Truth about real estate agent-referred inspectors

Truth about real estate agent-referred inspectors
(The opinions and views expressed on this page are those of Dennis R. Robitaille and most of the IHINA home inspectors. They do not represent the views of all home inspectors. The views and opinions expressed here may not necessarily apply in all areas of the country. These comments are based on personal experiences, feedback from home inspection clients, conversations with home inspectors, attorneys and real estate agents and written correspondence from a former MA State Representative.)

What’s Wrong With A Real Estate Agent Recommending A Particular Home Inspector To A Prospective Home Buyer? Most real estate agencies work on an average commission of 5% paid by the seller of the property. On a house selling for $350,000 there is a potential commission of $17,500. (FYI, real estate commissions are negotiable.) Sometimes a selling agent will recommend particular home inspectors to a prospective buyer, 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-bias inspector or is the agent recommending someone who will help protect the potential $17,500 commission? Unfortunately, for the prospective home buyer, some real estate agents view a thorough and non-bias home inspection as a threat to their sales commission.

Do prospective home buyers 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, you should contact your attorney. A real estate broker or sales agent who tries to get you to use an inspector of the agent’s choice is trying to control the home inspector selection process. 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, you are a customer of the agent, not a client. 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 is a deal killer”, or “that inspector takes too long” or “we’ve had trouble with that inspector” or “we don’t allow that inspector to inspect any of our listed properties” or “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 $250 or $300. By advising home buyers to expect these low (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” or “this inspector has the lowest fee” or “we use this inspector all the time” or “this inspector only takes an hour 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? A home inspector licensing law was passed in Massachusetts and became effective May, 2001. This law, to some degree, does address the potential conflict of interest of real estate agents referring home inspectors. The new law amended Chapter 112 section 87YY of the MA Real Estate Broker and Salesperson Licensing Law. It 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 which has this provision.) The prohibition does not apply 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.

Why Don’t I Read About This Conflict Of Interest Situation In The Newspaper? Simple answer, money! Look at the real estate section of any local newspaper, lots of houses being advertised by real estate agents. Those newspapers don’t run those ads for free. How many home inspector advertisements do you see in the newspapers? None. Do you think a newspaper is going to bite the hand that helps feed it?

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 welcome the opportunity to allow prospective home buyers freely choose 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. As you can see from the number of Independent Inspectors listed on this site, less than 1% of all home inspectors claim that they do not solicit real estate agents for client leads. 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. An inspector who claims to have no real estate agent affiliations doesn’t necessarily mean they do not solicit real estate agents for client leads. If you find that the inspector or inspection company gets more than 25% of their business from agents or 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.

Why Doesn’t The American Society of Home Inspectors (ASHI) Code Of Ethics 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, several years ago ASHI embarked on a “branding” campaign spending millions of membership dollars to educate real estate agents that they should refer only ASHI inspectors. This was unfortunate for the home buying consumer. The following paragraph aimed at real estate agents 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.“Do you want an inspector who “helps” the real estate agent earn a commission or do you want an inspector who is going to fully disclose the condition of the house?

What Can Be Done To Prevent This Potential Conflict Of Interest? Contact the Representatives and Senators of your own state or province. Send them an e-mail with a link to the: Independent Home Inspectors Of North America web site. Do not ask the real estate agent for the name of an inspector. Do not accept any short list or recommendations from the agent. If the state you’re buying in requires home inspectors to be licensed, obtain the list of licensed inspectors. Do a little research and choose your own inspector. The best source for referrals will come from people who do not have a vested interest in the sale, this includes your attorney and past clients of the inspector. Remember, it’s your money and your potential future home. Choose your home inspector wisely!

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