Pre-Listing Report Requested by the Buyer
A real estate agent hires you to perform a pre-listing inspection on a 1998 townhouse. The seller pays your fee and signs your agreement, which states the report is for the seller’s sole use and may not be relied upon by any third party. You find a 6-inch step crack in the foundation wall and a missing handrail on the basement stairs. Your report recommends further evaluation by a structural engineer and repair of the handrail. Two weeks later the townhouse is sold, and the buyer’s agent calls asking for a copy of your report, saying the buyer wants to rely on it. The seller has not provided the report. The buyer offers to pay you $200 for a “transfer.” The seller later asks you to remove the foundation crack from the report because they plan to repair it after closing.
1. Can you release the report to the buyer?
Read the worked answer
No. The report was prepared for the seller, and the agreement says it is for the seller’s sole use and may not be relied on by third parties. Releasing it without the seller’s written consent would breach confidentiality and my contract. The buyer’s agent is not my client. The Code of Ethics requires me to protect client information and avoid conflicts. I would tell the agent: “I can’t release the report without the seller’s written consent. I can perform a new inspection for the buyer under a new agreement.” If the seller consents in writing, I would still need to consider whether the report is current and whether the buyer understands its scope; but consent alone may not create a duty I want. I would not accept $200 as a “transfer” fee.
2. What are the risks of allowing reliance for a fee?
Read the worked answer
Allowing a third party to rely on a report creates a new duty of care and potential liability. The $200 does not reflect the risk, and my E&O insurance may not cover reliance by a non-client. There is also a conflict: the seller is my client, and the buyer may have interests adverse to the seller. If I wanted to allow reliance, I would require a new contract with the buyer, disclose the scope and limitations, perform an updated inspection (conditions can change in two weeks), and charge a proper fee. I would also need the seller’s consent to release the report. It is usually cleaner to do a new inspection for the buyer rather than transfer the old report.
3. The seller asks you to omit the foundation crack because they plan to repair it. What do you do?
Read the worked answer
I would not remove the foundation crack. My report must reflect the conditions observed at the time of inspection. If the seller plans to repair after closing, the buyer still needs to know about the crack before closing; concealing it could mislead the buyer and expose me to liability. I would explain: “I can’t delete a material observation. If the crack is repaired, I can re-inspect the repair and issue an addendum describing the repair and any remaining concerns.” I would not accept the seller’s assurance that it will be fixed later as a reason to omit it. The Code of Ethics requires integrity and objectivity; public safety and the client’s ability to make an informed decision come first.