The Wisconsin Realtors Association’s new law pertaining to home inspection report requirements and the new definition of defect has been in place for nearly a year now. Unfortunately, too many inspectors aren’t aware or just aren’t following the new report rules. I’m going to explain the WRA home inspection requirements so buyers can make sure they are receiving the required information on their report.
The new law (2021 Wis. Act 17) was the result of a collaboration between WAHI (Wisconsin Association of Home Inspectors) and WRA (Wisconsin Realtors Association) who often work together on legislation regarding real estate transactions. There are three main aspects to the new regulation, the new definition of defect, the required summary page and the required elements in a home inspection report summary page.
New Definition of Defect:
As of March 28th, 2021 the new definition of defect is:
A condition of any component of an improvement that a home inspector determines, on the basis of the home inspector’s judgment on the day of the inspection, would significantly impair the health or safety of occupants of a property or that, if not repaired, removed or replaced, would significantly shorten or adversely affect the normal life of the component of the improvement.
It’s important to note that the definition of defect for home inspection differs from the definition used in the WI offer to purchase form WB-11. The new definition for home inspection gives your home inspector more leeway to classify an issue in various other ways while keeping things that are a safety issue or major issues not due to normal age on the defect list. The classifications now required on the summary page help give the buyer guidance to what needs to be addressed now for the home sale and what can possibly wait until after the purchase.
Summary Page:
Wis. Act 17 requires that every home inspector include a summary page for their report. This is extremely important for the home buyer. Reports can often be 30-40 pages and having the most all issues categorized on the summary page will help buyers make important decisions. While many home inspectors already include a summary page, the new law requires them to categorize problems found.
Required Categories:
Besides a summary page, all items found to have some issue will need to fall into one of these categories. This will help buyers determine the severity of any issues found.
- Defects
- Items Needing Repair
- Items Needing Further Evaluation
- Items to Monitor
- Maintenance Items
What does this mean for Buyers?
While the new law applies to home inspection, the new definition of “defect” does not change in the offer to purchase. So while a home inspector may have an older roof under the Items Needing Further Evaluation or Items Needing Repair, a buyer may still request that their realtor submit a notice of defects. The new law helps realtors guide their clients to make reasonable decisions, but in the end, it is up to the buyer.
The prevailing definition of defect for realtors and buyers is the one on the offer to purchase:
“Defect” as defined on lines 449-451 means a condition that would have a significant adverse effect on the 214 value of the Property; that would significantly impair the health or safety of future occupants of the Property; or 215 that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life 216 of the premises.
Another note for buyers would be to remember there is a difference between submitting an amendment to the offer based on the home inspection vs. sending a notice of defects. Sending an amendment could be as simple as asking to lower the offered price based on the older roof in the situation above. Sending a notice of defects requires the seller to either fix the defect or walk away from the agreement. If the buyer gave the right to cure in their original offer, the seller has the right to fix any issues listed on the notice of defect.
The new requirements should make it easier for buyers to sort out any issues found by the home inspector. They should better be able to make determinations on how to move forward with the purchase. However It is all very confusing, especially to people who don’t work in the real estate industry. It is best to consult your realtor, home inspector or an attorney if you have questions.