April 9, 2000

Robert Hurst

Executive Producer “W5” (CTV)

P.O. Box 3000

Agincourt, Ontario

 

Dear Mr. Hurst,

You, Wei Chen and your W5 team are to be congratulated for the recent article on home inspections entitled “Inspecting the Inspectors.” I am sure the program opened a lot of eyes and that the feature has helped many Buyers make better decisions. Keep up the excellent work.

The segment was very good but it just touched the tip of a formidable iceberg. Naturally, there is only so much you can squeeze into a segment to stay focused. I would like to bring some information to light with the hope that you might continue to expose Real Estate issues.

1. How is it that poorly trained or poorly qualified “Home Inspectors” not only survive but are the norm, and are in fact, increasing in number?

Poorly qualified “Home Inspectors flourish because they are being systematically promoted.It is unlikely that they are being promoted by dissatisfied Home Buyers, except for those fortunate enough to have purchased a trouble-free property or who have not yet had trouble.

2. Who are those actively promoting poorly qualified “Home Inspectors?”

The Real Estate Industry (Agents and Brokers) is the number one promoter/facilitator of poorly qualified “Home Inspectors.”Franchise Companies heavily promote their members, regardless of qualifications, education or construction background so long as the Inspector takes their courses and passes their exams. To limit their liability they are careful to say, “Each franchise is independently owned and operated.”

3. Why would Agents and Brokers promote poorly qualified “Home Inspectors” over diligent well qualified “Home Inspectors?”

Agents and Brokers earn their livelihood via commissions paid on completed sales. These commissions ultimately come from the Seller. There is no better way for Agents to ensure that sales are not jeopardized or for Brokers to eliminate competent “Home Inspectors” (whose job is to protect Buyers) than to feed unsuspecting, trusting Buyers a choice of poor Inspectors. Should the Buyer later encounter a problem with the property, the Agent can simply say, “You chose the Inspector” or because the referrals are normally verbal, simply deny ever having given the Inspector’s name.

4. How do Agents promote poorly qualified “Home Inspectors?”

Agents control the majority of referrals to “Home Inspectors” and thus the Buyer’s right and ability to obtain a competent well qualified “Home Inspection” service. Agents are the point of first contact for the majority of Buyers, especially “first-time Home Buyers.” Agents are inventive and resourceful and are salespeople. There are lots of ways for them to control the Buyer. Typical are the following:

A. They can say, “We’re not supposed to refer Inspectors. Here are three names…you decide…”

B. They offer a bunch of brochures or cards from their select Inspector group or ask the Buyer to pick up brochures at the reception or lobby area of their office. The brochures and cards of the Inspection Firms that the Realtor wishes to promote are typically in full view while those of less sympathetic Inspectors quite often will be delegated to some obscure location or mysteriously disappear.

C. They tell the Buyer to look up names in the Yellow Pages and then add, “A lot of my clients have used “so ans so” and have been satisfied.” I hear “so and so” is very good, Don’t use that guy because he’s too picky…”

D. The worse ones simply say, “I’ll look after the Inspection for you.. I know just the Inspector to call… don’t worry he’ll do a good job…” or something to that affect.

E. Some Agents will pretend to call the well qualified Inspector but say they were unable to reach him or her or say he or she is unavailable.

5. How are Home Buyers so easily controlled?

Home Buyers do not understand that Real Estate Agents have a major CONFLICT OF INTEREST and should not be used as a source of referrals to Home Inspectors. Buyers typically fail to realize that the Agent’s allegiance does not change the fact that Agents are paid ultimately by the Seller.

Regardless if the agent says he or she is working for the Buyer, for the Seller or for Both*, the agent still has a major vested interest in the transaction. This means their commission will only be paid if the deal goes through and will be reduced if the Inspection results in a lowering of the sale price or sale commission amount.

(* It is absurd that Dual Agents are even allowed. In Law you would not expect a lawyer to represent both parties in a civil action. A Dual Agent cannot represent both parties equally, especially when the commission is paid for by the Vendor.)

6. Why don’t we hear more about the Conflict of Interest issue or about the the Inspection Industry being controlled by the Real Estate Industry?

As a rule, the media do not run articles or ads revealing the Conflict of Interest or the Realtor control of Inspectors because a very substantial portion of their revenue comes from Real Estate Companies. In short, the media have a Conflict of Interest of their own.

The media has a vested interest in not upsetting the apple cart. Real Estate advertisements of Open Houses, house for sale, real estate agents and service account for a sizabl e portion of media income. In short, the media industry is willing to keep quiet about these two issues in return for advertisement revenue. The primary medium is newspaper but real estate ads also occur on TV, real estate channels, web sites, and radio.

As it stands, the media appear to have taken a Caveat Emptor position of “Let the Buyer Beware” instead of “Buyer Be Aware” and have put their financial interests ahead of their readers and the General Public. They seem to be promoting the Seller’s interest at the sake of the Buyer’s interest.

7.Is there presently any way to make Real Estate Industry accountable to Buyers?

To make the Real Estate Industry truly and equally accountable to Buyers, Sellers and the General Public, all members of Discipline Committees, Arbitration Panels or any body dealing with complaints concerning the conduct of Agents should be independent of the Industry and free of conflict of Interest. The findings of such committees, panels or similar bodies should also be made public information.

The Real Estate Industry is self-governing within the confines of provincial regulations and Real Estate Board bylaws governing its members. The problem lies in transparency and accountability, especially as it relates to complaints against members.

Your segment “Inspecting the Inspectors” reminds me of what I have been trying to make public for a number of years and of my Web Site http://www.status.nb.ca Take a peek. If I can be of any service whatsoever, please contact me.

I look forward to hearing from you.

Sincerely,

Chuk Mac Donald C.E.T.

President,

Status Inspection & Design ®

638 Glengarry Place,

Fredericton, NB E3B 5Z9tus Inspection & Design ® 638 Glengarry Place, Fredericton, NB E3B 5Z9