True, the grooves are to be installed vertically. Here is an installation sheet from LP, who manufacturer’s the siding:
If you carefully read the instructions, you will not find any instructions that say it cannot be installed with the grooves horizontal. Rather, they only show it installed vertically.
Originally, T-1-11 siding was made from standard A-C plywood with a “textured” face ply (thus the T symbol in its name) and grooves cut into the plywood along the 8’ length.
This method of making “siding” was not acceptable, because the inner plies had voids. The voids were caused by spaces between the inner plies during fabrication. This allowed moisture to lay inside the siding and cause rot.
In order to avoid this problem, they started making the inner plies “plugged”. Plugged meant they’d fill all the voids in the second and third plies so that moisture could not penetrate the siding.
Your siding must be that latter type of siding, because I do not see blistering or rot on the face of the siding. Installing the siding with the grooves vertical or horizontal doesn’t matter with the inner plies plugged. Moisture cannot enter the siding.
Btw, you must have maintained your siding by repainting on a regular (3-5 years) period. Otherwise, any siding would have deteriorated and started showing signs of rot.
Btw, who paid for the home inspector? When I sell a property, I always pay for the home inspection, because if I don’t like it, I’ll hire another, and another, and another until I get one I like. (This works the same when I buy a property too.) If you paid for the home inspection, toss it and get another inspection.