Ann Arbor Home Inspection
THE TRUTH ABOUT REAL ESTATE AGENT REFERRED HOME INSPECTIONS AND THE LACK OF INDEPENDENCE IN THE HOME INSPECTION INDUSTRY
Most home inspectors rely on realtors to refer 80% or more of their inspection business. Without these referrals, they wouldn't be able to stay in business. This can make it difficult for the inspector to clearly identify the client. Is the client the person paying for one inspection or is the "undisclosed" client a Realtor who may refer many inspections?
For a brief time, I accepted realtor referrals to obtain new clients for home inspections and quickly learned that it was very difficult if not impossible to work exclusively in my client's best interests. Most realtors that provided an introduction, didn't want me to spend too much time or look too closely at their prospective home sale. They felt that only a few major items should be examined and getting too detailed was potentially a conflict with their ability to close the sale. I couldn't accept these restrictions since it compromised my ability to perform a thorough and proper home inspection. As a result, I quit soliciting realtor referrals so I could maintain my independence and hold my client's interests first - the interests of the home purchaser(s) and not the realtor.
MOST REALTOR REFERRED INSPECTORS INSPECT 2 TO 3 HOMES PER DAY AND THEIR UNDISCLOSED CLIENT IS THE REALTOR AND NOT THE HOME PURCHASER(S)
A proper home inspection for a home between 1,000 to 3,000 square feet takes between three to four hours (sometimes five) plus three additional hours to write the inspection report. Even though I charge a flat fee for each inspection, I do not set a time limit and if conditions require or a purchaser(s) wants to take more time, that's what we do until a comfort level is reached. With driving time included, each home inspection takes me a full work day to perform. I do not inspect more than one home in a single day so each of my client's receive my full and undivided attention for performing their home inspection.
Most realtor recommended inspectors, however, perform two to three inspection per day since their realtor referral sources have established an unwritten rule of only using inspectors who take between 1 1/2 to 2 hours per inspection (including the preparation of a report). If inspectors don't abide by this rule, they don't receive future referrals.
If you can visualize all of the components in a home and what it takes to look at it carefully and closely enough to evaluate its strengths and weaknesses, you will quickly realize that it is impossible to perform an adequate inspection in that brief amount of time and also be able to write a proper report.
I have always dedicated myself to doing the best possible job that I can, and this serious conflict between what a realtor wants inspected and what a prospective home owner should receive has caused me to take sides. My home inspection clients are exactly that - CLIENTS who engage my services to provide them with in depth independent advice about a home that they are interested in buying. It is my responsibility to look at each home fully independent of any controlling interests and to give each client my best professional opinion and advice.
YOUR HOME IS A SUBSTANTIAL INVESTMENT AND YOU OWE IT TO YOURSELF TO OBTAIN A PROPER INSPECTION
Do not ask your real estate agent for the name of an inspector, and do not accept any short list or recommendations from your agent. When Michigan requires home inspectors to be licensed later this year (more about this below), obtain the official list of licensed inspectors. Do a little research and choose your own inspector carefully.
If you would like to learn more about this serious conflict of interest and what you can do to protect yourself, please continue reading the remainder of this web page.
LET'S LOOK MORE CLOSELY AT WHY YOU SHOULDN'T USE A REALTOR SUGGESTED HOME INSPECTOR OR LIST
Most real estate agencies work on an average commission of 6% paid by the seller of the property. On a house selling for $350,000 there is a potential commission of $21,000. Sometimes a selling agent will recommend a particular inspector to a prospective buyer, and sometimes a list of three is given out. Who are these recommended inspectors? How did they "qualify" to get on the "approved" list of the agent? Is the agent recommending a thorough non-biased inspector or is the agent promoting someone who will help protect the $21,000 commission?
Unfortunately, many real estate agents view a thorough and non-biased home inspection as a threat to their sales commission. Even so, shouldn't a prospective home buyer have the right to use an inspector of their own choosing? If a real estate agent tells you that you cannot use an inspector of your choosing, or insists that you use one of their "recommended" or "approved" inspectors, they are trying to control the inspector selection process and you should begin to question the entire sales transaction.
Prospective home buyers must keep in mind that real estate agents who receive a commission from the property seller, are working in the best interest of their client, (the seller.) As the prospective home buyer, shouldn't the home inspector you're paying for, be working in your best interest?
WHAT IS A "DEAL KILLER"?
The derogatory phrase "deal killer" is often used by real estate agents to describe independent home inspectors who give buyers objective information in an inspection report, which may lead the buyer to renegotiate or to look at other properties. Many real estate agents view independent home inspectors as a challenge to their ability to generate income. They view these "deal killers" as foes and will use a number of tactics to control the inspector selection process to make sure that the prospective buyers do not retain independent home inspectors.
HOW DOES A REAL ESTATE AGENT CONTROL THE INSPECTOR SELECTION PROCESS?
There are many tactics used, some subtle and some not so subtle. The agent may discourage the potential buyer from using a certain inspector by making comments like: "that inspector takes too long", "we've had trouble with that inspector", "we don't allow that inspector to inspect any of our listed properties", "that inspector is too expensive." A twist on the fee tactic is to advise the prospective buyer that they should expect a home inspector to charge around $150 or $200. By advising home buyers to expect these unrealistic fees, agents are trying to steer home buyers to certain inspectors, because the prospective home buyers might limit their search to the arbitrary price range set by the real estate agent.
The tactics used to encourage a prospective buyer to use a particular inspector include: "We've had good luck with this inspector", this inspector has the lowest fee", "we use this inspector all the time", "this inspector can schedule an inspection on a day's notice", "this inspector only takes an hour and a half and he gives you a report right on the spot."
For instance, in the first stage of discussion about having the home inspected, the real estate agent may recommend to the buyer a "good" home inspector with whom they have worked with for several years. Some agents may have a list of three inspectors who have been carefully screened not to be deal killers. The list, however, will be long enough to protect the agent from any referral liability should the buyer want to blame the agent for any inspection mistakes. This gives the agent the perfect combination of: A) No liability for the referral; B) The buyer "chooses" an inspector the agent prefers; and C) The buyer's choice is limited to home inspectors who will not hurt the sale.
IF THERE IS A POTENTIAL CONFLICT OF INTEREST WITH SALES AGENTS RECOMMENDING HOME INSPECTORS, WHY DOESN'T THE GOVERNMENT DO SOMETHING ABOUT IT?Currently, the State of Michigan does not require home inspector licensing! However, after the recent Channel 4 Television two month investigation of 8 home inspectors in the Royal Oak area, the Channel 4 Defenders took the eight different reports from the local home inspectors to Lansing demanding answers on how this industry could be so unregulated and the inspection results so poor.
The result is that State Representative Frank Accavitti, Jr. introduced a new House Bill, HB 5587, the Michigan Home
Inspection Professional Licensing Act, which would require
home inspectors to obtain a professional license from the state and require them to meet minimum educational and professional standards. It also would ensure home inspectors maintain high standards of practice and ethics. It is expected to pass sometime in 2004 and begin a whole new approach to home inspections in Michigan.Even though this new bill is an excellent start, it does not eliminate the current and continued future realtor control over the selection of home inspectors. In May of 2001, Massachusetts passed a licensing law that to some degree addresses the potential conflict of interest of real estate agents referring home inspectors:
The Massachusetts' law "prohibits real estate brokers and salespersons from directly recommending a specific home inspection company or home inspector. Instead, upon request, the agents must provide a complete list of licensed home inspectors prepared by the Board of Home Inspectors." (So far, MA is the only state in the US which has this provision.)
The prohibition does not apply, however, if there is a written agreement between the buyer and real estate broker that the broker is acting exclusively for the buyer as a buyer's broker. Potential buyers must still be aware that regardless of who the real estate agent claims to be working for, his or her commission is still coming from the successful closing of the sales transaction. Consequently, this new law fails to completely alleviate the abuse that prospective home owners have been unknowingly experiencing for years, even still in Massachusetts.
WHY DON'T WE READ ABOUT THIS CONFLICT OF INTEREST SITUATION IN THE NEWSPAPER?
Very simple answer, money! Look at the real estate section of any local or regional newspaper - lots of houses being advertised by real estate agents. Those newspapers don't run those ads for free. How many home inspection advertisements do you see in the newspapers? Almost none. Do you think a newspaper is going to bite the hand that helps feed it? There have been a few articles written about the potential conflict of interest, but these have appeared in national papers which have very little real estate advertising.
WHY DON'T HOME INSPECTORS ORGANIZE AND CHANGE THE CURRENT CONTROL REAL ESTATE AGENTS HAVE OVER THE INSPECTOR SELECTION PROCESS?You would think inspectors would want consumers to have a free choice when it comes to selecting a home inspector. Unfortunately many inspectors rely upon real estate agents to steer clients their way. This is especially true for large multi inspector firms. It is estimated that well over 80% of the majority of home inspectors income comes from realtor referrals.
Considerably less than 1% of all home inspectors nationwide claim that they do not solicit real estate agents for client leads, and the only organization that requires a pledge stating that a home inspector does not solicit real estate agents for client leads is the Independent Home Inspectors of North America (IHINA). In a free marketplace, companies that offer a poor product or provide a poor service eventually go out of business. In the world of home inspection, there is an artificial marketplace controlled by real estate agents. This allows "agent friendly" inspectors to stay in business, regardless of their inspection abilities.
WHAT ABOUT INSPECTORS WHO CLAIM TO BE INDEPENDENT, BUT DON'T BELONG TO IHINA?
Many inspectors who claim to to be independent are not willing to sign the IHINA pledge. In addition, when an inspector claims to have no real estate agent affiliations it doesn't necessarily mean they do not solicit real estate agents for client leads. The best way to qualify the relationship is to ask the inspector whether he or she solicits real estate agents for client leads. If you find that the inspector or inspection company maintains brochures in real estate offices or if the inspector or inspection company is on the real estate agent's "recommended" list given out to prospective buyers, this should tell you something to the contrary.
WHY DOESN'T THE AMERICAN SOCIETY OF HOME INSPECTORS (ASHI), ONE OF 3 NATIONAL HOME INSPECTION PROFESSIONAL ORGANIZATIONS, PROHIBIT ASHI INSPECTORS FROM SOLICITING REAL ESTATE AGENTS FOR CLIENT LEADS?
GOOD QUESTION!
This question has been raised and discussed with ASHI National. The response has been that ASHI does not want to dictate to its members, how they should obtain their client leads. However, ASHI has recently embarked on a "branding" campaign spending millions of dollars to convince real estate agents that they should refer only ASHI inspectors. This is very unfortunate for the home buying consumer.
The following paragraph has been taken directly from the ASHI web site: "ASHI is your professional partner for home inspections. Your customers rely on you for your advice on which service professionals to use in the buying or selling process. You can trust that ASHI inspectors will deliver exceptional service and expert knowledge, enabling smart decisions and peace of mind to your customers, thus helping you in your role as a trusted resource."
This is very a serious conflict of interest and one which is unfortunate since if the home inspection industry itself can't remain impartial and independent, how can a home buyer(s) truly evaluate which inspector is going to impartially and independently serve his or her needs? If the realtors are in control over the introduction to home inspectors, and if the home inspectors derive over 80% of their income from these established referral relationships, how can independence ever be established? IT CAN'T! Not unless each home inspector is willing to divorce himself or herself from the realtor relationship completely, and that isn't going to happen voluntarily.
WHAT CAN BE DONE TO PREVENT THIS POTENTIAL CONFLICT OF INTEREST?Unfortunately, the only solution is legislation. Contact your Michigan Representative(s) and Senator. Send them a message along with a link back to this web page to explain the problem that exists within the real estate industry in Michigan regarding real estate agent control over home inspectors. You can do a search for your own Michigan Representative and Senator at the following web pages:
Search for Michigan Representatives:
http://house.michigan.gov/find_a_rep.aspSearch for Michigan Senators:
http://senate.michigan.gov/SenatorInfo/senfull2003.htm
District 52 Gene DeRossett gderossett@house.mi.gov District 53 Chris Kolb chriskolb@house.mi.gov District 54 Ruth Ann Jamnick rjamnick@house.mi.gov District 55 Matt Milosch mattmilosch@house.mi.gov Washtenaw County Michigan Senator: District 18 Liz Brater SenLBrater@senate.michigan.gov Do not ask your real estate agent for the name of an inspector, and do not accept any short list or recommendations from your agent. When Michigan requires home inspectors to be licensed later this year, obtain the official list of licensed inspectors. Do a little research and choose your own inspector carefully.
The best source for referrals will come from people who do not have a vested interest in the sale, and this includes your attorney and past clients of the inspector. Remember, it's your money and your potential future home. Choose your inspector wisely.
Ann Arbor Home Inspection Inspector
2121 Highland Rd, Ann Arbor, Michigan 48104
Phone: (734)369-3003 • Email: richard@annarborhomeinspection.com
