Inspectors may be forced to post bonds Bill intended to protect homebuyers from errors

February 24, 1991|By Timothy J. Mullaney

When Sandra Guthorn went to the supermarket last year, only a few days before she was to settle on the $370,000 house she and her husband, Lester, planned to grow old in, she heard a rumor that couldn't be true.

The house has water problems, a friend told her. But Mrs. Guthorn had already had the house inspected, and the inspector cleared the Green Spring Valley house again on a final inspection before the deal closed. "The inspector told me it was a well-maintained, fantastic house," said Mrs. Guthorn. "We thought it was in move-in condition."

But within a week of the settlement, the Guthorns had found the first of $40,000 worth of damage that the inspector missed, mostly water damage to the roof and outside walls. The Guthorns have already taken out a second mortgage to pay for repairs to make the house livable, and Mrs. Guthorn said contractors have told her that the home's foundation may have to be replaced.

So began Mrs. Guthorn's battle to turn her problem into someone else's warning. She contacted her state delegate, A. Wade Kach, R-Baltimore County, who has introduced a bill that would require home inspectors to carry $25,000 malpractice bonds to repay consumers who get stuck with bills for damage that inspectors miss.

"There's no state regulation of inspectors, no licensing, nothing," Mr. Kach said. "Anyone can be a home inspector. Unfortunately, there are people, as with any other business, . . . who don't know LTC what they are doing and those who are known to be 'soft.' "

Mr. Kach's bill would require inspectors to have what is called an "errors and omissions bond" of $25,000 or more and would bar the practice of limiting an inspectors' liability for undetected damage to the cost of the inspection itself. Mr. Kach wants liability limits to be set no lower than $10,000.

The inspection industry opposes the bill, Mr. Kach said.

"Our concerns are that we have had very little input into this legislation," said Ira C. Cooke, a lobbyist for the mid-Atlantic chapter of the American Society of Home Inspectors.

"We think there should be at some point an examination of somof the issues raised [by the bill], but we don't think the legislation before the General Assembly at this time is the appropriate vehicle."

Mr. Cooke said that the industry wants to be sure that the cost of inspections is kept minimal so consumers can afford them. "Excessive bonding costs or insurance costs could make the product so expensive that the average person couldn't avail himself of it," he said.

The industry believes the issue needs more study, possibly over the summer, before a law is passed, Mr. Cooke said. He added that most people in the inspection industry are competent and honest. "Just because an individual has one bad experience doesn't mean the entire industry is troubled," he said.

Mr. Kach said the idea for the bill began with Sandra Guthorn's complaints to him, but he said real estate industry people he contacted agree that consumers need protection against inept or unscrupulous inspectors.

Eric Freedman, an investigator for Montgomery County's Office of Consumer Affairs, said his office has historically received a small but steady number of complaints about shoddy home inspections. There are roughly half a dozen complaints pending now, he said.

Mr. Freedman said his office's first concern is eliminating contract provisions, which he said are already barred by law, that limit inspectors' liability for their mistakes to refunding the cost of the inspection.

"The inspector can't say, 'Here's your money back, sorry we missed the $100,000 problem,' " Mr. Friedman said. "Those home inspectors [who use the clause] are trying to do something that runs counter to the rule of the marketplace that everyone is responsible for what they do."

Mr. Friedman said the other problem is to make sure an inspection firm that does make a mistake has the money to make the consumer whole. That could be done by either requiring a bond or insurance, or by setting up a state-run guarantee fund.

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