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 sizable 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 5Z9