Why do they consider it a conflict of interest when a real estate agent recommends a home inspector?

The home inspector finds reasons why the buyer may not like the home.  It is their professional duty to disclose everything they find out about a home during an inspection.  The home inspector is the only independent person working on the buyers behalf during a real estate transaction.

The real estate agent tries to find reasons why people should like a home. The real estate agent doesn’t collect commission until the deal has successfully closed.

Things you may want to know….

Home inspectors and real estate agents work in a related industry.

70% of home buyers chose their home inspector by picking up a home inspectors brochure displayed on a rack at a real estate office or the real estate agent may hand them several home inspectors brochures and say pick one.

Because of pressure home inspectors may get from the real estate community, some home inspectors may call problems they find during a home inspection as common and smooth over more serious problems/potential problems with a home itself.  Remember a real estate agent can put a home inspector out of business in six months if they wanted to.

A real estate agents commission can be trimmed or lost entirely if a home sale gets bogged down with the inspectors report of home defects or potential home defects.  Now you can see why some real estate agents or some real estate offices may not be displaying the most thorough or aggressive home inspectors brochures and why real estate agents are not allowed to recommend any one particular home inspector.

Remember…

If your real estate agent is recommending one particular home inspector for you to use, this is not only considered a conflict of interest it is against the law.  Contact the real estate council in your area to report their activities. 

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10 Comments (+add yours?)

  1. coconews
    May 19, 2008 @ 09:36:42

    Although, we touched on this topic on the thread below, I wanted to go into more detail on this subject.

    Here is the link for the Real Estate Council of British Columbia in case you ever have a problem with a real estate agent.

    http://www.recbc.ca/

    Every other province, state or country has something similar in place to protect the consumer during real estate transactions.

    I also would highly recommend reading disciplinary action taken against realtors on the same website to familiarize yourself what problems have occurred in the real estate industry in general.

    http://www.recbc.ca/complaints/disciplinary.htm

    Plus, there is very good information for the consumer on the website too.

    http://www.recbc.ca/consumer_info/consumer_info.htm

    I will also feature more threads on various aspects of home inspections because I think there are “things you may want to know” (I know, it’s lame, but I couldn’t resist) lol.

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  4. coconews
    May 19, 2008 @ 12:21:15

    Seems other sites like to link to Coco’s post today. Although on the second comment the author was listed as team zillow instead of coconews. I’m not sure how you can miss posted by coconews right beside the thread headline.

    But..then again when I checked out this blog that linked my article today they mentioned that coconews was the author of this article instead “Gallup Poll: Obama Takes His Largest Lead” Quite funny since I’m Canadian, eh?

  5. Larry Yatkowsky
    May 19, 2008 @ 20:24:51

    Coco,
    “a real estate agent can put an inspector out of business”

    You are painting a sensational picture with a very big brush giving Realtors far too much credit for the shortcomings of home inspectors.

    I propose that they accomplish that failure on their own without much help from the RE industry.

  6. coconews
    May 20, 2008 @ 06:02:11

    Larry,

    If your going try to paint a sensational picture of what I’m saying at least have the courtesy to copy and paste the entire sentence.

    “Remember a real estate agent can put a home inspector out of business in six months if they wanted to.”

    “If they wanted to” kind of adds a whole new dimension to the rest of the sentence.

    If they wanted to means that real estate agents can certainly put a new non established home inspector out of business by bad mouthing the home inspector to the point the home inspectors income falls to a level that they can’t make it a go.

    Even inspectors that are very good, but just too thorough for certain real estate agents are bad mouthed in the industry and referred to as “deal killers.”

  7. Larry Yatkowsky
    May 20, 2008 @ 08:42:32

    re courtesy…..
    it’s presumed that readers read the post.

    If inspectors good or bad, base their business survival solely on word of mouth from Realtors they have made a fundamental business error.

    It’s the broad stroke of suggesting that Realtors “if they want to”, are king makers and by inference are solely responsible for the welfare of the good and bad inspectors that is misleading.

    A counter perspective would ask what if it is the consumer who bad mouths the inspector? Are they too as responsible for the inspectors demise? After all, they could “if they wanted to”! Would there be a brush for that painting?

  8. Bill
    May 20, 2008 @ 09:09:45

    Realtors also broad stroke their clients, so your point is irrelevant.

  9. InspectorStu
    May 20, 2008 @ 09:26:58

    Gee – I thought is was my ultimate goal to be a “Deal Killer” inspector. The Deal Killer inspector is the one the realtor calls when someone in his or her family is buying a house.

    In reality – there are inspectors who make dumb comments, don’t know enough about what they are reporting, don’t know how to communicate well, and should have stayed in the field they were in before they decided to make it BIG as a home inspector (wire puller, carpenter’s helper, roofer, plumber and I really LOVE these guys, the contractor turned inspector). I do not believe licensing and certifications have shown to actually bring about improvements in those jursidictions that have inacted government controls.

    And – there are realtors who are “bottom feeders”. Anything goes, ethics and laws are for the other “suckers”. The commission is the goal not the client’s best interest. The client was mad? Tough, another one will come through the door.

    Thank goodness a great number of inspectors and realtors are out there who wish to provide the best service they can for their clients.

    InspectorStu
    Virginia Inspection Service, LLC

  10. InspectorDon
    Aug 25, 2008 @ 11:19:17

    My understanding is that in Mass, agents may not recommend inspectors and must refer their buyers to a list of licensed inspectors. Here in CT, agents get around this by referring buyers to three inspectors, who might as well be Curly, Larry and Moe, since they are all feeding at the trough of agent referrals. Furthermore, attorneys, who are first in line at that same trough, are hardly going to draw attention to such a conflict of interest that applies to them in spades.

    The home inspection business gained acceptance following a series of large judgments against real estate agencies for negligence regarding the condition of the house. It became convenient to pass off this liability to home inspectors who in turn disclaim responsibility for reporting everything but the obvious. In fact, ASHIs Standards of Practice, supposedly the golden rule by which inspections are measured, contains not one single standard of any kind other than what the inspector shall be responsible for, or not responsible for, observing and reporting. The point is, nearly every significant matter in a home inspection is governed by one or more of the building codes, yet ASHI makes it clear that its members’ inspections are not code inspections. The reason for this, in my opinion, is that the certification to become an actual structural, electrical, plumbing or mechanical (HVAC) inspector is far beyond the capability of 95% of ASHI inspectors. ASHI members will reply that it is impossible to do an actual code inspection despite their doing precisely that without being code-certified inspectors. Either something is governed by code or it is not, it’s that simple. Legislatures in states with home inspection licensing laws, however, have been bamboozled into accepting the self-serving standards of ASHI over the actual laws of their respective states, which are the building codes.

    Take a look at sample reports on the Internet and you will see that the report invariably recommends that the buyer consult someone with real expertise when some problem is observed, making the home inspector superfluous since any intelligent buyer should know that something as complex as a house and its systems should be looked over by an expert in the first place.

    The effect of nearly all home inspections is to rubber stamp the agent’s deal while using an endless enumeration of the house’s details peppered with maintenance tips, running upto 30 pages, to give the impression of an evaluation. This works since buyers invariably mistake all this junk information for evaluation, complexity for substance, and length for thoroughness. In practice, reports are filled with trivial comments, like the condition of an $85 sump pump, while a house that needs to be repainted at a cost of $20,000 gets no more comment than the ubiquitous, “chipping and peeling paint noted.” Shake out the junk information and the average inspection report can be summarized in a few lines, not pages.

    One thing a home inspector might do that is worthwhile is to provide buyer’s with detailed cost estimates on remedying defects. Such data exists in well-established uniform formats from everything to pulling a nail to putting a new roof on a house, and is used every day by architects, contractors and insurance companies. But professional estimating requires special training and certification beyond most home inspector’s abilities–again this is just my opinion–, so those who do provide costs usually do so using canned ranges that are so broad as to make the estimate meaningless.

    A home inspection used to be called a “handyman walk-through” for good reason, since that is what a buyer is getting for a hefty price. The comment made by another inspector about contractors-turned-inspectors is quite accurate (and funny) since the probability that a successful contractor would give it all up to become a home inspector approaches zero. You will never be able to check your inspectors references anyway, other than self-serving numbers of trivial inspections performed, so beware all the phony credentialism in this phoniest of phony businesses and get real experts out there to look the house over.

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