Can an Austin Builder Restrict a Buyer to Using Certain Inspectors?

One of my buyers wrote an offer on a new home the other day. Not a completed “spec” home, but a “to be built”. While we can write an offer for a resale home in 15-30 minutes, signed, sealed and delivered (which sometimes isn’t fast enough in this Austin market), a new to be built home is a long, arduous sit-down in the builder’s onsite rep. We were there for over three hours. And this already knowing exactly what the buyer wanted except for just a few exterior items and colors. It just takes that long to write everything up, print it and go through it all.

Anyway, at some point going through the massive stack of builder contract paperwork with my buyer, a nasty little addendum emerged, the likes of which I’ve never personally seen. “Whoa, what’s this?”, I say.

It’s a document that imposes requirements on the private third party inspector that the buyer may hire to inspect a home. It requires that the inspector sign a document called a “Access Agreement for Home Inspection”. The access agreement requires that the inspector have:

Proof of General liability Insurance of at least $1,000,000
Proof of Auto Liability Insurance of at least $100,000
Proof of Worker’s Compensation Insurance equal to the “statutory minimum”.
Proof of Employer’s Liability Insurance of at least $1,000,000

So I dialed up my new home inspector while we sat there and asked about this. He said it’s total BS. A ploy by builders to limit inspections. He doesn’t meet the requirements, nor do most Texas Real Estate Inspectors (TREC requires $100K liability, so most carry the minimum), much less the Code Inspectors you want to be using on a new build.

Does this mean my buyer can’t use my over-credentialed, highly competent and trustworthy inspector? The builder was happy to offer a list of inspectors they have who do meet the requirements. No thanks. I want my buyer to have my inspector, not yours. So now what?

I emailed the builder (who shall remain unnamed until my deal closes in July or August 2013) this morning asking that my inspector be approved to inspect my buyer’s home. I want them to waive the rule and allow my inspector. I sent a copy of his insurance, which is actually 3x the state required amount ($300K), but still less than $1M. We’ll see how it goes.

I believe my buyer has the unrestricted right to inspect the home he is buying and to do so using any licensed Texas Inspector. Telling a buyer that he can’t use a licensed Texas Real Estate Inspector who meets all the state licensing requirements to be an inspector is, to me, intimidation.

I know probably 1/3 or fewer of “new home” buyers even get an inspection. Builders should be happy and pleased that the average home buying consumer is actually that dumb. Just think of all the shoddy work that goes undiscovered that they never have to fix. I’ve not had one single new home inspection not reveal problems and issues that the builder then fixed for my buyer. But builders should be happy that so few of their homes actually get inspected, and not then try to tilt things even more to their favor by setting an arbitrary high bar for those buyers who are smart enough, or well represented enough, to obtain inspections during the build process.

Hopefully my email letter does the trick. I find this tactic shameful and reprehensible. There can be no other reason for imposing a high bar on buyers and their inspectors than to further reduce the number of homes built that actually receive a proper inspection. A builder should be proud of its work and its quality, not afraid to have it checked out.

3 thoughts on “Can an Austin Builder Restrict a Buyer to Using Certain Inspectors?”

  1. I’ve seen that same addendum from one of the larger production builders here in Austin. My inspector signed the agreement but was not required to actually produce the documentation that was in the addendum.

  2. I read about anti-competition things like this all the time on the Institute for Justice’s news feed. They have a Texas chapter in Austin that might be interested in viewing these documents:


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