InterNACHI Inspection Agreement Section 6

Hello All, I’m using the InterNACHI Inspection Agreement and I have a question on Section 6.

“If you wish to eliminate this liquidated damages provision, we are willing to perform the inspection for an increased fee of _____, payable in advance.”

Is there a suggested amount to place here? My base residential fee is $350. Please help me better understand this section. Thanks in advance!

$2,500.00 .

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hi Forrest
Welcome to the forum. You are not alone. This is probably one of the most discussed items on the pre-inspection agreement. you can learn a lot about the pro’s and con’s of this item as well as wether or not it is even applicable in your state by reading through the discussions on this very topic from previous months.
type “Liquidated damages” in the search bar on the top right of your screen (it looks like a magnifying glass) and previous threads will be available to you.

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I personally recommend “$2500 or 1%of the home value, whichever is more.”

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Thank you all so much!

Forrest, welcome to our forum!..enjoy participating. :smile:

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I’m really curious about this.

Has anyone ever had a client request to eliminate the liquid damages provision and pay the higher fee?

Does this statement have a legal purpose that anyone is aware of? Is it a requirement to offer clients a way to eliminate the liquidated damages provision? Is it even a good idea to offer that alternative?

I never used that, Ryan. But, I would make it quite high, if I did. Probably more than what Bert mentioned. ($2,500.00 or 1% of the home value whichever is higher.)

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What is interesting is that if a client told me they would like to pay the $2500 (or whatever you might have in there) to eliminate the provision, a major red flag would go up in my mind. I would probably decline the inspection.

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So, in effect, you would have had a positive result from offering the provision.

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Seems almost like it’s just a deterrent field to keep the client from waiving.

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IMO… it’s to educate and set the level of expectations of the potential client. You can verbally tell them till you’re blue in the face, but NOTHING will ‘drive the message home’ like a hit to the wallet!!

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I think $2,500 is an arbitrary number unless you tie it to your insurance deductible. Because I agree with you…they are already considering litigation.

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… and to the cost of hiring experts to perform “technically exhaustive” evaluations of the systems you are not an expert in yourself!

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Possibly, but having the provision without a means to eliminate it seems to accomplish the same thing. That’s the reason for my question. Does the fact you offered a means to remove the provision, and the client refused it, cause the provision itself to be more enforceable in court? I know these are questions for a lawyer not a home inspector but still wanted to throw it out there to get other’s thoughts.

I personally have never had someone pony up the $2.5k+upgrade (on top of the inspection fee) to eliminate the alternate liability limit of 150% of the inspection fee.

I use the Liability limit clause (clause #6 on the Internachi PIA) three ways.

  1. by choosing the liability limit of 150% instead of the exhaustive inspection without liability limit they have chosen* to accept the standard inspection with the liability cap. notice that chosen* is an action-verb. They were offered two choices. If a client gets litigious and wants to sue for some reason, hopefully this active choice between limited and unlimited will help squash their complaint before it gets to mediation or trial. Stop it cold. That is the hope anyway. It might not work out like that in every state or indeed in every situation.
  2. If someone were to ask for the exhaustive inspection, my lead time would be two weeks to hire an HVAC tech and an electrician and a roofer and maybe even a structural engineer if applicable, with an addition week to produce the report. 3 weeks would probably be beyond what they are willing or able to wait with contracts typically contingent on a 10-14 day inspection period, or less.
  3. If someone were willing to pay $3k to inspect their $300k money-pit flipper special without a liability cap, I probably don’t want that job. Its a nice screening tool.

I’m not a lawyer, but that is my understanding of how that clause is used.

Bert Hull
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Are you inferring that I am sensitive? :open_mouth:

None-the-less… EXCELLENT post!! :+1:

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I’m going to assume you meant for one to be “limited.” :point_up:

I took the clause out of my agreement because I though it sounded a bit silly to even offer a higher level of liability in exchange for a higher fee. I couldn’t imagine someone agreeing to it and figured all it did was place doubts in client’s minds about what they were actually agreeing to. The recent threads on the subject here and on Facebook have me rethinking it though. I would like to hear from @jbushart2 on the subject if he hears my bat signal. He seems to have more legal knowledge than the average inspector.

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When contracts are challenged in court and there are no obvious violations of law in them to render the contract objectively unconscionable, the court attempts to determine the intentions of both parties at the time the agreement was made.

When you offer a client … for an additional amount of money … a contract that does NOT limit your liability, and the client considers your offer and chooses to opt for limited liability in direct exchange for a lower inspection fee, it clearly represents to the court reviewing it that both parties negotiated and agreed upon the fee and the inspector’s liability. It shows that the inspector paid the client, by accepting a lower fee, for his limited liability. It shows the client was aware of the option to have unlimited liability and chose the lower fee instead. It also shows that the inspector offered unlimited liability and that the client refused it.

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Making a note as we speak to put this clause back into my agreement tomorrow. Thank you James for your insight. Clearly NACHI had a purpose with this clause.

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