First, what is a “soft” home inspection report – and how can it do harm?

Many home inspectors that inspect homes for real estate transactions have built their businesses upon the referrals of real estate salesmen to stay in business. Since real estate salesmen make no money until a home actually sells, some inspectors feel compelled to assist them in selling the house they inspect in the hope for future referrals.  To do this, they will ensure that their inspection reports do not “alarm” the prospective home buyer and possibly interfere with the sale of the home – with the hope and expectation of gaining favor and receiving more referrals from the sales agent.

The result is a “soft” report that is of little value to the home buyer who commissions it and potentially harmful to anyone who comes to depend on it.  A “soft report” could result in a buyer missing out on important information that could affect their choice to purchase a home.  This can lead to a serious financial loss.

The following are a few common methods used by some home inspectors to “soften” their home inspection reports:

“Balancing” the Report

The most common method used to “soften” a home inspection report is to add “positive” things about the home that would be attractive to the buyer.  I have had some inspectors tell me that they actually strive to include one positive feature of the home for every material defect that they find in order to “balance” the information.

Most experienced and professional home inspectors already take into account the fact that their client has found features of the home that attract them or they would not have contracted to purchase it. Professional inspectors know that they are hired to describe the home’s condition and report material defects that could affect the health or safety of its occupants as well as the sustainability of the structure.

They will perform this service by providing a home inspection report that is complete, accurate and totally unbiased.

Sandwiching information about hazardous or defective conditions between flowery comments is not the proper way to write a home inspection report.

“It Wasn’t in the Code Book, Back Then“

Another common technique used to minimize a material defect in the mind of a potential buyer is for the inspector or real estate salesperson to point out a serious material defect in the home and then infer or suggest that it is somehow more acceptable since it was not required by the code or building standards at the time the home was built.

Any defect that could result in physical harm to the structure (click here) … or its occupants (click here) …   is serious and should be addressed.  A home inspector’s job is to bring to his clients’ attention every such issue he observes and to recommend that it be corrected.  It is not his job to make excuses for its presence.

Understanding that building codes are simply little more than basic minimum standards of which anything less is illegal … the fact that something harmful may have met or did not meet a code at the time it was built has no relevance to the owner, today.

Estimates

Another way that an inspector can take the “sting” out of a description of a material defect to soften a report is to include an estimate of repair to help the prospective buyer apply what is called “context” to the defect.  This is not common to most home inspection reports, but it happens in some cases.

It is … dangerous for the inspector as well as the home buyer (click here)  … for the buyer to make purchasing decisions based upon an inspector’s estimates.  Many state laws and all standards of practice discourage inspectors from providing repair or replacement estimates.

Estimates can only be accurately provided by a person or business who is currently doing the work and aware of the present costs of materials and labor associated with the project and will often find undiscovered issues that affect the cost of the project once work has begun (click here).  Many contracting companies employ professional estimators who are trained and current in the practice of providing them.

“I am not an Alarmist.”

Watch for these code words that home inspectors use to alert interested real estate salesmen that they will write a “soft” home inspection report in exchange for future referrals … something that one court referred to in one recent lawsuit as “consumer fraud”.

Among some home inspectors and the real estate agents they work with is an “understanding” that first-time home buyers are sometimes easy to frighten or “alarm” when they learn of imperfections with a house they intend to buy.  Some home inspectors address this as they solicit referrals from real estate agents by advertising themselves as friendly to first-time home buyers and provide an assurance that they do not “alarm” them in the manner that they describe defects in their reports.

Learn more about the bad results that come from this act of “consumer fraud” … from this lawsuit (click here) … that resulted from a soft home inspection report given to a first-time home buyer who got burned.

“Free” Warranties and ” Guaranteed Buy Back” Offers

It makes sense for a real estate salesman to want to take some of the worries out of taking a chance on a new home.  Many will encourage or enhance the sale by providing “home warranty services” that may or may not cover items that stop working when the new homeowner takes over the property.  Some will offer to buy the house if they can’t sell it … or “buy the house back” if you don’t like it, with (of course) a long list of certain disqualifying conditions.

While most home inspectors are careful to inform their clients that they are not providing or implying a guarantee or warranty through their inspection reports, many will want to impress real estate salesmen with the appearance of assisting them in providing an incentive to buy.  Accordingly, they will purchase “90 Day Home Warranties” or provide “Guarantees” that are supposed to cover selected systems within the home against defects for a very low cost ($5 to $15) and will provide them to their clients with paid home inspections.

These low-cost service contracts promising high-end payouts are a common source of complaints with state-level consumer advocacy offices (attorney general, BBB, etc.) and should be carefully scrutinized.  Even when they appear to be provided “free of charge”, reliance upon them when deciding to buy a home can be extremely costly.

In addition to the exclusion laden free “warranty”  is the recent promotion where some home inspectors offer to “buy back your house” if they miss a defect in their report.  If you really … really … believe that your home inspector can afford to “buy back” every house that he inspects charging his $300-ish inspection fee, then go ahead and take comfort in his offer when deciding to buy a home.  If, however, you are suspicious as to why he will NOT promise to pay to replace the broken water heater he failed to detect for $500 but is willing to “guarantee” to buy back the house for $300,000.00, instead … look carefully at the hundreds of exclusions that assure that no such transaction can ever take place.

When the home inspector … the person hired and trusted to report things that might be wrong with the house that one intends to buy … begins providing “free” incentives to help the potential buyer decide to purchase the home by addressing future recalls of appliances or “free warranties” should things break, this could indicate that someone other than the home buyers’ interests is being considered.

The use of these so-called “warranties” along with other gimmicks (such as ongoing updates on the recall status of appliances, alarm system evaluations, etc.) assist some home inspectors who wish to solicit additional referrals from real estate salespeople in promoting the sale of the home by furthering the sales agent’s presumption that the prospective buyer will decide to buy the house.  Carefully read these “warranties” and “guarantees” to see that they actually provide the intended coverage.  Many don’t.

While these gimmicks have little to do with reporting the present condition of the home  … they can go a long way in helping a sales agent create a mindset of “ownership” that advances the sale of the home.  This is why some inspectors, according to their conversations in private sections of professional forums, promote their use as “marketing tools” to solicit more real estate agent referrals.  “Agents love them” is a mantra for those who promote them.  One vendor who sells the “We will buy back your house if we miss something” goes as far as to promise participating home inspectors that “every” real estate agent he solicits will provide him with “every” client they serve as a referral.  Some home inspectors believe this and are willing to take a shot.

Home buyers should ensure that the company that is representing these service contracts is properly registered with their state and should not hesitate to hold the inspector that provided it to them responsible for the provider’s failure to perform under the contract – since it is being provided as a part of the home inspection service that they paid for.  Here is a lawsuit where the home buying victims of a “soft” home inspection report with a 90-day warranty did exactly that … (click here).  A “We will buy your house back” guarantee would also exclude the conditions described by the duped homeowners in this suit.

Caveat emptor.

What Should You Do (and NOT Do)?

Do your best to seek an experienced, full time and certified inspector, but be aware that even highly experienced and “credentialed” home inspectors can still be found to participate in writing soft reports or using gimmicks in return for future referrals.

While I personally know some excellent home inspectors who have scaled down their businesses for various reasons and continue to do quality inspections on a part-time basis … I know many others who have yet to reach a level of skill and expertise upon which they are able to confidently rely upon or fully commit themselves to be a home inspector on a full-time basis — yet these inspectors somehow expect others to place confidence in that level of skill and expertise to such a degree as to rely upon them to make the largest single purchase that many are likely to ever make in their entire life.

Use the internet to do your research and if you prefer to have someone refer an inspector to you, seek advice from friends or family who have had personal experiences with professional home inspectors.

Be skeptical of referrals for home inspectors from real estate agents or anyone else who has a financial interest or stands to gain from the sale of the home. Often, home inspector referrals come in the form of lists that will contain the names of inspectors known to the list provider to write soft reports or will be simply a list of inspectors who were willing to pay the real estate broker or agent a fee to appear on their referral list (click here). If one chooses to rely upon the recommendation of a real estate salesman for a home inspector and they provide a list of inspectors that they prefer to have a home buyer work with, it is not a good idea to go through the list simply searching for the inspector with the lowest fee.

Instead, home buyers should seek information about the inspector’s qualifications, length of experience, certifications and whether or not the inspector is committed to business on a full-time basis since some only perform inspections sporadically “on the side” from their other full-time job. When a home inspector adds a “free” gimmick to an inspection report such as a 90-day “warranty”, he should be asked how he has come to the conclusion that the buyer has decided to go forward with the purchase prior to having read his inspection report.

He should also be asked why he would be involved in matters, regarding future performance or recalls of appliances in a home, that he alleges his report to be exempt from. Using these selection criteria, the best inspectors will stand out quite readily.  Still, one should remember the “code words” when reviewing his advertising and his reports.

(Revised on 6/9/14)

“Plausible deniability” is a strategy used by some insurance companies to escape their contractual duties to their policyholders that leaves little or no evidence of wrongdoing or abuse.  It allows them to hide behind the wrongful acts of someone else that determines, on their behalf, that your claim should not be paid if and when, in fact, it should be paid.

How might this be done, and how might an engineer’s report play a part in it?

Let’s say that wind or hail has damaged your roof and you have consulted with a trusted roofing contractor or other roofing professional before filing your insurance claim who has confirmed the damage to your roof.  Your professional might have decades of practical experience and training working for a century-old roofing company, spending thousands of hours per year inspecting and repairing damaged roofs exactly like yours. He may have worked with identical materials like those on your roof hundreds of times with countless numbers of expert repairs or replacements provided to hundreds of satisfied homeowners who had hail or wind damage identical to yours … but your insurance company decides to bring in their “expert” to look at your roof, instead.

The hired gun …

Your insurance company’s “expert” will probably be a licensed engineer who has never installed or supervised the installation or repair of a single roof.  His specialty before becoming employed by the “engineering company” he now works for may have been geotechnical, water resources, electronics, or any other of the numerous variety of engineering specialties that have nothing at all to do with building materials.  His brief training program provided by his company may be the only credential he has earned to be an “expert” in the area that he has been called upon to inspect for your claim — and is likely to have seen fewer storm damaged roofs in a year than your contractor has seen in a month or less.

Unwittingly, some policyholders will actually request on their own that the insurance company call in an engineer to provide what the policyholder mistakenly believes to be an unbiased inspection.  The requested engineer is then selected, hired, and paid by the insurance company to provide them with the report that the policyholder is believing to be independent and unbiased.  Whether requested by the insurance company on their own or at the request of the policyholder, the engineer is being directed and paid by the insurance company for his opinion and, like any paid contractor, serves the party who contracts with him.

Back to our example, the insurance company’s “expert” provides an “engineering report” to the insurance company that contradicts the finding of your experienced roofing contractor and your insurance company concludes … based upon the opinion of their hired gun … that the hail damage reported to you by your experienced contractor is not really hail damage and your claim is denied.

Many of these “engineering” companies that employ licensed engineers to provide these types of reports to insurance companies do not provide any other service. Writing these reports for insurance companies is their major (or, in many cases, only) source of business income.  Sometimes, as reported by the television news program “60 Minutes” (click here), the company’s managers may even change the language in the engineer’s original report to benefit an insurance company at the expense of the homeowner.  The financial incentive (usually $1,500 to $2,500 per report) for future repeated business is what will often drive some of them to find creative ways to “help” the insurance company to determine that your hail damage is not really hail damage, that structural damage is not really structural damage, and so on.

As most public adjusters know from the numerous “engineering reports” that we read and discuss with insurance companies, many of them are simple boilerplates with only the beginning and ending pages unique to the applicable home, and many of them lack merit or fact that would actually support a denial of an insurance claim. Unfortunately,  policyholders do not have the advantage of reading enough of these “engineering reports” to recognize the numerous errors, omissions, and duplications contained within them and, accordingly, will mistakenly believe that the report cannot be successfully disputed.

My recent experiences …

Because they don’t know better, many policyholders who have been stung by a fraudulent engineer’s report (or simply one they do not agree with) will insist that their insurance company “send out another engineer”.  First, understand that the engineer was hired to write the controversial report in the first place, and at a considerable sum.  The insurance carrier has no incentive at all to argue with itself.  Second, a second engineer’s report that differs at all with the first simply puts the disputed question in a “tie” – one for and one against.  The second report is not definitive simply because it disagrees with the first.  Requests from policyholders for the insurer to send out a second engineer for a second opinion go nowhere and – even if the carrier should decide to pay for a second report, it is highly unlikely to result in the policyholder’s favor, even if the second engineer disagrees with the insurance company.

An engineer’s report that I received from one of these companies specified how the insurance company’s expert closely examined the “clay tiles” that were chipped and found the damage to be attributed to something other than hail. He then provided a lengthy and generic boilerplate description of how “clay tiles” are made and the scientific studies of the effects of hail that strikes them.  What the expert that wrote the report failed to observe was the fact that the roof was covered with eighty-year-old concrete tiles and not clay tiles.  The homeowner’s experienced contractor knew the difference but the insurance company’s expert obviously didn’t. (If you are not familiar with the difference between the properties of clay and concrete tile, more information is available by clicking here. Now, you know more than a certain insurance company’s expert.)

One engineer’s report for a client that was used to deny an insurance claim for a church with a wind-damaged roof incorrectly described a tongue-in-groove roof covering as plywood sheathing, identified the wrong date (and the wrong windstorm) when he incorrectly reported low wind speeds, and failed to identify and record the fact that the steeple had been lifted and moved by a 100 mph wind. This report was written by an engineer from a company commonly used by insurance companies in several states to support their claim denials.  Whether his errors and omissions were caused by his negligence or bias is not important since his licensing board prohibits both.  When the errors that I found in the report were brought to the insurer’s attention, they promptly paid the claim to replace the steeple.

In another recent case, another engineer from the same company went as far as to actually interpret the insurance policy’s coverage for the insurance company and presented in his report that, while the copper roofing material had clearly been dented by a recent hail storm, the damage “could not be seen from the ground” and was not, in his opinion, actual “damage”.  The insurance company conveniently and improperly allowed this errant interpretation of coverage by the engineer to stand … knowing fully that the policy had no such exclusion for hail damage that “could not be seen from the ground”.  The insurer denied payment to the policyholder, an elderly widow, and I was hired to intercede on her behalf.  I immediately challenged their action and reopened the claim.  The insurance company finally … and reluctantly … agreed to pay the policyholder over $232,000.00 to restore the roof to its pre-damaged condition and the engineer has reportedly returned to his full-time of job of selling real estate.

As you can see from these three recent examples … it has been my professional experience and personal observation that not all engineer reports reflect accuracy, competency or non-bias — and insurance companies that use these reports to deny claims are not always acting in good faith.

[Worthy of note are the instances in which the engineer report is, by design or negligence, written in an ambiguous manner that allows facts about the damage that could benefit the policyholder’s claim to be manipulated in favor of the insurance company paying for the report. Most policyholders are not trained or able to fully comprehend detailed engineering reports.  In one recent claim in 2019, for example, an engineer report that accurately described and reported damage to a commercial building was wrongfully interpreted by the insurance company to deny a claim that, after I reopened it and challenged their interpretation, resulted in a check to my client for over $682,000.00.  Prudent policyholders will arrange to have their insurance denial letters and accompanying engineer reports reviewed by a public adjuster before walking away from their claim.]

What can you do if you are working the claim on your own…?

First, feel free to email a link to this page to your insurance company’s adjuster and let him or her know that you are on to the game.

While some state Departments of Insurance may not find these actions to be something they wish to handle or spend political capital, there are often other departments within state government that are able to act to preserve the integrity of the engineering profession and, in turn, protect the public from licensed engineers who are acting in an incompetent or biased manner.

Licensed professional engineers are accountable for their acts of bias and/or negligence to the state that issue their licenses. Accordingly, home insurance policyholders that believe they are victims of an improper relationship between their insurance company and an “engineering company” may have recourse through the state department that licenses the engineer that wrote the incorrect and/or biased report.

Formal complaints from homeowners that have merit will be investigated by the licensing board, and the competency and integrity of the licensed engineer that wrote the report will be evaluated by the board that issued his or her license.

Engineers who write reports for insurance companies to use to deny claims that contain incorrect, partial, or biased information will have to justify their actions (if they can) to their respective licensing boards that monitor and enforce competency and impartiality. Their actions, if found to be due to incompetence or partiality, could result in sanctions up to and including fines and forfeiture of their licenses and these findings can be used by homeowners to address their denial or underpayment through the proper channels available to them … through their policies or judicial means.

Enough enforcement actions taken against licensed engineers that participate in the practice of routinely providing insurance companies with undue “plausible deniability” used in their refusal to pay legitimate claims could effectively reduce this threat to policyholders seeking to be indemnified for their losses.

[Note:  Policyholders should also take care to ensure that the “engineer report” was actually written by a state licensed engineer.  In some cases, these damage inspections are conducted by “consultants” and/or “home inspectors” who are not licensed engineers.  The reports that they compose are subsequently sent to engineers to sign and affix their seal before forwarding them to an insurance company for their use. When you find the inevitable errors or omissions in these reports resulting from the unprofessional inspection or observation, and report them to the insurance company, be certain that the insurance company is not responding to you regarding these errors with advice from the same unlicensed consultant instead of a licensed engineer. I have communicated with some insurance adjusters who are not aware of the difference.]