Soft Wood Signs
This wood looks like it has expanded or has been
filled with wood fillers of some sort.
Use an awl to check for any damage when you run into wood that looks soft or a possibility of wood filler.
As a potential homeowner, if you are looking at the property and thinking about purchasing it, there is a good chance this wood will eventually have to be replaced.
Whenever you see damage like this on a set of stairs keep one thing in mind, stairs are a high traffic area and something like this could become a safety hazard or a liability further down the road.
As a home inspector you are going to be looking for any irregularities and this is a good sign of one of them.