§444-K(1) of the NYS Home Inspection Professional Licensing Act requires that a person applying for a home Inspector license provide proof of their having general liability insurance, and licensed home inspectors are required by that law to maintain that insurance at all times. The law further requires the liability insurance to be made in the coverage minimum amounts of $150,000 per occurrence and $500,000 aggregate.

So, being a newly hatched graduate of the state-mandated 140-hour required training course and having passed the licensing exam, you do a search on the Internet to find “home inspector liability insurance” and find a company that will sell it to you for around 500 bucks. You do the deal and send your application into the State, signed in affirmation that you have the required insurance.

License in hand, you are “good to go” and you hang your shingle on the World Wide Web and work hard to start to grow your business.

You get a call one day from an irate homeowner saying he’s going to sue you because you destroyed his house by causing a major water leak when you tested the whirlpool bath. You explained to him that all you did was fill it with water deep enough to test the whirlpool function, turn the whirlpool thing on to make sure it worked, turned it off and drained the water. If that caused a leak it certainly wasn’t your fault and he should be talking to his homeowner’s insurance carrier. The homeowner says the problem would not have occurred if you hadn’t done what you had done during the inspection and you can expect to hear from his lawyer.

Wow!

Well, that should be a pain and it could be costly. Better call my liability insurance company.

That did not go very well. After listening to your description of the incident the company representative points out to you the clause in your policy relating to exclusions and the specific exclusion of “Professional Liability”. The rep explains that as licensed home Inspector, you are a professional and you made a professional judgment call to test that whirlpool tub. Anything resulting from that professional judgment should be covered by Professional Liability Insurance, otherwise known as E&O (Errors and Omissions). You are not covered for it by your general liability policy due to that specific exclusion. You point out to the rep that the homeowner’s claim is not even legit and that their homeowner’s insurance should cover it. Can you just call them and straighten it out? The rep explains to you that her company has no obligation to provide any support or defense for you since it is clearly excluded from coverage and that they will not get involved in any way. She wishes you the best and suggests that perhaps you should get a quote from your agent for E&O.

*%$@# !! I thought I was insured!

• Lesson #1: Exclude testing whirlpool tubs as they often leak where you can’t see it. (And because the State SOP excludes it: Not required to…“Observe and report on any spas, saunas, hot-tubs or jetted tubs”
• Lesson #2: Read and understand your insurance policy.
• Lesson #3: You really should not be practicing a profession without E&O coverage.

This particular scenario has reportedly occurred. Twice.

The New York State Association of Home Inspectors (NYSAHI) Board of Directors has had this as a matter of discussion at multiple meetings. Is has been pointed out that it seems right that E&O should insure against failures of professional judgment in reporting and that general liability insurance should rightfully protect against damage to a house that results from the from the physical acts of conducting an inspection. After all, contractors of all types, who are not licensed professionals and do not carry E&O, have general liability insurance that would cover them if they had filled and turned on the whirlpool tub. It seems reasonable for home inspectors to expect the same.

It has also been noted that the State should define more clearly what the mandated general liability insurance should cover. It is apparent that the intent of the law was to protect the public against damage to their homes as a result of a home inspection. As things stand now, the liability insurance offered by some appears to offer little protection of this kind to either the homeowner or the home inspector. That makes buying a liability insurance policy that the State will accept more of an administrative formality and unnecessary expense, whose benefit is only to an insurance company that “clips coupons” collecting annual premiums with little if any exposure to risk of defense cost or payout.

A comment made by a very experienced and successful home inspector, “You get what you pay for”, should serve as a warning to home inspectors. Getting a general liability policy that provides good and expected coverage will certainly be substantially more expensive than one that serves only as a placeholder for licensing. Also, if you are a sole proprietorship or LLC, all your personal assets are on the line in every inspection. Even if you have great general liability insurance, the real professional judgments that you make, that are reflected in your reports and elsewhere, are not insured unless you carry E&O. One bad call can have devastating financial impacts. Even if a claim against you has no merit, you may have to mount a defense, and legal costs can be staggering. Insurance policies provide coverage for defense against claims as well as payment of damages (subject to your deductible and limits).

NYSAHI believes that the State should do a better job of protecting the public by being far more clear in their regulation about the requirements for general liability insurance and what it should cover. However, we do not expect that to happen anytime soon. So, with regard to your general liability insurance policy, we recommend “Buyer Beware!”.

The Perils of Walk-n-talks

Walk-n-talks, also known as “walkthough consultations”, are characterized by short duration (perhaps only 30 minutes), usually no contract, no written report and substantially reduced fee, as compared to a full home inspection done per NYS minimum standards. These are often performed by a contractor, but sometimes a licensed home inspector, who walks through a home with a buyer client and discusses various conditions observed.

Walk-n-talks have become more frequent, due to market pressure with limited housing supply. Some involved in selling a home have favored this practice to reach closing quicker in a strong seller’s market. Buyers are attracted to the reduced cost of the “inspection” and because a walk-n-talk can be done at a showing before making an offer. Also, relying on a walk-n-talk, buyers often waive a full home inspection, making their purchase offer more attractive in a competitive environment. Sellers may specifically encourage this in their offers for sale. We were advised that in some places in New York State the practice has become common and is encouraged by real estate industry professionals.

In response to our inquiry to the Department of State, the NYSAHI Board was advised that since there is no written report produced, walk-n-talks are not home inspections under the professional licensing law and thus are not regulated. They also advised that licensed home inspectors are accordingly not prohibited in that law from engaging in walk-n-talks.

After further exploring the practice, we have concluded that walk-n-talks are contrary to the public interest that the NYS Home Inspection Professional Licensing Law was enacted to protect, and that all parties who engage in the practice do so at great risk, especially licensed home inspectors. Following are considerations that have led us to this conclusion:

Buyers

• There are no professional standards. Licensing does not apply. Any unqualified person may engage in the practice.
• Buyers have limited legal recourse against any unlicensed consultant.
• Even if performed by a licensed home inspector, a walk-n-talk is by far substandard to a State-regulated home inspection. It is not possible to properly evaluate all of the systems of a home in a short walk through. Undisclosed issues and unanticipated expenses are sure to arise after sale.
• Without a written home inspection report a buyer has no professionally documented tool to use as a reliable basis for negotiation and no written documentation of the conversation that happened during the walkthrough.
• There is no Code of Ethics to protect a buyer from from conflicts of interest or collusion among their walk-n-talk consultant and others on the seller's side.
• Walk-n-talks fast-track the home buying process, shorting due diligence at a time when it is most needed for a life-changing major investment.

Sellers

• Accepting a purchase offer where a home inspection is waived, especially if in any way encouraged by the seller, can expose the seller to a claim for damages resulting from undocumented defects and/or those not detected in a walk-n-talk. Did the seller prevent the buyer from exercising due diligence? Did the seller imply that waiving the inspection contingency was a requirement of sale? A full home inspection protects both buyer and seller.

Realtors, Lawyers, Mortgage Brokers

• Professionals practicing within a real estate transaction can be named in legal actions if they in any way recommend a walk-n-talk in lieu of a full home inspection or encourage a buyer to waive a home inspection. Realtors especially have a duty to both buyer and seller to recommend a home inspection prior to sale.

Licensed Home Inspectors

• Any inspection you perform without a written report is very likely not covered by your insurance. Without a report, that service is not considered a home inspection, which is your insured business. Your company and perhaps all your personal assets are on the line.
• As a licensed professional you are held to a higher standard under the law. Regardless of anything you say or agree to, a buyer has a rightful expectation to trust you to protect them from buying a house with undisclosed defects. Will you find them all in a half-hour?
• Without a written Home Inspection report, any legal action against you may be based on hearsay. This can place you at a considerable disadvantage and in an indefensible position in court.
• Providing a walk-n-talk could be tantamount to encouraging the buyer to purchase a home without a proper home inspection exposing you to substantial liability.
• A walk-n-talk performed without a contract further increases liability.
• Lawsuits against home inspectors involved in walk-n-talks are reportedly on the rise...

We have come to believe that the practice of walk-n-talks is contrary to the public interest and the spirit of the law that established our profession which recognizes that "A home inspection has a direct and vital impact on the quality of life for all home buyers"*. We also believe that licensed home inspectors engaging in such practice undermine the credibility of our profession by offering an unreliable and far inferior service as compared to a home inspection conducted in accordance within the NYS Standards of Practice. We remind you all that "In performing home inspection services, home inspectors shall adhere to the highest principles of ethical conduct."* We do not believe it is ethical for a home inspector to engage in this questionable practice because buyers may reasonably, but in ignorance, rely on a walk-n-talk conducted by a licensed home inspector to be equivalent to a true full home inspection.

* As per NYS Home Inspection Code of Ethics

Licensing for home inspectors in New York State came into being in 2006. For years after that, against the grindingly slow halls of congress, NYSAHI sponsored a bill amending the licensing law to require that the original, absurdly easy, State-offered exam, which did not meet the State's own requirements for a psychoimetrically valid exam, be replaced by the National Home Inspector Exam (NHIE). In November of 2019, our bill was finally signed into law (the first change to the licensing law since it took effect).

A mere 4 months later, language was inserted into the 2020 budget proposal to amend the law once more to allow the DOS to accept either exam, much to our chagrin. Our lobbtist contacted members in the senate delegation to oppose this 180-degree change in the governor's position and the line item was subsequently changed to read as follows (underlined is new text):


(See the new law on nysenate.gov here: https://www.nysenate.gov/legislation/laws/RPP/444-E, paragraph (c) )

So NYSAHI is memorialized in the NYS home inspector licensing law.

The DOS hired a point person with a background in education and exam psychometrics to spearhead the creation of a new exam. In her own words regarding the original exam: "This exam sucks". To that end, three NYSAHI board members served as subject matter experts to help with the development of a new test, which is now being offered. The new test is psychometrically valid and is continually updated. For example, if everyone gets a particular question right or wrong, the question is tossed. License applicants can still take the NHIE (the exam required by ASHI) if they prefer, although the main complaint about the NHIE is that it is not NYS-specific.

Low standards for attaining and maintaining a Home Inspector license are a disservice to individual inspectors, the profession, and consumers of inspection services. NYSAHI has performed various surveys and has found that the majority of home inspectors agree that harm to the public perception of this profession could result from weak standards.

During the regulatory development period following enactment of the Home Inspection Professional License law, the New York Department of State (DOS) consistently expressed and acted upon a concern that certain provisions of the law could unfairly limit individuals from being able to attain licensure. This continues to be a guiding concern for the DOS and has resulted in weak initial educational requirements, minimal continuing education requirements, and a Mod 5 (field training) that clearly does not meet the requirements of the law for true on-site, and real-life training. The facts show that this concern on the part of the DOS is totally without basis. At least 10 other states have requirements more stringent than New York, including New Jersey, where reciprocity would be out of the question. New York inspectors who wish to work in New Jersey currently have to obtain a separate license under more stringent conditions.

Consumers believe that a New York State license is their assurance of a properly trained and knowledgeable professional. Under the present law, nothing could be further from the truth. Despite the massive, multidisciplinary knowledge base required to perform a proper residential inspection for the most important and expensive purchase that most people make in their lifetimes, and despite the many life threatening safety concerns that can exist in homes, the hours of training to become a home inspector are a small fraction of those required by cosmetologists, barbers or hearing aid dispensers. The 140 hours of education and training pale by comparison with the 2,000 hours of training required of real estate appraisers, whose base of required technical knowledge is minimal compared to the home inspection profession. Unfortunately for the consumer, the minimal requirements for a home inspector license are incongruous with the responsibilities of a professional home inspector.

It is clear to those of us in the profession that the present 140 hours of training are woefully inadequate to provide the knowledge necessary to properly evaluate all the structural, mechanical systems, as well as safety concerns found in homes. Ultimately a two-year degree focusing on the proper evaluation of these systems should be required, as well as significant supervised on-the-job training. Through our interviews with many individuals who teach home inspection licensing courses, all have expressed concerns that the current training requirements do not allow for sufficient time necessary to cover the intended subject matter, especailly Module 5, the field training section.

It is NYSAHI's position that the required hours of training should be raised from 140 to a minimum of 200 (30 hours each for Mods 1 through 4; 80 hours for Mod 5).

This need for additional training hours is also important for another reason: Many NYS licensed inspectors in the downstate area need to be able to practice in New Jersey as well as New York, in order to have viable businesses. Because of insufficient training requirements in New York State, New Jersey does not recognize our regulations as sufficient to allow our inspectors to practice in their state. Reciprocity with New Jersey is important to many of our members. We have asked the DOS to negotiate with New Jersey to determine and enact those requirements that would make reciprocity possible.

(Similar to HUD's - "For Your Protection: Get a Home Inspection")

In most cases, purchasing a home is the most important and expensive decision people make. Purchasing a home with serious defects could financially cripple a family's finances, and lead to foreclosure. For this reason, several years ago, the Federal Department of Housing and Urban Development (HUD) required all purchasers who were buying a house with a federally insured mortgage to read and sign a rider included with the purchase contract. Although we feel that a home inspection should be encouraged for all home purchases, we do not want the purchasers to incur any additional expenses, especially during tough economic times. Including this rider will incur no additional costs. It is highly important that potential home purchasers know the difference between an appraisal, which is a determination of the home value in relation to comparable, recently sold, nearby, properties, and a home inspection, which details major defects that can cost the unsuspecting purchaser thousands of dollars of necessary repairs. The purchasers also need to be protected form unethical players in the transaction who may conflate an appraisal with a home inspection, or attempt to dissuade them altogether from a home inspection.

A member asked about home inspectors being able to be qualified to perform windstorm certificate inspections, which is an inspection done on behalf of insurance companies for their insured clients in high-wind (coastal) areas. Windstorm certificates are currently provided by Professional Engineers. Therefore, we would need to change the insurance company requirements, as well as justify to the engineering community that home inspectors could be qualified to perform this inspection. Since windstorm certificates would be a sideline at best for only a limited amount of home inspectors, the Board decided that the limited resources of NYSAHI be allocated for more important efforts.

A member asked about making home inspections mandatory for real estate transactions in New York State. It was discussed by the Board. The best system to compare this to is the property appraisal system, which is already in use. Appraisal reports must be in a uniform format. Although New York State has a Standard of Practice set forth for home inspections, reporting formats actually vary widely among home inspectors, with many exceeding the Standard to provide more in-depth service. Like appraisals, mandating a home inspection report would essentially reduce it to filling out a form, similar to the HUD forms used for property condition / compliance inspections. Along with the variation in home inspection reporting formats comes variation in pricing. If reports were to be delivered in a standardized format, this would lead to "apples-to-apples" comparison shopping for consumers and ultimately end up driving down the market price of a home inspection. This is exactly what occurs in the appraisal industry, not to mention that banks have changed the way appraisers are hired, making it very difficult for appraisers to maintain client lists and living wage pricing for their work. NYSAHI resources would be stretched in an attempt to change the rules of the NYS mortgage industry as well as dealing with the real estate lobby, who would likely oppose any measure to make home inspections mandatory. The board duly decided that it was not worthwhile to pursue this measure.

From the Code of Ethics for Home Inspectors for the State of New York, Title 19 NYCRR: 197-4.7 Conflicts of Interest:



The Code of Ethics for Home Inspectors in the State of New York clearly includes a provision prohibiting paying for referrals. This is obvious to most inspectors, but can become muddied when hidden within a “preferred vendor” marketing program. The Code of Ethics sets forth the position that payment to be placed on a list of “preferred providers” is payment for referrals.

Professionals have a duty to act in good faith toward their clients. Paying for referrals and participating in preferred vendor programs, as interpreted by the Code of Ethics, violates our responsibility to act in good faith toward our clients. The home inspection client should be able to have a reasonable expectation that when a home inspector is being recommended, the referral is based on merit, experience, and knowledgabilty, not on the payment of what could be interpreted as a bribe to the referring party.

A major part of all ethical codes involves the avoidance of conflicts of interest that can compromise, or appear to compromise, professional independence, objectivity, and integrity. Referring individuals whose interests lie in the successful sale of real estate, and home inspectors, acting in good faith toward their clients, may well have conflicting interests.

Placement on a list of “preferred providers” constitutes a referral. There is no real difference between being recommended verbally or in writing, singly or as part of a small group, such as a short list of “preferred inspectors”. When placement on such a list is contingent upon payment of a fee, it represents a payment for referral. It is misleading to the client, who does not know that the home inspector paid for the privilege of being placed on that list.

The State of New York, under the enforcement division of the Department of State, is pursuing legal action against inspectors who participate in these pay-to-play schemes. In addition, disgruntled clients may use the existence of a contractual arrangement between an inspector and a real estate agency in a lawsuit against the inspector. Conflicts of interest aren’t just ethical violations, they are a source of potentially significant liability. Home inspectors should be very cautious about developing business relationships with realty agents or brokers that might compromise, or appear to compromise, the integrity of the inspectors, or the profession, and increase their liability. Any financial arrangement with a real estate agency constitutes a slippery slope toward a clear conflict of interest. Many home inspectors welcome and appreciate the referral of business from real estate agents, believing that such referrals represent a genuine expression, on the part of the agent, of confidence in the knowledge, competence, and integrity of the inspector. We strongly believe that, in the long run, adherence on the part of home inspectors to the strong ethical principles embodied in the Code of Ethics, and the avoidance of potential conflicts of interest, will encourage rather than reduce future referrals and recommendations, and will work to the benefit of the profession as a whole.