Home Inspectors & Conflicts Of Interest
(The opinions and views expressed on this page do not represent the views of all home inspectors. These comments are based on personal experience, feedback from clients, conversations with home inspectors, attorneys and real estate agents and written correspondence from a former State Representative.)
What’s Wrong With Real Estate Agents Recommending Home Inspectors To Prospective Home Buyers?
Most real estate agencies work on an average commission of 5% paid by the seller of the property. A house selling for $350,000 has 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. How did these inspectors “qualify” to get on the “approved” list? Is the agent recommending a thorough non-bias inspector or is the agent recommending someone who will help protect the potential $17,500 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 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, the inspector you’re paying for should be working in your best interest.
What Is A “Deal Killer”?
The derogatory phrase “deal killer” is a term used by by real estate agents to taint home inspectors who give buyers objective / non-bias information. Information that may lead the buyer to renegotiate or to look at other properties. Many real estate agents view these “deal killers” as obstacles to the sales commission and will use a number of tactics to control the inspector selection process to make sure that prospective buyers do not retain independent home inspectors.
How Does A Real Estate Agent Control The Inspector Selection Process?
The agent could discourage a potential buyer from using a certain inspector by making comments like: “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 fees, they are in effect steering home buyers to certain “agent friendly” inspectors.
The tactics used to encourage use a particular inspector include: “We’ve had good luck with this inspector” or “this inspector has a low 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.” Some agents may have a list of three inspectors who have been screened to be “agent friendly”. The list, however, will be long enough to protect the agent from referral liability should the buyer want to blame the agent for any inspection mistakes.
If There’s A Potential Conflict Of Interest With Sales Agents Recommending Home Inspectors, Why Doesn’t The Government Do Something About It?
A real estate licensing law went in effect in Massachusetts in May, 2001, which to some degree, addresses the potential conflict of interest of real estate agents referring home inspectors. The 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 agent that the agent is acting exclusively for the buyer as a buyer’s agent. 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 Home Inspectors Organize To 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 to freely choose a home inspector. Unfortunately too many inspectors rely upon real estate agents to steer clients their way. 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 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 claim to to be independent, but 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 maintains brochures in real estate offices or if the inspector or inspection company is on the real estate agent’s “recommended” or “preferred” list given out to prospective buyers, or is listed on a real estate agency web site, this should tell you something.
What Can Be Done To Prevent This Potential Conflict Of Interest?
Contact the Representatives and Senators of your own state. 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 referrals will come from people who do not have a vested interest in the sale. Remember, it’s your money and your potential future home. Choose your home inspector wisely!