Why do modern standards require grounded outlets?
The ground connection present on modern outlets is designed to protect you from wiring problems in certain household appliances, most notably refrigerators, freezers aquariums and window-style air conditioners.
I personally suffered the effects of a window air conditioner plugged into 3-prong outlet that was in fact ungrounded. While in college, I lived in an “efficiency” apartment. What this means is that it was an extremely tiny corner of a Victorian house built in maybe 1910. I happen to be a very tall guy, and because the apartment was so small my bed was right next to the window where I had installed my air conditioner. Sometimes when I slept, my arm or shoulder would touch the air conditioner, and my feet would touch the cast iron radiator. After living in this apartment for a few months, I realized that I was waking up in the middle of the night with a strange feeling running through my body. It occurred to me that I was acting as a conductor for stray voltage that was passing from the air conditioner to the grounded radiator. Yikes!
Besides the risks to people, sensitive electronics use the ground prong as a path to eliminate stray voltage, which protects them from damage. And surge protectors can’t protect equipment from surges without a ground connection. I learned several years ago the value of a good surge protector after losing a good flat panel TV to a power surge.
Why would anyone incorrectly install a 3-prong outlet?
These older homes in Buffalo, Lancaster and the surrounding towns most likely were originally built with Knob and Tube (K&T) wiring, which was the first residential wiring method. It had inherent dangers, and starting in the 1940s homeowners replaced it with cloth-covered wiring, which brought about great safety improvements but did not yet introduce the concept of grounding.
Typically, when a home inspector’s outlet tester shows that a 3-prong outlet is ungrounded, an inspection of the exposed wiring in the basement or electric service panel reveals that the wiring is this older style cloth wiring, and the ground prong of the outlet is not connected to anything.
I think it comes down to cost
So, the homeowner didn’t replace all of the wiring in the home, yet replaced all of the outlets with new 3-prong ones. More often than not, all of the outlets on the first floor are wired correctly and the second-floor ones are all missing ground connections. Thinking about this, the wiring on the first floor is usually mostly exposed to the basement and easy to get to. The upper level, though, would probably require tearing into plaster walls to replace wiring. I am guessing that that unqualified handy people are doing this electrical work for the homeowners, or that they are poorly advised by an electrician.
A Ground Fault Circuit Interrupter (GFCI) will provide some improvement
GFCI outlets are designed for wet areas, including bathrooms, exteriors and kitchen countertops. But they also will protect people from most electric shocks by sensing very small changes in current flow. Keep in mind that GFCIs do not create a ground path, so surge protectors and electronics will not benefit from them.
When I find report on improperly wired outlets to my clients, I always recommend that they #1 do not give up on the house. It’s just not that bad. My second recommendation is to have an electrician test all outlets in the home properly wire them, to include running new wires to each of them.