Real Estate Inspecting

In the past 10 years, home buyers have been faced with increasingly complex real estate transactions. Buyers must obtain a mortgage with a lender, sometimes obtain private mortgage insurance, establish mandatory escrow and survive intrusive credit checks. Buyers must then review appraisals, water and radon testing results, home inspection results and wood destroying insect or organism inspections reports. (In this article, the term “WDI” will be used to describe wood destroying insects and organisms.) Each of these individually can jeopardize the deal.

Unfortunately, today, sometimes the WDI inspector is on the receiving end of the wrath of buyers, real estate agents and sellers when two other inspectors — appraisers and home inspectors — release information that may conflict with the report of the WDI inspector. Parties encountered by WDI inspectors on the job, either before, during or after the WDI inspection have varied backgrounds and allegiances.

THE APPRAISER. Appraisers are primarily inspecting in order to justify the offered price of a home so that the lender agrees to release the funds. An appraiser is involved to protect the investment of the lender. For the most part, appraisers are heavily regulated by state agencies and a professional designation is usually required. The appraiser looks at the structure from a competitive dollar viewpoint.

Twenty years ago, the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), became the leading authority and set the standard for housing and appraisals. Appraisers working under FHA requirements use Form 92564-VC, which is a check sheet for appraising the structure for HUD programs. The form has always had a general section on WDIs.

Form 92564-VC has dozens of questions leading the buyer to believe that the appraisal is a home inspection and WDI report. The issue of the WDI language was not addressed directly because HUD officials were aware that, in many states, WDI inspections are regulated by state agencies that had requirements in place for inspectors and the appraisal form did not preempt state rules. Further, the NPCA-1 (it is still called the NPCA-1; HUD adopted it as such in 1995), which is required in 38 states for real estate transactions, stipulates that only a licensed pest control company can complete and submit the form.
Anyone who fraudulently completes the form and submits it is subject to civil and criminal action by HUD. To date, however, no action has ever been taken by HUD against non-licensed pest control companies for fraudulent use of the form in states that do not regulate WDI inspections.

THE HOME INSPECTOR. The profession of home inspector has evolved from what might be described as a curiosity 20 years ago to a respected profession today. While some in the pest management industry see home inspectors as a threat to the existence of the WDI inspector, the fact is that home inspectors have specific roles and can only perform WDI inspections if permitted by state rules.

As with any profession, competence and training of home inspectors varies. Some states are now requiring licensing of home inspectors. Licensing frequently involves completing coursework, field experience and passing an exam, although requirements vary from state to state. The most respected and recognized organization for training and certification is the American Society of Home Inspectors (ASHI).

The main purpose for ASHI’s 25-year existence is to provide certification and training and currently has more than 5,500 individual members. Membership in ASHI has a combined prerequisite of education, experience and successful completion of a rigorous examination. There are other groups that “certify” home inspectors. The quality ranges from competent groups similar to ASHI to mail-order certificate sellers.

The home inspector looks at many structural components of a building including roofing, windows, doors, plumbing, electrical, HVAC and also looks for evidence of decay which may affect the structural integrity. Sometimes, depending on regulations, a home inspector will also comment on WDI-related issues even if they are not performing a WDI report. These comments can lead to confusion as to status of the structure if a WDI inspector releases findings that differ with the home inspector on one of the “gray” areas.

Usually, the home inspector is employed by the buyer in order for the buyer to make an educated decision as to whether they want to buy the building, so the home inspector’s allegiance is to the buyer.

THE WDI INSPECTOR. Few readers of this magazine need a description of the WDI inspector. The duty of the WDI inspector is to inspect accessible areas to determine evidence of wood destroying insects, and, in some states, organisms.

Requirements for training and certification vary from state to state. Some states now have association-sponsored accreditation programs. National programs have not been pursued due to the varying state conditions and regulatory requirements. The Pennsylvania Pest Management Association (PPMA) established an accreditation program in 1993 and has become the industry model for accreditation programs. Covering biology, inspections and reporting, the program has been recognized as the preeminent program nationwide. The PPMA program is not mandatory, but rather it is a series of voluntary guidelines embraced by all accredited inspectors.

Similar programs, with varying degrees of intensity have been adopted by Nebraska, Ohio, Virginia and New Jersey. North Carolina is currently developing a program that may go beyond guidelines and adopt standards of practice for completion of the inspection. Other states are in the process of developing similar programs.

CONFLICTING INFORMATION. There are several areas on a WDI report that can cause a conflict with the inspectors, regardless of state and reporting requirements.

Inaccessible Areas. The ASHI standards of practice typically require an inspector to go into areas that might be deemed inaccessible by the pest management industry typical practices. For example, some states clearly stipulate that a ladder is not used in an inspection. A home inspector, however, usually uses a ladder in their daily work. Now, in this example, if the inspector uses a ladder to access a scuttle and finds extensive infestation and structural damage and reports this information, the WDI inspector appears as though their inspection was inadequate.

The issue is further complicated if two pest management professionals visit the site and they have conflicting ideas as to what is accessible. There is a misconception among real estate agents and buyers that WDI inspectors must find all infestation and damage and that no area is inaccessible, regardless of what the report explains about inaccessible.

One newspaper recently advised a buyer that WDI inspectors are responsible for finding infestation and damage even if in inaccessible areas as the paper published the following advice:

“In any event, the termite inspection firm is clearly liable for failing to discover the termite damage. That’s their business to find termite problems. Getting that firm to pay will probably be much easier than suing the sellers. Please consult a local real estate attorney for details.” — Florida Today

Conditions Conducive to Infestation. In states that require the reporting of conditions that may lead to infestation, there is a potential conflict as well. If an appraiser finds decay and the WDI inspector doesn’t report that decay as a condition, there is a potential conflict. Then, also, the question is raised as to whether evidence is structural in nature, a question that the WDI inspector should not address unless qualified.

These are just two examples of differences encountered. The pest management professional must take steps to eliminate these serious contradictions (see related story below)

THE FUTURE. The future of pest management will be bright if the industry adapts to the changing world around us. The four steps on page 62 should be addressed by pest management professionals in order to guarantee future success.

The eighth edition of the  Handbook of Pest Control (by Arnold Mallis) reports that 70 percent of claims against pest management professionals are WDI related. Pest management professionals are no longer the only inspector to evaluate a structure. Adapting to the changing world of the real estate transaction and its accompanying inspections will guarantee the pest management professional’s place as vital in the transaction.

The author is president of Pro-Tech Pest Management, Raleigh, N.C. His firm is affiliated with residential and commercial building inspection companies. In addition, he is the former technical director of the National Pest Management Association. Baumann can be reached via e-mail at gbaumann@pctonline.com.

Steps To Avoid Contradictions

Here are four steps you can take to eliminate conflicting information between appraisers, home inspectors and WDI inspectors:

1.) Understand the world of the other inspectors. Research appraiser responsibilities and home inspection standards. Buyers typically have more interest in these two areas than in the area of WDI inspections, perhaps because the buyer is frequently not present for the WDI inspection.

2.) Support industry guidelines or standards. This in itself can create much debate, but the world around us has embraced guidelines or standards. If three WDI inspectors look at the same building, there might be three different reports as to accessibility and conditions found. State association programs of guidelines or standards have a goal of consistency in WDI inspections. Because industry practices vary widely, a state chief regulator recently was quoted describing termite inspections as, “It’s an art today. It’s not a science anymore.” “Art” is hardly defendable in court and the industry continues as easy prey for plaintiffs’ lawyers unless formal programs are developed which set guidelines or standards.

3.) Perform thorough inspections using the guidelines or standards. Depending on regulations and local practices, the interior, crawl or basement and other accessible areas must be inspected in order to get a good picture. Both appraisers and home inspectors look at these areas, so the pest management industry must make sure that these areas are examined on every inspection.

4.) Take a defensive approach. Imagine that the next time a report will be seen will be in court. Support state language that clearly defines inaccessible areas and conducive conditions as well as other areas of potential conflict with other inspectors’ reports.