Has anyone come across hybrid hot water heaters during your inspections?
Any red flags I should look for?
It is installed in a 1,400 square ft. open basement. I guess you would treat it like a standard water heater except for the heat pump parts?
Why don’t you look up the installation instructions for this specific model. It’s a hybrid electric water heater and these generally require 750 ft.³ in the installation area.
No more comments let it rip I can handle it. 
See them all the time.
There’s a filter on top that no one ever bothers to clean.
It has condensate drain lines that are rarely installed correctly.
The unit has a control panel that cycles through the available modes (electric, hybrid) and many times it has been set to bypass the heat pump mode.
And they make some noise, which some clients may not like, especially if it’s located in an attached garage or large laundry/utility room.
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UPDATE ON THE ELECTRIC HYBRID HOT WATER HEATER
I installed this Hybrid water heater approximately 3 months ago, So far it is running with no glitches. It keeps up in the hybrid mode for two people with no problems, As far as the noise, it is in the basement and you can not hear it up in the living space but the noise in the basement is minimal, Another benefit is it dehumidifies the basement nicely. I have received 3 electric bills since the install and my electrical bill has dropped around $60.00 a month consistently with no changes inhabit, No I have no way to measure the exact amount of electricity it uses. So far I give it a thumbs up all around.
Sounds good! how warm/cold was your basement during this period?
The basement temperature averaged low to mid-60s during the summer, we will see how it go in the winter months, I do heat the basement with a wood stove in the winter so it will probably draw heat from that, It does lower the basement temperature it is kind of a drawback.