Texas Investor Property Inspections

The "Walk Inspection"

This paper will describe a method of providing a limited property inspection suited to real estate investors in the state of Texas.

Walk Inspections

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Texas Investor Property Inspections

The “Walk Inspection”

(Also see www.capcityinspections.com )

From time to time as a home inspector in Texas you may be called upon to inspect properties for an investor or someone whose needs differ somewhat from the standard home buyer. An investor is more apt to want to know the condition on the major components of the home, much like a so-called 4-point inspection. In many cases the investor will likely be interested in the foundation, roof, HVAC, electrical and plumbing components of the property. Some, depending upon the plans for the property, may want to exclude the built-in appliances or other specific components as they are to be replaced regardless.

This paper will provide guidance on how to work with those clients and to do it in a manner that is consistent with the Texas Real Estate Commission (TREC) rules that we all must abide by. There are several tactics a home inspector may choose to follow for those clients and this paper will deal with a protocol sometimes referred to as the “Walk Inspection” or a verbal inspection. In my opinion, the Walk Inspection described here is the minimum inspection allowed by Texas law and only legal if certain steps are taken.

We are all familiar with the process that is used to inspect for the standard home buyer. Of course, all of the pertinent information is gathered regarding the property then you may have a standard or a semi-customized Inspection Agreement that is generated and signed by the client. Payment arrangements are agree to, the inspection is scheduled and performed and a handwritten or computer generated report is delivered. Some inspectors opt to deliver the report on-site but many prefer to go back to the office and generate the report where reference material is readily available if needed. The report is then delivered via several methods such as hard copy hand delivered or mailed. The predominate method in this day and age is of course a ‘soft copy’ delivered via an e-mail attachment or uploaded to a server for subsequent access by the client and others after receiving access instructions and/or a password.

In any case the TREC promulgated report form REI-7A-0 is used as the basis for the report since TREC requires the use of that form when reporting on inspections that fall under their jurisdiction. There are, however, several things that one must remember when using that form. First, there are numerous do’s and don’ts that pertain to the form regarding modifications.

Here are some excerpts from the TREC website regarding the form:

Q: Are there exceptions from the mandatory use of TREC report forms?

A: Yes. In addition to transactions in which a federal or state law requires use of a different form, the inspector is not required to use the TREC forms for quality control construction inspections of new homes, inspections of remodeling, reinspections, or for inspections performed for a lender or a person other than the prospective buyer or prospective seller.

Q: May inspectors modify report form REI 7A-0?

A: Yes, to the extent permitted by the rule adopted by the Commission. The inspector may select the type and size of the fonts (so long as they are no smaller than those used in the adopted form); use legal sized paper; insert additional information in the space shown for the name of the client, address and licensee identification on the first page; insert additional information in the space provided between the two double lines on the first page (so long as the caption “Additional Information Provided By Inspector” is not deleted); delete inapplicable provisions relating to the optional systems; add footers to each page (except page one) and add headers to each page.

While it is important that you know what you can and cannot change on the form, this paper will describe an inspection method that requires no modifications to the form.

One of the most important aspects of developing this Investor Inspection protocol is to understand and utilize the TREC inspection departure rule.

The Texas Administrative Code (TAC 535.227) describes this rule as:

(c) Departure Provision.

(1) An inspector shall exclude from the inspection any part, component or system which the inspector is not competent or qualified to inspect.

(2) An inspector may exclude any part, component or system required for inspection by the standards of practice which is inaccessible, cannot be inspected due to circumstances beyond the control of the inspector, or the inspector's client has agreed is not to be inspected.

(3) This departure provision does not prohibit an inspector from specializing nor require the inspector to specifically exclude other parts, components or systems not ordinarily considered a part of the inspector's specialty. However, the inspector shall comply with the standards of practice for the items being inspected.

(4) If an inspector excludes any part, component or system listed in the standards of practice, other than one which the client has agreed is not to be inspected, the inspector shall:

(A) advise the client at the earliest practicable time that the specific part, component or system will not be included in the inspection; and

(B) state in any written inspection report that the excluded part, component or system was not inspected. (by checking the ‘Not Inspected’ box)

Simply put, if you and your client agree to not inspect an item in the home then that is OK with TREC. I’ll outline two methods of documenting that agreement with the client. The first method is to define, line item by line item, which components listed in REI-7A-0 will be and which will not be included in the inspection and have the client sign off on that list. That could be e separate document or it could be included in your Service Agreement. Appendix “A” of this paper shows the components required to be considered when agreeing on the inspection. The upside to this method is that it leaves little to chance and prevents any misunderstandings as to what will be included and excluded from the inspection. The downside is that this method is time consuming and results in a very client specific Inspection Agreement rather than a generic one that is easier to generate.

The second method is similar but consists of a general purpose clause in your Inspection Agreement that states certain components may be excluded and will be so noted on the report as “Not Inspected”.

Here is my Inspection Agreement paragraph that addresses this topic:

5. Written Report: The written and/or e-mailed report to be prepared by the inspector shall be considered the final exclusive findings of the inspector of the structure. Client understands and agrees not to rely on any oral statements made by the inspector prior to the issuance of the written report. The client and inspector may agree that certain items are to be excluded from the report. The client should notify the inspector immediately upon receipt of the report if there are any discrepancies between what the client expected and what was delivered. Client further understands and agrees that the inspector reserves the right to modify the inspection report for a period of time that shall not exceed forty-eight (48) hours after the inspection report has first been delivered to the client.

The upside to method two is that it is short and sweet and can be included in your Inspection Agreement that you use for all of your inspections. This method also allows for the decision on what to include/exclude to be made at the time of the inspection if the client is present. The downside is that it is not specific and could lead to a misunderstanding with the client. You will be relying on the hand written report that states a component was “Not Inspected” to inform the client of what was not included. There is little risk of misunderstanding if the client is present at the inspection.

My advice would be to use Method #1 for out-of-town clients or those that do not plan to be present at the inspection. Method #2 works well if the client or a representative is present at the inspection to make the include/exclude decisions.

In conclusion, I would like to emphasis that there is a lucrative market for these types of inspections and it is important that you understand the limitations and responsibilities that a Texas Home Inspector must take to provide the proper product to the client, protect his own interests and abide by TREC rules. I also advise you to check with your business counsel or attorney prior to implementing any new business protocol.

Finally, these are the steps to follow to provide a compliant Investor or Walk Inspection:

Discuss and agree with the client what components he/she wants inspected.
Document that agreement
Perform the “Walk Inspection”
1. Talk about issues you see, i.e. think out loud as you are inspecting the property
2. Let the client keep his own notes
3. The time spent on-site will, of course, vary by the size of the property but generally should take no more than 1 hour
Provide a handwritten form REI-7A-0 to client (very important step)
1. Briefly describe defects on those agreed upon components
2. Check “Not Inspected” on those components that were agreed to be excluded
3. This should take no more than 10-15 minutes
Collect your fee and schedule the next Walk Inspection for the client