SENATE, No. 2250

Report of the Senate committee on Post Audit and Oversight (under the provisions of Section 63 of Chapter 3 of the General Laws, as most recently amended by Chapter 557 of the Acts of 1986) entitled "A Crack in the Foundation: Unlicensed Home Inspectors in Massachusetts" (Senate, No. 2250).

The Commonwealth of Massachusetts

Seal of the Commonwealth of Massachusetts

In the Year One Thousand Nine Hundred and Ninety-Eight.


A CRACK IN THE FOUNDATION

Unlicensed Home Inspectors in Massachusetts


A Report of the
Senate Committee on Post Audit and Oversight
June 1998

Massachusetts Senate
The Honorable Thomas F. Birmingham
   Senate President

Senator Cheryl A. Jacques, Chair
Senator Robert A. Havern, Vice Chair
Senator Robert A. Durand
Senator Robert L. Hedlund
Senator Mark C. Montigny
Senator Marc R. Pacheco
Senator Warren E. Tolman

Senate Committee on Post Audit and Oversight

Senator Cheryl A. Jacques, Chair

The Senate Committee on Post Audit and Oversight works to ensure that state government is accountable to the citizens of the Commonwealth. The Committee's charge is to monitor compliance with state laws, to act as a watchdog to protect taxpayers from waste and fraud, to evaluate the efficiency and effectiveness of state agencies and programs, and to recommend corrective actions through legislation, regulation, or administrative initiatives.

Senate Post Audit and Oversight Bureau

Angus McQuilken
Director

Joel Andrés Barrera
Deputy Director and Editor

Vivian J. Mazier
Principal Writer and Researcher

Victoria Grafflin
Analyst

The Bureau acknowledges the work of Roberto DiMarco, Ellyce Makrauer, Michael Monteforte, Missy Popp, Christine Riley, Stacey Rolland, Kara Santangelo, Daniel Tristan, Vered Tsarfaty, and Joel Warner.

The Bureau would also like to acknowledge the assistance of Peggy Meagher and Jeff Terry from the Office of the Attorney General, Jeffrey May for allowing us to accompany him on a home inspection, the American Society of Home Inspectors, the Massachusetts Association of Realtors, the Office of Consumer Affairs and Business Regulation, and the Division of Registration.

Table of Contents

I.   Highlights
         Findings
         Recommendations

II.  Background

III. Unprotected Consumers

IV.  Problems With the Home Inspection Industry
         Lack of Standards and Oversight
         Limited Financial Protection for Home Buyers
         Potential Conflicts of Interest
         Lack of Public Education

V.   Proposed Solutions
         Standards and Oversight
         Financial Protection
         Preventing Conflicts of Interest
         Public Education

VI.  Recommendations

VII. Addendum

Highlights

Findings:

Recommendations:

Background

For most people, purchasing a home is the single largest financial investment they will ever make. Home buyers, particularly first-time buyers, go through a series of complicated transactions with banks or mortgage companies, real estate attorneys, real estate brokers, real estate appraisers, and other professionals. In recent decades, home inspectors have come to play an increasingly prominent role in this investment.

Home inspection evolved in the 1970's as a way to protect home buyers by allowing them to make an informed decision about the purchase of a new home. Over the past twenty years, an increasing percentage of home buyers have come to rely on home inspections to gain expert knowledge about the condition of their prospective homes and as a bargaining tool in the transaction 1.

In Massachusetts, more than 110,000 homes were sold in 1997 2. Approximately 60 to 70 percent of these homes were inspected professionally 3. Nationally, almost one-half of home buyers now use home inspectors before completing a real estate transaction 4. Home inspections are so common that the Massachusetts Association of Realtors' standard Contract to Purchase includes a home inspection contingency that allows the buyer to conduct a home inspection prior to deciding whether or not to proceed with the purchase 5. In another sign of the growth of the industry, there are an estimated 400 home inspection companies in Massachusetts 6.

According to voluntary industry standards, a home inspection involves an evaluation of visual systems andstructures 7:

Since the inspection is limited to an evaluation of visual systems and structures, it generally does not include any systems or conditions that are covered by a wall or other structure 9. Following the inspection, the home inspector typically provides the buyer with a written report detailing the condition of the premises.

A quality home inspection that evaluates the condition of the home is the best way to ensure that the house is in satisfactory condition, that repairs are made before the sale, or that a financial accommodation is arranged before the final settlement. The inspection and report are also useful in describing observable defects. This information can help the home buyer plan improvements and negotiate the final terms of the transaction 10.

Despite the fact that home inspections have become a standard part of the home buying process, the industry remains entirely unregulated. Most consumers are not aware that home inspectors do not need any training or experience. In Massachusetts, anyone can use the title of home inspector and immediately begin to conduct inspections for a fee. There are no standards that must be followed and no minimum educational requirements. In addition, when a problem does arise due to an inadequate home inspection, there is no established avenue to file a complaint against an inspector. Unlike similar professions, there is no way to professionally discipline a home inspector since there is no governing board responsible for oversight.

Without Foundation

In 1993, Elizabeth and David Smith decided to buy a home in the historic section of the Town of Shirley. The house was inspected prior to purchase. During the inspection, the home inspector noted that there were several areas of wood that were damaged due to rot, the floors were sagging, and there were cracks in the walls and ceiling. His report also stated that these conditions were normal and at no time did he mention that these could be signs of a larger problem. Nine months after purchasing the home, the couple discovered that the house was built directly on the ground and was in an advanced state of decay. The structural damage to the house was too extensive to repair. The house will have to be demolished and another built in its place at an estimated cost of $189,000 11.

Buyers can suffer serious financial harm due to inadequate home inspections. An aggrieved buyer will usually complain that the home inspector did not discover an existing condition, such as roof damage or structural defects, that should have been discovered during a visual inspection. The buyer is then stuck with additional repair costs that were not anticipated and that could have been taken into consideration in the final price negotiation.

Voluntary Professional Organizations

There are several voluntary professional organizations for home inspectors including the American Society of Home Inspectors (ASHI), the National Association of Home Inspectors (NAHI), and the Society of Real Estate Inspectors (SREI). The majority of home inspectors in Massachusetts are not affiliated with any organization, but ASHI has far more members in Massachusetts than either of the other organizations. Of the 408 inspectors listed in the Yellow Pages, approximately 75 are members of ASHI. Requirements to become an ASHI member are rigorous 12. For example, all ASHI members must:

  • perform a minimum of 250 paid inspections,
  • pass a series of written examinations administered by ASHI,
  • complete a six month period as a candidate for membership, and
  • adhere to the ASHI Standard of Practice and Code of Ethics 13.

Unprotected Consumers

Despite the absence of a central clearinghouse for complaints, the Bureau was able to document consumer complaints against home inspectors in several forums, including the Office of the Attorney General and various small claims courts. The following pages represent a sample of the complaints home buyers have brought against home inspectors in Massachusetts.

Complaints Filed With the Attorney General's Office

Wired for Disaster

A home inspector gave the wiring in a home an "A" rating, which indicated that the wiring was functioning as originally intended. The inspector also told the potential buyer that the wiring was Copper Romex, a brand that is guaranteed to last a lifetime. After the buyer moved in, he discovered that the home was wired with orange extension cords. The estimated cost of rewiring was more than $8,500 14.

Claims Filed in the Dedham District Court Small Claims Division

A Rotten Inspection

In 1996, an inspector gave the outdoor siding, windows, floors, and toilet of a Medfield home an "A" rating. After moving in, the buyer found that the siding was rotting from water damage, the windows would not shut properly, the floors were warped, and the toilet did not work properly. The estimated cost of replacing the siding was approximately $20,000. The buyer won the maximum small claims judgment of $2,019 against the inspector 17.

This is a sampling of just two forums where complaints have been filed. Other regulatory agencies have also received complaints about home inspectors. For example, the Board of Registration of Real Estate Brokers and Salespersons reports that approximately one-third of the cases handled by the Board mention problems with home inspectors 20.

Problems with the Home Inspection Industry

Lack of Standards and Oversight

In Massachusetts, anyone can call themselves a "home inspector" and immediately start doing business. Unlike similar professions, there are no uniform standards of practice, code of ethics, licensing requirements, or official oversight of the industry.

In addition, there is no regulatory body to oversee home inspectors or to investigate consumer complaints, and, unlike other professions, there is no central location where a consumer can investigate the background of an inspector before hiring them. Although a consumer may turn to the Attorney General's Office or to the Better Business Bureau to register a complaint, there is little that can be done outside of private litigation.

While organizations such as ASHI do provide some guidelines for their members to follow, membership is entirely voluntary. These organizations lack the regulatory and oversight capabilities that the Division of Registration within the Office of Consumer Affairs and Business Regulation currently provides for other professions 21.

A Board of Registration is generally responsible for the following:

The preceding consumer stories demonstrate the significant financial harm that can result from a faulty home inspection. Given these stories, the lack of standards and oversight is troubling.

Limited Financial Protection for Home Buyers

A home buyer who has a legitimate claim against a home inspector often finds himself with little or no recourse. A home buyer's only means of obtaining reimbursement from a home inspector is through a civil action, a costly and time-consuming process. Many home inspectors do not carry insurance and the collection of a judgment against an uninsured inspector can be difficult. For example, only half of the practicing ASHI home inspectors carry errors and omissions insurance 23. In addition, the Bureau has heard from consumers whose efforts to sue an inspector have been thwarted by fly-by-night operations that declare bankruptcy and fail to pay judgments against them.

The Bankruptcy Escape

In 1989, Peter and Elena Vitale purchased a home in Wakefield. After an inspection was completed, the home inspector discussed his findings with the buyers and stated that the house was in excellent condition and showed no signs of distress with regard to any of the systems or structures he inspected. He also stated that he did not observe any evidence of wood-boring insects. Shortly after moving in, however, the new owners discovered that water was leaking into the basement, and that the house was infested with termites. In addition, they later discovered that the electrical wiring leading to the pump and filter of the outdoor pool was not properly grounded, creating a danger of electrocution. The total cost of repairs was estimated at $10,000.
The home buyers filed suit against the inspector and won a significant judgment against him for $14,297. The inspector was not insured and filed for bankruptcy one month later 24.

Licensed professionals in Massachusetts are often required by law to post a bond or to obtain insurance coverage prior to the issuance of a license. For example, real estate brokers must provide a bond of $5,000 made payable to the Commonwealth for the benefit of any aggrieved person 25. Plumbers must have a current liability insurance policy including completed operations coverage, other types of indemnity against liability providing substantially equivalent coverage, or a bond 26. Home inspectors, however, have no such obligation since they are not members of a licensed profession.

Many home inspectors also seek to contractually limit their liability for an error or omission to the cost of the home inspection 27. The price of an average home inspection is approximately $250 28.

Potential Conflicts of Interest

Home buyers often rely on the advice of real estate brokers for referrals to mortgage consultants, real estate attorneys, and home inspectors 29. In most transactions, however, the real estate broker has only one client: the seller 30. When enlisting the services of a home inspector, the buyer is relying on the inspector to provide an accurate and objective report on the condition of a property. A home inspection is one of the few bargaining tools the buyer has in negotiating final terms with the seller. The impartial role of the home inspector can be jeopardized if the inspector has a hidden financial or business relationship with the real estate broker.

Real estate brokers are advised by their trade association to provide buyers with a list of various home inspectors that the brokers recommend 31. There is evidence, however, that some real estate agents shy away from recommending an inspector who will perform such a thorough inspection that it threatens to frighten away the buyer from completing the real estate transaction 32. Roughly one-half of home inspections take place through a referral made by a real estate broker 33.

Existing voluntary standards for home inspectors provide insight into potential state standards. For example, the ASHI Code Of Ethics states that members will not:

Testimony before the Committee suggested that the promise of a "favorable report," i.e., one that does not hinder or delay a deal, creates a reputation as a "realtor friendly" home inspector, which in turn can lead to more referrals in the future 35. Home inspectors testified that there are real estate brokers who will try to dissuade buyers from using certain inspectors who are too thorough 36.

"Customers Don't Grow on Trees"

A recent article in The ASHI Reporter, a monthly newsletter of the American Society of Home Inspectors, further outlined the potential conflict of interest between brokers and home inspectors. In the article the author wrote, "What is marketing? Marketing is anything you do to get or keep a customer. . . Remember where your customers come from. Don't ever forget that buyers come to you through referrals from real estate agents, mortgage brokers, attorneys, and other affiliated groups in the real estate industry . .. In the home inspection business we have two basic customers: the real estate agent and the home buyer. . . The home buyer really wants to purchase the house you are inspecting. The goal of the home inspector should be to assist that buyer in figuring out a way to get into the house and not to convince them to kill the deal'. If we can do this, then we will have two very happy clients - the real estate agent and the home buyer" 37.

The relationship between home inspectors and real estate agents is inevitably intertwined. While their services focus on a common property, they serve different clients 38. This division of duties may be blurred due to the nature of referrals and impartiality may be threatened when an inspector is worried about getting a steady flow of referrals.

Lack of Public Education

In Massachusetts, home buyers receive little information about the home inspection process. Many first-time home buyers may not even be aware that a home inspection is standard practice until an offer to purchase has been accepted. Others may not be aware of what to expect from an inspection and may be unsure of how to interpret an inspector's comments. Finally, many consumers do not know where to turn when they are the victims of an inadequate inspection.

The Office of Consumer Affairs and Business Regulation does not currently publish any information about home inspections or home inspectors, and there is no requirement that real estate brokers give any information to home buyers about the home inspection process.

Proposed Solutions

Standards and Oversight

Massachusetts should establish an oversight system for the home inspection industry, including a board of registration, standards of practice, a code of ethics, and licensing requirements.

Seven states currently have licensing requirements for home inspectors: Alabama, Arkansas, New Jersey, North Carolina, South Carolina, Texas, and Wisconsin 39. At least seven other states are considering legislation to license home inspectors 40.

New Jersey: Setting the Standard

New Jersey's home inspection statute, signed into law on January 8, 1998, includes the following provisions:

  • Creates a home inspection advisory committee within the Division of Consumer Affairs. The committee issues and renews licenses, establishes standards for continuing education, and adopts and publishes regulations for the industry.
  • Creates the category of "associate home inspector" to describe a person employed by a licensed home inspector to conduct an inspection under the direct supervision of the licensed home inspector.
  • Requires candidates for home inspector licenses to have completed high school or its equivalent, conducted at least 250 paid home inspections as associate home inspectors under the direct supervision of a licensed home inspector, and passed the two written examinations offered by ASHI.
  • Requires that all home inspectors maintain a certificate of errors and omissions insurance of at least $500,000 per occurrence 41.
  • Adopts the ASHI Standards of Practice and Code of Ethics.

New Jersey's strict licensing requirement is viewed by some members of the home inspection industry as the most comprehensive and effective licensing law in the country 42.

Legislation calling for some form of certification or licensing of home inspectors has been introduced numerous times in Massachusetts over the past decade. The most recent bill, House Bill 1295, "An Act Relative to Home Inspectors," was filed in 1997 by Representative Louis L. Kafka (D-Sharon). This legislation was reported favorably by the Committee on Government Regulations on July 14, 1997, and referred to the House Committee on Ways and Means on the same date. The bill currently remains in the House Committee on Ways and Means 43.

Professional Licenses: A Useful Tool to Protect Consumers

The Division of Registration is responsible for regulating more than 45 categories of professional licensing. Many of these professions are similar to home inspection, such as the following:

    • real estate brokers and sales agents,
    • plumbers & gas fitters,
    • architects,
    • professional engineers and land surveyors,
    • landscape architects, and
    • real estate appraisers.

The Division of Registration recognizes the consumer protection value of professional licenses. The introduction to the 1997 Annual Report of the Division of Registration stated that "a license suspension or revocation is generally a sufficient resolution to protect consumers."

According to the Division of Registration, there are four criteria that they encourage lawmakers to consider before imposing regulation or licensing on a profession:

At the Committee's recent public hearing, Daniel Grabauskas, the Director of the Office of Consumer Affairs and Business Regulation, stated that he and the Administration support the licensing of home inspectors given these criteria 45.

Financial Protection

Home inspectors should be required to carry errors and omissions insurance or post a bond prior to obtaining a license. Home inspectors should also be barred from limiting their liability through contractual liability waivers.

Errors and omissions insurance reimburses the holder of the policy for any loss sustained as a result of an error or oversight on his part 46. For a home inspector, errors and omissions coverage would protect the home buyer if the inspector fails to detect a defect such as a roof in need of replacement. A licensing bond may be required by state law, municipal ordinance, or by regulation as a prerequisite to the granting of a license or permit to engage in a specified business or to exercise a certain privilege. Such a bond provides payment to the person harmed for the loss or damage resulting from the operations permitted by law, ordinance, or regulation, under which the bond is required and for violations by the licensee of the duties and obligations imposed upon him 47.

Of the states that require licensing, four also require that home inspectors obtain errors and omissions insurance or post a bond prior to being licensed. Errors and omissions coverage would protect the home buyer if the inspector fails to detect a defect. A bond would provide payment to the person harmed for the loss or damage resulting from an inadequate inspection. Either approach would prevent liability avoidance by fly-by-night home inspectors who are currently able to shield their assets by periodically reincorporating under a new name.

Home Inspector Insurance or Bonding Requirements

Alabama: Requires public liability and damage insurance and a bond of $10,000.
Arkansas: Requires liability insurance of $100,000 and a positive net worth of fidelity bond of $10,000 48.
New Jersey: Requires liability insurance of $500,000.
Wisconsin: Requires errors and omissions insurance and a bond. The amount of the insurance coverage and the bond have not yet been established.

In addition to requiring insurance or a bond, Wisconsin passed legislation in April 1998 that prohibits limited liability clauses in home inspection agreements. The language states:

"No home inspector may include, as a term or condition in an agreement to conduct a home inspection, any provision that disclaims the liability, or limits the amount of damages for liability, of the home inspector for his or her failure to comply with the standards of practice prescribed in this subchapter or in rules promulgated under this chapter." 49

Preventing Conflicts of Interest

A firewall should be created between home inspectors and real estate brokers. Real estate brokers who choose to provide referrals should be required to give the potential purchaser of a home a list of at least ten licensed home inspectors. Real estate brokers should also be prohibited from recommending a specific home inspector on the list.

When referring a potential buyer to a home inspector, the National Association of Realtors recommends that real estate brokers do the following in order to minimize the risk of a conflict of interest:

According to real estate industry standards, a real estate broker should not recommend a specific home inspector or inspection company 51. Real estate brokers should also tell home buyers that they do not guarantee the work of any home inspector 52. The Massachusetts Association of Realtor's sample home inspector listing sheet contains the following disclaimer:

Notice: This list of home inspectors is for informational purposes only and is not a recommendation or representation concerning the qualifications of any inspector or the quality of their services. . . before hiring a home inspector, consumers should satisfy themselves concerning the qualifications of the inspector, the services to be provided and the amount to be charged 53.

Real estate brokers are also advised by their trade association to disclose to a client any financial benefit they or their firm may receive as a direct result of having recommended real estate products or services endnote 54.

Prohibiting direct referrals to home inspectors would maintain the spirit of these national standards, while limiting potential conflicts of interest.

Public Education

The Office of Consumer Affairs and Business Regulation should publish a brochure to educate consumers about home inspections and real estate brokers should be required to distribute this brochure to all home buyers when they sign a purchase and sale agreement.

There are already good models of public education in the home buying process. For example, when a potential home buyer signs a purchase and sale agreement, he or she receives a packet of information on the Massachusetts lead paint law, including the obligations of the seller and buyer to solve the problem. This is an example of timely public education.

This recommendation will ensure that prospective home buyers have information about home inspections at the exact time that they may need to hire one. As a consequence, home buyers will have guidance on selecting a home inspector, knowledge about the nature of an inspection, and information about the appropriate forum for complaints.

Recommendations

Standards and Oversight

Financial Protection

Preventing Conflicts of Interest

Public Education

Please send comments to:
     Senator Cheryl A. Jacques, Chair
      Senate Committee on Post Audit and Oversight

Addendum

This addendum contains the Standards of Practice and the Code of Ethics of the American Society of Home Inspectors,® Inc. Published in the United States of America. © 1993 by the American Society of Home Inspectors. All Rights Reserved. It has been reproduced with permission. No parts of this addendum may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopy, recording or otherwise, without the prior written consent of the publisher.
Additional copies are available from:

The American Society of Home Inspectors®, Inc.,
85 West Algonquin Road, Suite 360
Arlington Heights, Illinois 60005-4423
(708)-290-1919

INTRODUCTION

Home Inspection
Home inspections began as a consumer service in the early 1970's in direct response to the growing demand by home buyers to learn about the condition of a house prior to purchase. It is a unique discipline, distinct from construction, engineering, architecture, or municipal building inspection, and as such requires its own set of professional guidelines and qualifications. It was for this reason that the American Society of Home Inspectors® (ASHI®;) was formed in 1976. A home inspection performed in accordance with the ASHI®; Standards of Practice helps buyers to make a sound purchasing decision based on accurate, objective information.
American Society of Home Inspectors®
ASHI®; is the oldest and most respected professional organization of home inspectors in North America. Its purpose is to build public awareness of home inspection and enhance the technical and ethical performance of professional home inspectors.
Standards of Practice
The ASHI®; Standards of Practice guide home inspectors in the performance of their inspections, They are the most widely-accepted home inspection guidelines in use, and include all of the home's major systems and components. The ASHI®; Standards of Practice and Code of Ethics in this booklet are recognized by many government, professional, and legal authorities as the definitive standard for professional performance.
Code of Ethics
The American Society of Home Inspectors® Code of Ethics stresses the home inspector's responsibility to act in a strictly fair, impartial, and professional manner, and protects consumers from conflicts of interest.
Inspector Qualifications
Selecting the right home inspector can be as important as finding the right home. Members of ASHI®; have demonstrated their proficiency by performing no fewer than 250 fee-paid inspections in accordance with the ASHI®; Standards of Practice; they have also passed a series of written examinations testing their knowledge of residential construction, inspection techniques, report-writing, and The ASHI®; Standards of Practice and Code of Ethics. Membership in the American Society of Home Inspectors®; is an earned credential, and the best evidence of an inspector's competence and professionalism.

TABLE OF CONTENTS

Section Description
1. Introduction
2. Purpose & Scope
3. General Limitations & Exclusions
4. Structural Components
5. Exterior
6. Roofing
7. Plumbing
8. Electrical
9. Heating
10. Central Air Conditioning
11. Interiors
12. Insulation & Ventilation

Note: Italicized words are defined in the Glossary.

1. INTRODUCTION

1.1 The American Society of Home Inspectors®, Inc. A. The American Society of Home Inspectors, Inc.(ASHI ®) is a not-for-profit professional society established in 1976 whose volunteer membership consists of private, fee-paid home inspectors. ASHI®'s objectives include promotion of excellence within the profession and continual improvement of its member's inspection services to the public.

 1.2 These Standards of Practice: A. provide inspection guidelines
B. make public the services provided by private fee-paid inspectors
C. define certain terms relating to these inspections
 2. PURPOSE AND SCOPE 2.1 Inspections performed to these Standards shall: A. provide the client with a better understanding of the property conditions, as observed at the time of the inspection.

 2.2 Inspectors shall: A. observe readily accessible installed systems and components listed in these Standards
B. submit a written report to the client which shall: 1. describe those components specified to be described in sections 4-12 of these Standards
2. state which systems and components designated for inspection in these Standards have been inspected
3. state any systems and components so inspected which were found to be in need of immediate major repair
 2.3 These Standards are not intended to limit inspectors from: A. reporting observations and conditions in addition to those required in Section 2.2
B. excluding systems and components from the inspection if requested by the client
 3. GENERAL LIMITATIONS AND EXCLUSIONS
3.1 General limitations: A. Inspections done in accordance with these Standards are visual and are not technically exhaustive
B. These Standards are applicable to buildings with four or less dwelling units and their garages or carports
 3.2 General exclusions: A. Inspectors are NOT required to report on:
1. life expectancy of any component or system
2. the causes of the need for a major repair
3. the methods, materials and costs of corrections
4. the suitability of the property for any specialized use
5. compliance or non-compliance with applicable regulatory requirements
6. the market value of the property or its marketability
7. the advisability or inadvisability of purchase of the property
8. any component or system which was not observed
9. the presence or absence of pests such as wood damaging organisms, rodents, or insects
10. cosmetic items, underground items, or items not permanently installed
 B. Inspectors are NOT required to: 1. offer or perform any act or service contrary to law
2. offer warranties or guarantees of any kind
3. offer or perform engineering, architectural, plumbing, or any other job function requiring an occupational license in the jurisdiction where the inspection is taking place, unless the inspector holds a valid occupational license in which case he/she may inform the client that he/she is so licensed, and is therefore qualified to go beyond the ASHI Standards of Practice, and for and additional fee, perform additional inspections beyond those within the scope of the basic ASHI® inspection
4. calculate the strength, adequacy, or efficiency of any system or component
5. enter any area or perform any procedure which may damage the property or its components or be dangerous to the inspector or other persons
6. operate any system or component which is shut down or otherwise inoperable
7. operate any system or component which does not respond to normal operating controls
8. disturb insulation, move personal items, furniture, equipment, plant life, soil, snow, ice, or debris which obstructs access or visibility
9. determine the presence or absence of any suspected hazardous substance including but not limited to toxins, carcinogens, noise, contaminants in soil, water, and air
10. determine the effectiveness of any system installed to control or remove suspected hazardous substances
11. predict future conditions, including but not limited to failure of components
12. project operating cost of components
13. evaluate acoustical characteristics of any system or component
3.3 Limitations and exclusions specific to individual systems are listed in following sections.
 4. SYSTEM: STRUCTURAL COMPONENTS 4.1 The inspector shall observe: A. structural components including: 1. foundation
2. floors
3. walls
4. columns
5. ceilings
6. roofs
 4.2 The inspector shall: A. describe the type of: 1. foundation
2. floor structure
3. wall structure
4. columns
5. ceiling structure
6. roof structure
 B. probe structural components where deterioration is suspected. However, probing is NOT required when probing would damage any finished surface
C. enter underfloor crawl spaces and attic spaces except when access is obstructed, when entry could damage the property, or when dangerous or adverse situations are suspected
D. report the methods used to observe underfloor crawl spaces and attics
E. report signs of water penetration into the building or signs of abnormal or harmful condensation on building components
 5. SYSTEM: EXTERIOR 5.1 The inspector shall observe: A. wall cladding, flashings and trim
B. entryway doors and representative number of windows
C. garage door operators
D. decks, balconies, stoops, steps, areaway, and porches - including railings
E. eaves, soffits and fascias
F. vegetation, grading, drainage, driveways, patios, walkways and retaining walls with respect to their effect on the condition of the building
 5.2 The inspector shall: A. describe wall cladding materials
B. operate all entryway doors and representative number of windows including garage doors, manually or by using permanently installed controls of any garage door operator
C. report whether or not any garage door operator will automatically reverse or stop when meeting reasonable resistance during closing
 5.3 The inspector is NOT required to observe: A. storm windows, storm doors, screening, shutters, awnings and similar seasonal accessories
B. fences
C. safety glazing
D. garage door operator remote control transmitters
E. geological conditions
F. soil conditions
G. recreational facilities
H. outbuildings other than garages and carports
 6. SYSTEM: ROOFING
 6.1 The inspector shall observe: A. roof coverings
B. roof drainage systems
C. flashings
D. skylights, chimneys and roof penetrations
E. signs of leaks or abnormal condensation on building components
 6.2 The inspector shall: A. describe the type of roof covering materials
B. report the methods used to observe the roofing
 6.3 The inspector is NOT required to: A. walk on the roofing
B. observe attached accessories including but not limited to solar systems, antennae, and lightning arrestors
 7. SYSTEM: PLUMBING 7.1 The inspector shall observe: A. interior water supply and distribution system including:
1. piping materials, including supports and insulation
2. fixtures and faucets
3. functional flow
4. leaks
5. cross connections
 B. interior drain, waste and vent system including:
1. traps; drain, waste, and vent piping; piping supports and pipe insulation
2. leaks
3. functional drainage. C. hot water systems including:
1. water heating equipment
2. normal operating controls
3. automatic safety controls
4. chimneys, flues, and vents
 D. fuel storage and distribution systems including:
1. interior fuel storage equipment, supply piping, venting, and supports
2. leaks
 E. sump pump
 7.2 The inspector shall: A. describe:
1. water supply and distribution piping materials
2. drain, waste, and vent piping materials
3. water heating equipment
 B. operate all plumbing fixtures, including their faucets, and all exterior faucets attached to the house
 7.3 The inspector is NOT required to: A. state the effectiveness of anti-siphon devices
B. determine whether water supply and waste disposal systems are public or private
C. operate automatic safety controls
D. operate any valve except water closet flush valves, fixture faucets and hose faucets
E. observe:
1. water conditioning systems
2. fire and lawn sprinkler systems
3. on-site water supply quantity and quality
4. on-site waste disposal systems
5. foundation irrigation systems
6. spas, except as to functional flow and functional drainage
 8. SYSTEM: ELECTRICAL 8.1 The inspector shall observe: A. service entrance conductors
B. service equipment, grounding equipment, main overcurrent device, main and distribution panels
C. amperage and voltage ratings of the service
D. branch circuit conductors, their overcurrent devices, and the compatibility of their ampacities and voltages
E. the operation of a representative number of installed lighting fixtures, switches and receptacles located inside the house, garage, and on its exterior walls
F. the polarity and grounding of all receptacles within six feet of interior plumbing fixtures, and all receptacles in the garage or carport, and on the exterior of inspected structures
G. the operation of Ground Fault Circuit Interrupters
 8.2 The inspector shall: A. describe:
1. service amperage and voltage
2. service entry conductor materials
3. service type as being overhead or underground
4. location of main and distribution panels
 B. report any observed aluminum branch circuit wiring
 8.3 The inspector is NOT required to: A. insert any tool, probe or testing device inside the panels
B. test or operate any overcurrent device except Ground Fault Circuit Interrupters
C. dismantle any electrical device or control other than to remove the covers of the main and auxiliary distribution panel
D. observe:
1. low voltage systems
2. smoke detectors
3. telephone, security, cable TV, intercoms, or other ancillary wiring that is not a part of the primary electrical distribution system
 9. SYSTEM: HEATING 9.1 The inspector shall observe: A. Permanently installed heating systems including:
1. heating equipment
2. normal operating controls
3. automatic safety controls
4. chimneys, flues, and vents
5. solid fuel heating devices
6. heat distribution systems including fans, pumps, ducts, and piping, with supports, dampers, insulation, air filters, registers, radiators, fan-coil units, convectors
7. the presence of an installed heat source in each room. 9.2 The inspector shall: A. describe:
1. energy source
2. heating equipment and distribution type
 B. operate the systems using normal operating controls
C. open readily open access panels provided by the manufacturer or installer for routine homeowner maintenance
 9.3 The inspector is NOT required to: A. operate heating systems when weather conditions or other circumstances may cause equipment damage
B. operate automatic safety controls
C. ignite or extinguish solid fuel fires
D. observe:
1. the interior of flues
2. fireplace insert flue connections
3. humidifiers
4. electronic air filters
5. the uniformity or adequacy of heat supply to the various rooms
 10. SYSTEM: CENTRAL AIR CONDITIONING 10.1 The inspector shall observe: A. central air conditioning including:
1. cooling and air handling equipment
2. normal operating controls
 B. distribution systems including:
1. fans, pumps, ducts, and piping, with supports, dampers, insulation, air filters, registers and fan-coil units
2. the presence of an installed cooling source in each room
 10.2 The inspector shall: A. describe:
1. energy sources
2. cooling equipment type
 B. operate the systems using normal operating controls
C. open readily open access panels provided by the manufacturer or installer for routine homeowner maintenance
 10.3 The inspector is NOT required to: A. operate cooling systems when weather conditions or other circumstances may cause equipment damage
B. observe non-central air conditioners
C. observe the uniformity or adequacy of cool-air supply to the various rooms
 11. SYSTEM: INTERIORS 11.1 The inspector shall observe: A. walls, ceilings, and floors
B. steps, stairways, balconies, and railings
C. counters and a representative number of cabinets
D. a representative number of doors and windows
E. separation walls, ceilings, and doors between a dwelling unit and an attached garage or another dwelling unit
F. sumps
 11.2 The inspector shall: A. operate a representative number of primary windows and interior doors
B. report signs of water penetration into the building or signs of abnormal or harmful condensation on building components
 11.3 The inspector is NOT required to observe: A. paint, wallpaper, and other finish treatments on the interior walls, ceilings, and floors
B. carpeting
C. draperies, blinds, or other window treatments
D. household appliances
E. recreational facilities or another dwelling unit
 12. SYSTEM: INSULATION & VENTILATION 12.1 The inspector shall observe: A. insulation and vapor retarders in unfinished spaces
B. ventilation of attics and foundation areas
C. kitchen, bathroom, and laundry venting systems
 12.2 The inspector shall describe: A. insulation and vapor retarders in unfinished spaces
B. absence of same in unfinished space at conditioned surfaces
 12.3 The inspector is NOT required to report on: A. concealed insulation and vapor retarders
B. venting equipment which is integral with household appliances.

GLOSSARY

Automatic Safety Controls:
Devices designed and installed to protect systems and components from excessively high or low pressures and temperatures, excessive electrical current, loss of water, loss of ignition, fuel leaks, fire, freezing, or other unsafe conditions.
Central Air Conditioning:
A system which uses ducts to distribute cooled and/or dehumidified air to more than one room or uses pipes to distribute chilled water to heat exchangers in more than one room, and which is not plugged into an electrical convenience outlet.
Component:
A readily accessible and observable aspect of a system, such as a floor, or wall, but not individual pieces such as boards or nails where many similar pieces make up the component.
Cross Connection:
Any physical connection or arrangement between potable water and any source of contamination.
Dangerous or Adverse Situations:
Situations which pose a threat of injury to the inspector, and those situations which require use of special use of special protective clothing or safety equipment.
Describe:
Report in writing a system or component by its type, or other observed characteristics, to distinguish it from other components used for the same purpose.
Dismantle:
To take apart or remove any component, device or piece of equipment that is bolted, screwed, or fastened by other means and that would not be dismantled by a homeowner in the course of normal household maintenance.
Engineering:
Analysis or design work requiring extensive preparation and experience in the use of mathematics, chemistry, physics, and the engineering sciences.
Enter:
To go into an area to observe all visible components.
Functional Drainage:
A drain is functional when it empties in a reasonable amount of time and does not overflow when another fixture is drained simultaneously.
Functional Flow:
A reasonable flow at the highest fixture in a dwelling when another fixture is operated simultaneously.
Household Appliances:
Kitchen and laundry appliances, room air conditioners, and similar appliances.
Inspector:
Any person who examines any component of a building, through visual means and through normal user controls, without the use of mathematical sciences.
Installed:
Attached or connected such that the installed item requires tools for removal.
Normal Operating Controls:
Homeowner operated devices such as a thermostat, wall switch, or safety switch.
Observe:
The act of making a visual examination.
On-site Water Supply Quality:
Water quality is based on the bacterial, chemical, mineral, and solids content of the water.
On-site Water Supply Quantity:
Water quantity is the rate of flow of water.
Operate:
To cause systems or equipment to function.
Primary Windows and Doors:
Windows and/or exterior doors which are designed to remain in the respective openings year round and not left open for the entire summer.
Readily Operable Access Panel:
A panel provided for homeowner inspection and maintenance which has removable or operable fasteners or latch devices in order to be lifted off, swung open, or otherwise removed by one person, and its edges and fasteners are not painted in place. Limited to those panels within normal reach or from a 4-foot step-ladder, and which are not blocked by stored items, furniture, or building components.
Recreational Facilities:
Spas, saunas, steam baths, swimming pools, tennis courts, playground equipment, and other exercise, entertainment, or athletic facilities.
Representative Number:
For multiple identical components such as windows and electric outlets - one such component on each side of the building.
Roof Drainage Systems:
Gutters, downspouts, leaders, splash blocks, and similar components used to carry water off a roof and away from a building.
Safety Glazing:
Tempered Glass, laminated glass, or rigid plastic.
Shut Down:
A piece of equipment or a system is shut down when it cannot be operated by the device or control which a home owner should normally use to operate it. If its safety switch or circuit breaker is in the "off" position, or its fuse is missing or blown, the inspector is not required to reestablish the circuit for the purpose of operating the equipment or system.
Solid Fuel Heating Device:
Any wood, coal, or other similar organic fuel burning device, including but not limited to fireplaces whether masonry or factory-built, fireplace inserts and stoves, wood stoves (room heaters,) central furnaces, and combinations of these devices.
Structural Component:
A component which supports non-variable forces or weighs (dead loads) and variable forces or weights (live loads.)
System:
A combination of interacting or interdependent components, assembled to carry out one or more functions.
Technically Exhaustive:
An inspection is technically exhaustive when it involves the extensive use of measurements, instruments, testing, calculations, and other means to develop scientific or engineering findings, conclusions, and recommendations.
Underfloor Crawl Space:
The area within the confines of the foundation and between the ground and the underside of the lowest floor structural component.

CODE OF ETHICS
OF THE AMERICAN SOCIETY OF HOME INSECTORS

Honesty, justice, and courtesy form a moral philosophy which, associated with mutual interest among people, constitutes the foundation of ethics. The members should recognize such a standard, not in passive observance, but in a set of dynamic principles guiding their conduct. It is their duty to practice the profession according to this code of ethics.

As the keystone of professional conduct is integrity, the members will discharge their duties with fidelity to the public, their clients, and with fairness and impartiality to all. They should uphold the honor and dignity of their profession and avoid association with any enterprise of questionable character, or apparent conflict of interest.

  1. The member will express an opinion only when it is based on practical experience and honest conviction.
  2. The member will always act in good faith toward each client.
  3. The member will not disclose any information concerning the results of the inspection without the approval of the clients or their representatives.
  4. The member will not accept compensation, financial or otherwise, from more than one interested party for the same service without the consent of all interested parties.
  5. The member will not accept nor offer commissions or allowances, directly or indirectly, from other parties dealing with their client in connection with work for which the member is responsible.
  6. The member will promptly disclose to his or her client any interest in a business which may affect the client. The member will not allow an interest in any business to affect the quality of the results of their inspection work which they may be called upon to perform. The inspection work may not be used as a vehicle by the inspector to deliberately obtain work in another field.
  7. An inspector shall make every effort to uphold, maintain, and improve the professional integrity, reputation, and practice of the home inspection profession. He will report all such relevant information, including violations of this Code by other members, to the Association for possible remedial action.
Endnotes

Endnote 1. Ellen James Martin, Unsettling Inspections, THE BOSTON GLOBE, Sept. 12, 1997, at F1, F6

Endnote 2. Kim Savage, Market Posts Gains, But Pace of Growth Slows, BANKER & TRADESMAN, Feb. 8, 1998, at 21. Homes include single family, multi-family and condominiums.

Endnote 3. Interview with Robert Caldwell, President of the New England Chapter of the American Society of Home Inspectors, in Boston, Mass. (January 27, 1998).

Endnote 4. ASHI, American Society of Home Inspectors General Information Brochure, (visited Apr. 22, 1998) http://www.ashi.com/ashi/ashigeneralinfo.htm

Endnote 5. "This Contract is subject to the right of the buyer(s) to obtain, at the buyer(s) sole cost, a home inspection of the premises by consultant(s) of the buyer(s) own choosing . . . If the buyer(s) is not satisfied with the results of such inspection, the Contract may be terminated by the buyer(s) . . ." Massachusetts Association of Realtor's Standard Contract to Purchase.

Endnote 6. An Internet search of the Big Yellow Pages conducted on April 22, 1998, found 408 listings for home inspection companies in Massachusetts.

Endnote 7. The Standards of Practice and Code of Ethics of the American Society of Home Inspectors, Inc. A full copy is attached as Addendum A.

Endnote 8. ASHI, The Home Inspection and You, (visited Apr. 22, 1998) http://www.ashi.com/ashi/hqyou.htm.

Endnote 9. ASHI, The Home Inspection and You, (visited Apr. 22, 1998) http://www.ashi.com/ashi/hqyou.htm.

Endnote 10. ASHI, What to Expect, (visited Apr. 22, 1998) http://www.ashi.com/ashi/buyexpect.htm.

Endnote 11. Interview with Elizabeth Tyson Smith. (May 6, 1998).

Endnote 12. Interview with Robert Caldwell, President of the New England Chapter of ASHI, in Boston, Mass. (January 27, 1998). See Addendum A.

Endnote 13. Interview with Robert Caldwell, President of the New England Chapter of ASHI, in Boston, Mass. (January 27, 1998). See Addendum A.

Endnote 14. This complaint was provided by the Attorney General's Office. The names and addresses of the complaining parties have been redacted by the Attorney General to protect confidentiality. When a complaint is filed, the complainant has three options: 1) they may choose to take part in the voluntary mediation proceedings offered by the Attorney General's office; 2) the consumer may choose to do nothing, in which case the complaint is recorded as a matter of public record; or 3) the consumer may choose to independently pursue the complaint through civil litigation. The resolution of these cases is unclear since the Attorney General's Office does not track those cases which are resolved through outside means.

Endnote 15. This complaint was provided by the Attorney General's Office. The names and addresses of the complaining parties have been redacted by the Attorney General to protect confidentiality. When a complaint is filed, the complainant has three options: 1) they may choose to take part in the voluntary mediation proceedings offered by the Attorney General's office; 2) the consumer may choose to do nothing, in which case the complaint is recorded as a matter of public record; or 3) the consumer may choose to independently pursue the complaint through civil litigation. The resolution of these cases is unclear since the Attorney General's Office does not track those cases which are resolved through outside means.

Endnote 16. This complaint was provided by the Attorney General's Office. The names and addresses of the complaining parties have been redacted by the Attorney General to protect confidentiality. When a complaint is filed, the complainant has three options: 1) they may choose to take part in the voluntary mediation proceedings offered by the Attorney General's office; 2) the consumer may choose to do nothing, in which case the complaint is recorded as a matter of public record; or 3) the consumer may choose to independently pursue the complaint through civil litigation. The resolution of these cases is unclear since the Attorney General's Office does not track those cases which are resolved through outside means.

Endnote 17.Testimony of the complainant at a public hearing before the Senate Post Audit and Oversight Committee on May 5, 1998.

Endnote 18.This case was found through a search of the Dedham District Court Small Claims Division conducted on April 15, 1998. The names of the parties have been redacted to protect confidentiality.

Endnote 19.This case was found through a search of the Dedham District Court Small Claims Division conducted on April 15, 1998. The names of the parties have been redacted to protect confidentiality.

Endnote 20.Donna L. Goodison, Inspectors Fault Realtors For Inaccurate Reports, BANKER & TRADESMAN, May 11, 1998, at 19.

Endnote 21.The Division of Registration is an umbrella agency within the Office of Consumer Affairs and Business Regulation and is responsible for ensuring the integrity of the licensure process for more than 45 trades and professions that are regulated by 32 boards of registration. 1997 Annual Report, (Division of Registration), 1997, at 7.

Endnote 22.The Division of Registration is an umbrella agency within the Office of Consumer Affairs and Business Regulation and is responsible for ensuring the integrity of the licensure process for more than 45 trades and professions that are regulated by 32 boards of registration. 1997 Annual Report, (Division of Registration), 1997, at 7.

Endnote 23.Errors and omissions insurance is a form of insurance that indemnifies the insured for any loss sustained because of an error or oversight on his or her part. Sharing the Risk, (Insurance Information Institute), 1989.

Endnote 24.Interview with Peter Vitale. (May 5, 1998).

Endnote 25.MASS. GEN. LAWS. chapter 112, section 87TT.

Endnote 26.MASS. GEN. LAWS. chapter 142, section 21A.

Endnote 27.Testimony of Peggy Meagher, Director of the Division of Consumer Complaints for the Office of the Attorney General, at a public hearing before the Senate Post Audit and Oversight Committee on May 5, 1998.

Endnote 28.Interview with Robert Caldwell, President of the New England Chapter of ASHI, in Boston, Mass. (January 27, 1998).

Endnote 29.Interview with Robert Nash, President of the Massachusetts Association of Realtors (MAR), in Boston, MA, (Feb. 4, 1998).

Endnote 30.Almost all Massachusetts real estate brokers represent the seller, with the exception of a buyer's agent who contracts with the home buyer directly.

Endnote 31.Interview with Robert Nash, President of the Massachusetts Association of Realtors (MAR), in Boston, MA, (Feb. 4, 1998).

Endnote 32.James Denn, A Final Look Before Buying, TIMES UNION, (Albany) Nov. 10, 1996, at B-2.

Endnote 33.Dateline NBC, May 8, 1998.

Endnote 34.The Standards of Practice and Code of Ethics of the American Society of Home Inspectors, Inc., 1993, at 7.

Endnote 35.Testimony of Dennis Robitaille at a public hearing before the Senate Post Audit and Oversight Committee on May 5, 1998.

Endnote 36.Testimony of Dennis Robitaille at a public hearing before the Senate Post Audit and Oversight Committee on May 5, 1998.

Endnote 37.Scott Newcomer, Customers don't grow on trees, THE ASHI REPORTER, Published by THE AMERICAN SOCIETY OF HOME INSPECTORS, Jan. 1998, at 1.

Endnote 38.Dennis Robitaille, Point: Keeping Brokers at Arms' Length, THE ASHI REPORTER, June 1995, at 24.

Endnote 39.National Conference of State Legislatures search conducted on February 4, 1998. Wisconsin enacted legislation on April 13, 1998.

Endnote 40.National Conference of State Legislatures search conducted on February 4, 1998. California, Connecticut, Delaware, Florida, Georgia, Maryland, and Pennsylvania.

Endnote 41."Within meaning of insurance provision requiring notice of a reportable occurrence to insurer as soon as practicable, 'occurrence' means incident which was sufficiently serious to lead a person of ordinary intelligence and prudence to believe that it might give rise to a claim for damages covered by policy". BLACK'S LAW DICTIONARY, 1080 (6th ed., 1990).

Endnote 42.Interview with Robert Caldwell, President of the New England Chapter of ASHI, in Boston, Mass. (January 27, 1998).

Endnote 43.Legislative Tracking Network search conducted on April 22, 1998.

Endnote 44.Testimony of William Wood, Director of the Division of Registration, at a public hearing before the Senate Committee on Post Audit and Oversight on May 5, 1998.

Endnote 46.Testimony of Daniel Grabauskas, Director of the Office of Consumer Affairs and Business Regulation, at a public hearing before the Senate Committee on Post Audit and Oversight on May 5, 1998.

Endnote 46.Testimony of Daniel Grabauskas, Director of the Office of Consumer Affairs and Business Regulation, at a public hearing before the Senate Committee on Post Audit and Oversight on May 5, 1998. Errors and omissions insurance differs from liability insurance because liability insurance covers the policyholder's legal liability for injuries to other persons or damages to their property while errors and omissions insurance only covers errors and oversights by the policyholder.

Endnote 47.Testimony of Daniel Grabauskas, Director of the Office of Consumer Affairs and Business Regulation, at a public hearing before the Senate Committee on Post Audit and Oversight on May 5, 1998. Errors and omissions insurance differs from liability insurance because liability insurance covers the policyholder's legal liability for injuries to other persons or damages to their property while errors and omissions insurance only covers errors and oversights by the policyholder.

Endnote 48.Public liability insurance is a type of insurance coverage which protects against claims arising from the conduct, property and agents of the insured and which indemnifies against loss arising from liability. Sharing the Risk, (Insurance Information Institute), 1989.

Endnote 49.WIS. ACT. chapter 81, section 2

Endnote 50.Memo from the National Association of Realtors, Feb. 2, 1998.

Endnote 51.Wayne S. Falcone, The Nuts and Bolts Guide to Home Inspections, REAL ESTATE TODAY, Mar. 1993, at 20.

Endnote 52.Donna L. Goodison, Inspectors Fault Realtors for Inaccurate Reports, BANKER & TRADESMAN, May 11, 1998, at 19.

Endnote 53.Massachusetts Association of Realtors Sample Home Inspector Listing Sheet.

Endnote 54.Code of Ethics and Standards of Practice of the National Association of Realtors, Article 6, §§ 1-2, (National Association of Realtors), Jan. 1, 1998, at 8. MASS. GEN. LAWS. chapter 112, section 87AAA also states that the board of registration may revoke or suspend a license if the broker has been found to have "accepted, given or charged any undisclosed commission, rebate or profit on expenditures for a principal."

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