherence to statutory and ethical rules governing the broker’s role in property inspections.
Follow
the guidelines and common practices
To assist and
guide brokers in their compliance with statutory and ethical rules relative
to the property inspection process, a number of common practices or guidelines
have been developed over the years.
A few of the more common and reasonable guidelines include the following:
• Brokers should avoid making specific recommendations of particular inspectors.
• Brokers should avoid making statements such as "this is an excellent inspector" or "this inspector will give you an excellent report." Such statements might arguably be the basis for one to allege that the broker warranted the inspector’s performance. Any suggestions the broker may make about the selection of an inspector should be qualified and should disclaim any warranty of performance by the inspector.
• It is prudent for the broker to simply provide a list of inspectors who are active in the area from which buyer can select an inspector. The broker should qualify (on the list) that the broker does not recommend a particular inspector or warrant the quality of the inspection.
• It is equally prudent for brokers to avoid any derogatory statements against any one inspector to avoid allegations that the broker is directing the prospect away from a well-qualified inspector to a lesser-qualified inspector. However, if known to the broker, the broker is not prohibited from conveying copies of public documents related to an inspector’s past performance, such as whether the inspector has been disciplined by TREC or another regulatory authority or other legal proceedings related to the inspector’s past performance.
• Generally, it is more prudent for the broker not to arrange for the hiring of the inspector. The client or customer should have the responsibility for retaining the inspector’s services.
• Generally, listing brokers should not attend inspections, except to allow access and secure the property when necessary. A buyer’s broker should discuss whether the buyer prefers the buyer broker to be present at the inspection.
• Brokers should not comment or offer opinions regarding the sufficiency or adequacy of an inspection or the report and results of the inspection.
• Brokers should direct any questions or concerns about the inspection to the inspector. Brokers should avoid trying to clarify or explain another person’s report.
This is a representative sample of suggested guidelines relating to the broker’s role for inspections. These are all good suggestions for a broker to follow, especially when working with a buyer who is a customer. They are equally good suggestions to follow when the buyer is the broker’s client. Utilization of the above guidelines reinforces the well-accepted fact that a real estate broker is not an inspector and, ideally, should not be actively involved in the inspection process.
A broker’s client or customer must recognize this fact and look to the inspector as the expert in property-condition matters. Otherwise, a client or customer might be lulled into believing the broker is experienced or qualified to render opinions regarding inspections.
Inspection
rules and buyer agency
It is hardly
newsworthy to note that buyer agency has become commonplace in today’s
market. It is a popular and frequently established legal relationship between
brokers and their clients. And while the above guidelines can be embraced
by a broker who represents a buyer, it is not always easy for the broker to
stand firm on such guidelines.
For example, an out-of-town client who enters into a contract to buy property may want the client’s broker to recommend an inspector and handle the arrangements for scheduling the inspection. Further, if the client cannot be present for the inspection, the broker may be asked to attend and be the eyes and ears for their client. And finally, the client may ask the broker to contact the inspector to obtain clarifications to the report or additional information.
The broker could decline to perform these tasks for the client, but that might lead to a strained relationship between the broker and client.
Instead, the broker might attempt to assist the client in arranging for the inspection and even selecting an inspector. Such administrative acts may run counter to the guidelines, but would not violate statutory or ethical rules.
The point is rather transparent: a buyer’s broker can be directed by a client to perform certain tasks or run the risk of having the relationship terminated. A broker who performs purely administrative tasks for a client or acts as a conduit of information between client and inspector cannot be accused of violating the statutory or ethical rules. But the broker must be wary of being drawn into more substantive areas surrounding the inspection itself.
The best course is to periodically remind the client that the broker is not an inspector and is unqualified to express opinions in such matters. Most, if not all clients will appreciate the broker’s candor and accept the broker’s limited role in the inspection process.
J. Richard Hargis is a partner with Hargis & Harpold L.L.P., in Houston and is legal counsel for the Houston Association of REALTORS®.
This article first appeared in the October issue of Houston REALTOR®. It has been modified with assistance from TAR Director of Legal Affairs Ron Walker.
home current issue top 10 resources
Buyers & sellers,
visit www.texasrealestate.com.
REALTORS®, visit www.tar.org.
Brokers should avoid making statements such as "this is an excellent inspector" or "this inspector will give you an excellent report."
