📋 Overview: Inspection Issues in California

When you purchase a home in California, multiple parties have duties to inspect and disclose defects: the seller, the seller's agent, the buyer's agent, and the home inspector you hire. When any of these parties fails in their duty, you may have a claim for damages to cover repair costs, diminished value, and consequential expenses.

Who Can Be Liable?

California law creates potential liability for several parties in a real estate transaction:

🔍 Home Inspector

Failed to identify visible defects, did not follow CREIA standards, or missed issues within scope of inspection

🏠 Seller

Knew of defects but failed to disclose on TDS, actively concealed problems, or made misrepresentations

👤 Seller's Agent

Failed to conduct visual inspection required by Civil Code 2079, knew of defects and failed to disclose

🤝 Buyer's Agent

Failed visual inspection duty, did not recommend appropriate specialist inspections, or missed obvious red flags

Common Inspection Failures

🔍 Inspector Missed Visible Defects

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Home inspectors must identify defects that are visible and accessible during a reasonably competent inspection. If your inspector failed to note water stains, foundation cracks, roof damage, or other observable issues, they may have breached their duty of care. The key question is whether a reasonably competent inspector following CREIA standards would have identified the defect.

📄 Inadequate or Misleading Report

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Even when defects are noted, inspectors can be liable if they downplay serious issues, fail to recommend further evaluation by specialists, or use vague language that obscures the severity of problems. Reports should clearly identify defects and recommend appropriate follow-up inspections for issues outside the general inspector's expertise.

⚖ Broker Failed Visual Inspection

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Under California Civil Code 2079, real estate agents have an independent duty to conduct a "reasonably competent and diligent visual inspection" of accessible areas and disclose material facts. This duty exists separately from the home inspector's role. If your agent should have noticed obvious defects during showings or walkthroughs, they may share liability.

🚧 Seller Concealed or Failed to Disclose

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Sellers must complete the Transfer Disclosure Statement (TDS) honestly. If the seller knew of defects and either lied on the TDS or actively concealed them (fresh paint over water damage, covering foundation cracks), they remain liable even if the inspector also missed the issue. Multiple parties can share responsibility.

🔧 Failed to Recommend Specialist Inspection

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General home inspectors should recommend specialist inspections when they observe conditions suggesting problems outside their expertise: signs of pest damage warrant a pest inspection, foundation concerns warrant a structural engineer, suspected mold warrants environmental testing. Failure to make appropriate referrals can constitute negligence.

⚠ Statute of Limitations

California has different limitation periods depending on your claim:

  • Professional negligence (inspector): 2 years from discovery (CCP 339)
  • General negligence: 2 years from discovery (CCP 335.1)
  • Breach of contract: 4 years written / 2 years oral (CCP 337/339)
  • Fraud: 3 years from discovery (CCP 338(d))

Act promptly once you discover defects to preserve all potential claims.

✅ Evidence Checklist

Gather these documents and evidence before sending your demand letter. Strong documentation is critical for inspection claims.

📄 Inspection Documents

  • ✓ Original home inspection report
  • ✓ Inspection contract/agreement
  • ✓ Any photos taken by inspector
  • ✓ Pest/termite inspection report
  • ✓ Any specialist inspection reports

📝 Disclosure Documents

  • ✓ Transfer Disclosure Statement (TDS)
  • ✓ Seller Property Questionnaire (SPQ)
  • ✓ Agent Visual Inspection Disclosure (AVID)
  • ✓ Natural Hazard Disclosure
  • ✓ All other disclosure forms provided

📷 Defect Documentation

  • ✓ Photos/videos of all defects discovered
  • ✓ Post-purchase inspection report documenting issues
  • ✓ Repair estimates from licensed contractors (minimum 2-3)
  • ✓ Expert opinion on when defects likely existed
  • ✓ Receipts for any repairs already completed

📈 Proof of Prior Knowledge

  • ✓ Permit history from city/county (for prior repairs)
  • ✓ Seller's prior insurance claims on property
  • ✓ Prior inspection reports (if obtainable)
  • ✓ Neighbor statements about known issues
  • ✓ Evidence of concealment (fresh paint, patches)

💡 Expert Review

Consider having another CREIA-certified inspector review the original inspection report and compare it to the actual property condition. An expert can identify specific deviations from the standard of care and explain what a competent inspector should have found. This expert opinion strengthens both demand letters and litigation.

💰 Calculate Your Damages

In inspection-related claims, you can recover damages to compensate for the harm caused by negligent inspection, nondisclosure, or breach of duty.

Category Description
Cost of Repairs Reasonable cost to repair or remediate the missed/undisclosed defects
Diminished Value Reduction in property value even after repairs (stigma damages)
Consequential Damages Temporary housing, storage, lost rental income during repairs
Inspection/Expert Fees Cost of post-purchase inspections and expert evaluations
Attorney Fees If provided in purchase contract or inspection agreement

Damages by Defendant

🔍 Against Inspector

Cost of repairs for defects that should have been identified. May be limited by contract clause, but gross negligence or fraud can void limitations.

🏠 Against Seller

Full cost of repairs, diminished value, and consequential damages. Benefit of the bargain or out-of-pocket damages. Potential rescission in severe cases.

👤 Against Agent

Damages for defects the agent should have identified through visual inspection. Agent's E&O insurance often provides recovery source.

📊 Sample Damages Calculation

Example: Missed Foundation and Water Intrusion Issues

Foundation repair (missed cracks and settling) $35,000
Water intrusion remediation (missed roof/flashing issues) $18,000
Mold remediation (consequence of water intrusion) $12,000
Electrical panel replacement (missed code violations) $8,500
Temporary housing during repairs (6 weeks) $9,000
Post-purchase inspections and engineering reports $3,500
TOTAL DAMAGES $86,000

💡 Apportioning Liability

When multiple parties share fault (seller concealed, inspector missed, agent failed visual inspection), California's comparative fault system allows recovery from each defendant based on their percentage of responsibility. You may be able to collect the full amount from any defendant who is then entitled to seek contribution from others.

📝 Sample Language

Use these tabs to access demand letter language for different parties. Copy and customize for your situation.

Opening - To Home Inspector
I am writing regarding the home inspection you performed on [DATE] for the property located at [PROPERTY ADDRESS]. I relied on your inspection report in proceeding with the purchase of this property, which closed on [CLOSING DATE]. Since taking possession, I have discovered serious defects that you failed to identify in your inspection, despite these conditions being visible and within the scope of a reasonably competent home inspection.
Defect Description - Inspector Negligence
Specifically, your inspection failed to identify the following defects that were visible and accessible at the time of your inspection: [LIST SPECIFIC DEFECTS - e.g., "significant foundation cracks visible in the garage and crawlspace," "water staining on ceiling indicating roof leaks," "corroded electrical panel with double-tapped breakers"]. A subsequent inspection by [POST-PURCHASE INSPECTOR NAME] on [DATE] confirmed these conditions existed at the time of your inspection and should have been identified by a reasonably competent home inspector following CREIA Standards of Practice.
Legal Basis - Inspector
Under California Business & Professions Code sections 7195-7199 and established case law including Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, home inspectors owe a duty of care to exercise the skill and competence that a reasonably careful home inspector would use under similar circumstances. Your failure to identify visible defects that fall within the standard CREIA scope of inspection constitutes professional negligence. I relied on your report in deciding to purchase this property, and your negligent inspection directly caused my damages.
Demand - Inspector
I hereby demand payment of $[TOTAL DAMAGES] to compensate me for the cost of repairs necessitated by your failure to identify these defects. This amount includes $[REPAIR COSTS] for necessary repairs and $[OTHER COSTS] for [post-purchase inspection fees, temporary housing, etc.]. I am aware your contract contains a limitation of liability clause; however, your failure to identify clearly visible defects constitutes gross negligence that renders such limitations unenforceable under California law. Please respond within [30 DAYS]. If I do not receive payment, I will file a complaint with CREIA and pursue all available legal remedies including litigation.
Opening - To Seller
I am writing regarding the property located at [PROPERTY ADDRESS], which I purchased from you on [CLOSING DATE]. Since taking possession, I have discovered serious defects that you failed to disclose on the Transfer Disclosure Statement in violation of California Civil Code sections 1102-1102.17 and your common law duty to disclose material facts affecting the property.
Defect Description - Seller Nondisclosure
Specifically, I have discovered [describe defects - e.g., "extensive water damage and mold behind the walls of the master bathroom," "foundation settlement requiring structural repair," "a history of basement flooding"]. Evidence establishes you knew of these conditions: [describe evidence - e.g., "prior repair permits on file with the city," "insurance claims for water damage," "fresh paint and patches clearly covering prior damage," "statements from neighbors that you discussed these issues"]. Despite this knowledge, you answered "No" to the relevant questions on the TDS, constituting fraud and intentional concealment.
Demand - Seller
I hereby demand payment of $[TOTAL DAMAGES], representing the cost of repairs, diminished property value, and consequential damages resulting from your intentional concealment and failure to disclose known defects. Under Lingsch v. Savage and Civil Code 1102, your silence and misrepresentations constitute actionable fraud. Payment must be received within [30 DAYS]. Absent resolution, I will pursue litigation seeking full damages, rescission of the sale, and attorney fees as provided in our purchase agreement.
Opening - To Real Estate Agent/Broker
I am writing regarding your representation in the sale of the property at [PROPERTY ADDRESS], which I purchased on [CLOSING DATE]. Under California Civil Code section 2079 and the holding in Easton v. Strassburger (1984) 152 Cal.App.3d 90, you had a statutory duty to conduct a reasonably competent and diligent visual inspection of the property and disclose material facts affecting its value or desirability. You breached this duty.
Breach Description - Agent
A reasonably competent visual inspection of this property would have revealed [describe observable conditions - e.g., "visible water staining on ceilings," "cracks in the foundation visible from the exterior," "evidence of pest damage at the exterior wood trim," "improper drainage grading toward the foundation"]. These conditions were visible during the showings and open houses you conducted, yet you failed to note them on the Agent Visual Inspection Disclosure (AVID) or otherwise bring them to my attention. Your failure to identify and disclose these obvious conditions breached your statutory duty under Civil Code 2079.
Demand - Agent/Broker
I hereby demand payment of $[DAMAGES AMOUNT] to compensate me for repairs and damages resulting from defects you should have identified and disclosed. Please forward this letter to your Errors & Omissions insurance carrier for evaluation. I expect a response within [30 DAYS]. If I do not receive a satisfactory response, I will file a complaint with the California Department of Real Estate and pursue litigation. Your broker, [BROKER NAME], is copied on this letter as they share vicarious liability for your breach of duty.

🚀 Next Steps

After sending your demand letter, follow this roadmap based on the response you receive.

Expected Timeline

Days 1-7

Recipients receive and review demand letters

Days 7-21

Insurance carriers notified, claims investigated

Days 21-30

Response with offer, counteroffer, or denial

If They Don't Pay

  1. File CREIA Complaint (Against Inspector)

    The California Real Estate Inspection Association accepts complaints against member inspectors. While CREIA cannot award damages, a complaint creates regulatory pressure and documents the misconduct. Visit creia.org for complaint procedures.

  2. File DRE Complaint (Against Agent/Broker)

    File a complaint with the California Department of Real Estate against any licensed agent who failed their inspection duties. The DRE can discipline licenses and may facilitate resolution. File at dre.ca.gov.

  3. Pursue Insurance Claims

    Home inspectors typically carry E&O (Errors & Omissions) insurance. Real estate agents have E&O coverage through their broker. Request insurance information and file directly with carriers if the parties are unresponsive.

  4. Demand Mediation

    Most California real estate purchase agreements (CAR forms) require mediation before litigation. Request mediation to preserve your right to recover attorney fees if you later sue and prevail.

  5. File Lawsuit

    Claims under $12,500 can go to Small Claims Court. Larger claims require Superior Court. Consider suing all potentially liable parties - inspector, seller, and agents - to maximize recovery and let the court apportion fault.

⚠ Preserve Your Rights

If your purchase contract has a mediation clause, you must mediate before filing suit or you may lose the right to recover attorney fees. Send a written mediation demand to all parties. If they refuse or fail to respond within 30 days, you have satisfied the requirement and may proceed to litigation.

Need Legal Help?

Inspection claims involve complex issues of professional negligence and comparative fault. Get a 30-minute strategy call with an attorney to evaluate your claims against each party and plan your approach.

Book Consultation - $125

California Resources

  • CREIA (CA Real Estate Inspection Association): creia.org - Inspector standards and complaints
  • CA Dept. of Real Estate: dre.ca.gov - Agent/broker complaints and license lookup
  • DRE Consumer Line: 1-877-373-4542
  • CA State Bar Lawyer Referral: calbar.ca.gov - Find a real estate attorney
  • CA Civil Code 1102: leginfo.legislature.ca.gov - TDS requirements
  • CA Civil Code 2079: leginfo.legislature.ca.gov - Broker inspection duty
  • Local Building Department: Check permit history for prior repairs