Who Signs the Contract?

[randynavarro]

1st inspection completed for a client. Deal falls through due to real estate contract glitches.

Real estate agent accepts blame. They find another home and call for a another inspection. Agent will pay for 2nd inspection.

Whose name should be on the inspection report and the contract?

I've always just put the buyers name on the contract regardless who pays.

I'll bounce this off an attorney. Just wanted to see what y'all had to say.

[hausdok]

Hi,

Regardless of who pays, the homeowner is the client. That's my position. If a mother is paying for her daughter's inspection, the daughter, who is buying the house and will be making all of the payments is still the client. I don't see the agent any differently. Even with the agent paying, I always get the client's signature on the pre-inspection, fill out the amount of the fee as $0. and then provide the agent a receipt in his/her own name.

ONE TEAM - ONE FIGHT!!!

Mike

[homnspector]

My interpretation is that the name on the contract is the person you have liability to. That is unless the agent is signing for the client. I usually put the report in the name of whoever signed the contract. If you are really inspecting for the buyer, not the agent, they should sign, they are the ones who need to know the limitations. Doesn't really matter who pays, you could do it for free if you want.

Man, if you are bouncing that off a lawyer, you are much more dilligent than I am!

[Jim Katen]

The buyer pays me. If the agent wants to reimburse the buyer, that's a deal between them.

- Jim in Oregon

[randynavarro]

Originally posted by homnspector

Man, if you are bouncing that off a lawyer, you are much more dilligent than I am!

Well, in the interest of full disclosure let me explain that I take advantage of the Pre-Paid Legal membership. For $275 a year I get to have all these 'minor' contractual questions answered and also bounce other basic legal questions off them.

Fortunately, I've never had legal issues that have elevated past the level of the 'basics'. Pre-Paid has served me well but if I really get in hot water, I'd have to engage a more "personal" attorney.

[Les]

I am with Jim, my client is who pays me and who pays me has to be my client. It is an issue of value received. I don't care where the money comes from as long as it comes from my client.

I would have a "genuine fit" is one of my guys took a check from a real estate sales person for a report and inspection done for a potential buyer.

It is a simple issue until questioned.

[DLRambo]

Whoever writes the check and pays me is my client and who signs the Inspection Contract. What they do with my report or who they give it to is up to them, BUT they are the only one I'm responsible to.

[Brian G]

In a lot of other legal situations the client is the person or party who is relying on the professional's work product to make a business decision, which may or may not be the same person providing the check. I don't know if that's ever been established in court for HI's, but that's the way I play it.

In Mike's example, I would have the daughter sign the contract or I wouldn't do the job. No offense to Mom. [:-splat]

Brian G.

Yo Momma! [-crzwom]

[hausdok]

Hi Brian,

Yes, that's exactly what I do. I do a PIA, fill in the amount as Zero and then explain the whole thing to the person who's going to be living in the house and is the actual homeowner and I have that person sign it.

There are a few realtors who refer clients to me who always pay for the home inspection as part of their "service." That's fine with me, but the person purchasing the home, not the realtor, is the client, and I don't cut the realtor any slack for referring the client to me. Do that once, and before too long they'll think that they oughta get a buy X and get X free type of deal.

ONE TEAM - ONE FIGHT!!!

Mike

[Brandon Chew]

Great topic, and I'm writing this into my business side SOP. I'm with Jim and Les on this one.

Originally posted by Brian G.

In a lot of other legal situations the client is the person or party who is relying on the professional's work product to make a business decision, which may or may not be the same person providing the check. I don't know if that's ever been established in court for HI's, but that's the way I play it.

That's how it works in the engineering world, from which I came. Those of us in states with HI licensing usually have the state telling us who our client is. Here's the state of New York telling me:

"Client" means any person who engages or seeks to engage the services of a home inspector for the purpose of obtaining inspection of and written report about the condition of a residential building.

I'm not sure why the "seeks to engage" part is in there. It seems to just muddy the water. The state of New York also tells me:

The duty of every home inspector shall be to the client.

and

No later than five business days after the completion of a home inspection on behalf of a client, each home inspector shall provide such client with a written report of the findings of such inspection. ... Every such written report and the information contained therein shall be deemed confidential and shall not be disclosed without the express consent of the client

Then this is followed by a lot of the "avoid conflict of interest" stuff that you find in several of the major HI association Code of Ethics.

In my company I want to drive home the message that I am client focused and that I am independent of all others who may be involved in the real estate transaction. With the above in mind my rules are:

My client is the person who retains my services and to whom I will deliver my report.

My client does not get an inspection unless they (or a legally authorized representative of my client) sign my contract.

My client pays me for my services. It does not matter to me where the client gets the money that they give to me for my services (as long as it was obtained by legal means!).

My client does not get my report unless I am paid.

I want to have my payment in hand before I leave the property, but I also want to allow for some flexibility. So if I don't receive payment within 5 days of the inspection, I'll fire my client for breach of contract and terminate our transaction. Because the inspection is usually a contingency in the real estate contract and because I'm marketing to mid to upper income clients, I don't expect this to happen very often. If it does, I'll eat my time invested in the inspection and report and walk away. My time is valuable and I'd rather spend it on the next inspection than chasing after a deadbeat client. My client is placing trust in me when they hire me, so I'll return the favor by placing trust in them that they will pay me for a job well done.

Mike - I don't know how it works in your state, but a lot of times a contract is not valid unless something of value is exchanged between the parties. So you might want to consider changing that $0 to $1.

[pi]

If the amount on the "contract" is 0, then there really is no contract as there is no consideration (the bargained for exchange). If there is a post closing problem with the inspection, the buyer has no recourse against the inspector. The person who "paid" for the inspection has no recourse either since they did not sign the "contract" The contract should be signed by the buyer or their legal representative with the amount clearly written on the contract. Once the inspection is completed and paid for, it really does not matter who paid for it. The inspection is done, the inspector has been paid, and there is a binding contract between the inspector and buyer who signed the contract.

[Chris Bernhardt]

Even if you do a free inspection for a client with no written contract you will be liable just the same for negligent misrepresentation, negligence and fraud.

If your client breaches the contract for example by not paying you are not off the hook. You are still up for negligent misrepresentation etc. The fact that you did not receive the agreed upon consideration is a separate issue.

Chris, Oregon

[Les]

Chris is right. Bargin must have consideration and an obligation is consideration.

Do not really believe what you read here - GO TO YOUR ATTORNEY. I have seen nearly every angle on this discussion and will tell you that you must have in place before the incident a standard and policy. Talk to your attorney now. My opinion today is that your attorney is more important than your insurance carrier!

[Brian G]

Originally posted by Brandon Chew

That's how it works in the engineering world, from which I came.

I did one year in appraisal, and they drill that stuff into your head at Appraisal Institute training. You gotta know who the client is in any given situation, because legally you can't disclose anything about the appraisal report to anyone but the client. It's very common for the buyer to be paying for the appraisal, but the lender is actually the client. Really pisses the buyer off when you won't tell them anything. [:-taped]

Brian G.

Mafia Home Inspector...I Ain't Talkin' [:-grumpy]

[Southbeach]

Accepting payment from a real estate agent creats a major conflict of interest. I would not do it unless the agent is the buyer. If the agent wants to pay for the buyer's inspection, he/she can remburse the buyer.

I get my contract signed by the buyer with my LLC. And the buyer pays the LLC. That way I have no personal libiality.

[housewhisperer]

Your Client/Customer is the individual whose name appears on the inspection contract. If another individual is going to sign the contract on behalf of the Client/Customer, you may wish to consider using an “Authorization to Sign the Home Inspection Contract on Behalf of the Customerâ€

[Brandon Chew]

Originally posted by Les

Chris is right. Bargin must have consideration and an obligation is consideration.

Do not really believe what you read here - GO TO YOUR ATTORNEY. I have seen nearly every angle on this discussion and will tell you that you must have in place before the incident a standard and policy. Talk to your attorney now. My opinion today is that your attorney is more important than your insurance carrier!

Great point Les. In my post I used the phrase "fire my client for breach of contract and terminate our transaction" very loosely, just so the reader could get a sense of my goal. But the details of bringing something like that about need to be worked out with my attorney and written into my business SOP.

[housewhisperer]

A contract is a mutual agreement between two or more competent parties to do something which is legal, such as an act, forbearance, or a return promise, for sufficient consideration.

"Mutual agreement" implies that all of the parties to the contract are in agreement with regard to the terms and conditions of the contract.

"Competent parties" implies that all of the parties to the contract are legally competent to enter into the agreement. For example, in Colorado, individuals under the age of eighteen are not legally competent to enter into contracts.

"To do something" implies a mutual obligation on the part of all parties to the contract - a this-for-that or quid pro quo.

"Legality" implies that the duties of all of the parties to the contract must be legal and that the contract must be enforceable or otherwise recognizable at law. If Bob enters into a contract with Bill and pays Bill to kill George and then, Bill runs away with the money but doesn't kill George, Bob can't sue Bill for breach of contract since killing people is illegal. Therefore, the contract isn't enforceable or recognizable at law.

"Consideration" implies that there is an exchange between the parties to the contract which is fair, reasonable, and sufficient. Here's a place where a contract can get sticky because "fair, reasonable, and sufficient" are subjective. Take the example of an inspection company which uses a negotiated contract, one which offers a client two options - one is an option of an inspection for which the liability of the inspection company is limited to the inspection fee and the other is an option to remove the limitation on liability for an additional fee. If the additional fee for removal of the limitation on liability is so high that no one would ever consider it, the courts will very likely find that it's not a legitimate negotiated contract because the additional fee was not fair or reasonable.

Every inspector I've spoken with whose company uses this type of negotiated contract has told me that no client has ever opted to pay the additional fee for the removal of the limitation on liability. Therefore, a negotiated contract can provide an additional layer of protection for inspection companies who wish to limit their liability to the inspection fee. In the event that a client doesn't choose to pay the additional fee to remove the limitation on liability and later seeks damages for negligence greater than the inspection fee, the negotiated contract permits the inspection company to point out that there was no coercion involved. Even if the client was up against a time deadline with regard to the real estate contract inspection contingency and claims that "he had no choice but to sign a contract limiting the inspection company's liability," the inspection company can legitimately counter that it offered an option to remove the limitation on liability.

Attorneys seem to view a fee of $500.00 to $750.00 in addition to the normal inspection fee as reasonable under the same theory that insurance companies charge higher premiums for lower deductibles. In short, the fee is proportional to the risk.

[randynavarro]

Originally posted by randynavarro

Whose name should be on the inspection report and the contract?

So. . . whose name should be on the inspection report and the contract?

[Bill Kibbel]

So. . . whose name should be on the inspection report and the contract?

The people who will be relying on your findings.

I'm not concerned who pays for the inspection. I rarely even look at the names on the check, just the $.

On some really, really 'spensive properties, it's written in the agreement that the seller pays for the buyer's inspections and testing (negotiating things like this is probably why they can afford to buy a high-end property). I don't know of this arrangement until the end of the inspection.

In a divorce, sometimes the husband pays for the inspection of the home where the ex and his kids will be living. His name is on the check, but her name is on the contract.

Two weeks ago, a Daddy had me inspect the horse farm he is buying for his daughter and son-in-law. He will not be residing there, but since his name is on the purchase documents and he is likely going to be financially responsible for the property, he is the client. (I should have asked if he has any more daughters)

There are several other unique situations where the party paying for the inspection was differrent than the folks relying on my findings. I've never had any concerns about it. I just do my job.

[housewhisperer]

The name(s) on the contract is/are the party(ies) for whom the work is performed. If Bob Smith wants you to inspect a home for him, he is your client/customer and his name goes on the contract. Bob, or his authorized representative, must sign the contract. If Betty Jones writes the check for payment of the services you performed for Bob Smith, that's between Betty and Bob. Just note that payment was received and from whom it was received. The name which appears on your contract in the space designated for the name of the client is your client, regardless of who pays. If someone else states that he or she is authorized to sign the contract on behalf of your client, it's a good idea to have that individual also sign a simple document such as the one below, stating that they are so authorized.

My signature below acknowledges that I am authorized by _______________________ (Client) to sign

the (company name) "HOME INSPECTION CONTRACT" for inspection of the property located at

____________________________________________________________________ (Subject property)

on behalf of the above referenced Client and to receive a copy of the inspection report.

____________________________________________ (Authorized individual) __________________ (Date)

[hausdok]

Oh, hell no!

We're talking about legal documents here. That's like having an arrested fellow's friend show up at the police station with a piece of paper and state that he can legally waive his buddy's miranda right not to be interrogated without a lawyer present. It just doesn't fly. Well, at least it wouldn't fly with me until I'd had an attorney, my attorney, tell me it would.

I don't release the report to anyone other than the client, unless the client has initialed the block on my form that says someone else besides he/she, that the client designates, can have a copy. I've had clients not initial that form and then their realtor called me up wanting a copy of the report and I've refused to provide it until I heard directly from the client. When they get upset, I tell them they can contact the client and have the client forward a copy of the report to them, but without those initials it isn't coming from me.

There's no way that I'd use such a bogus document. Now, if that person showed up with a power-of-attorney, that would be a whole different matter. Then I've got something which is legally defensible to fall back on, not some made up document pulled out of someone's butt.

I still maintain that it's the person who will be paying the mortgage who is the client, regardless of who's paying for the inspection, so that person's signature needs to be on the PIA.

This entire discussion is moot anyway, because what flies in one state won't necessarily fly in another, and what my lawyer says is important here could be insignificant in Chicago, where Kurt's lawyer would have an entire different take on it.

That's why Satan made lawyers. Take your PIA to your lawyer and discuss all of these various contingencies with him/her, so that whatever you do will be legal and defensible in your state.

ONE TEAM - ONE FIGHT!!!

Mike

[ozofprev]

Whew, same here. I followed whisperer until that last line. If someone tells me they are allowed to sign for my client, I say, "Sorry, but client must sign."

I do have a place on my contract where the client places names of people I am authorized to share the final report with. This comes in handy for situations with the spouse, adult children, client's realtor/lawyer, etc. If they ain't on that list, they don't see it. I've had no complaints.

Originally posted by hausdok

Oh, hell no!

We're talking about legal documents here. That's like having an arrested fellow's friend show up at the police station with a piece of paper and state that he can legally waive his buddy's miranda right not to be interrogated without a lawyer present. It just doesn't fly. Well, at least it wouldn't fly with me until I'd had an attorney, my attorney, tell me it would.

I don't release the report to anyone other than the client, unless the client has initialed the block on my form that says someone else besides he/she, that the client designates, can have a copy. I've had clients not initial that form and then their realtor called me up wanting a copy of the report and I've refused to provide it until I heard directly from the client. When they get upset, I tell them they can contact the client and have the client forward a copy of the report to them, but without those initials it isn't coming from me.

There's no way that I'd use such a bogus document. Now, if that person showed up with a power-of-attorney, that would be a whole different matter. Then I've got something which is legally defensible to fall back on, not some made up document pulled out of someone's butt.

I still maintain that it's the person who will be paying the mortgage who is the client, regardless of who's paying for the inspection, so that person's signature needs to be on the PIA.

This entire discussion is moot anyway, because what flies in one state won't necessarily fly in another, and what my lawyer says is important here could be insignificant in Chicago, where Kurt's lawyer would have an entire different take on it.

That's why Satan made lawyers. Take your PIA to your lawyer and discuss all of these various contingencies with him/her, so that whatever you do will be legal and defensible in your state.

ONE TEAM - ONE FIGHT!!!

Mike

[roadguy]

Housewhisperer,

You were doin' fine 'til you got to your sample simple document (hee,hee). What's missing from the document is a release by the client, which you previously went to great lengths to define/protect, and are now handing over the "object exchanged for reasonable and fair compensation" without their consent. Are you saying that, if I happened to be walking by, notice that you are performing an inspection, presented you with a document such as the one you submitted (without any acknowledgement in written form from your client), that you would hand over the results of your inspection? That was the implication of your post.

I'm with O'Hausdok on this one: HELL, NO.

[randynavarro]

Well, as a follow up if its worth anything. . .

One attorney I spoke with actually recommended a very simple solution (I couldn't believe it!!). As Jim Katen suggested at the beginning of this thread - the client (future homeowner) signs the contract. They also pay.

If the real estate agent, or sugar daddy, or brother-in-law wants to pay for the inspection, they simply reimburse the client and its between them.

No special clauses. No special contracts. No special receipts. Keep it clean.

Jim K. - ever though about becoming at atty?