The home inspector’s relationship with the real estate agent is a topic often discussed among home inspectors and agents. Some home inspectors tout strong relationships with real estate associations and agents as the best way to grow an inspection business. Others say the reliance of the home inspector on agent-referrals is a key problem when it comes to keeping the home inspection profession honest, ethical, and professional.
The fact is, a large percentage of home inspectors rely on agent referrals to bring in work and keep them in business. While this is not necessarily a negative thing, many inspectors argue that there is an inevitable conflict of interest inherent in such a relationship, as ambitious and unethical real estate agents select home inspectors who aren’t thorough and don’t find problems. Some inspectors complain that on numerous occasions they’ve had realtors combatively ask them if they are “deal killers,” sometimes right in front of the buyer!
Those who follow the relationship between real estate appraisers and mortgage brokers, agents, and lenders may see some similarities between the way the appraiser is pressured into meeting “value” and some home inspectors are encouraged to “sign-off” on a home after a quick hour inspection. Sean Wiens, a home inspector from Vancouver, Canada sees agent referrals as a threat to the integrity of the profession, saying that those home inspectors who are the most successful are the ones “who cater to the agents.” The result, according to Wiens , is that inspectors end up not looking out for the buyer’s best interest and as a result the standards of the profession are lowered.
Dennis Robitaille, Director of Independent Home Inspector’s of North America (IHINA), believes that the home inspector’s reliance on agent referrals creates a serious conflict of interest and this belief is what led him to found IHINA. Robitaille says that some agents have a list of two or three home inspectors who have been prescreened as not being 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 results in no liability for the agent for the referral- the buyer "chooses" an inspector the agent prefers but the buyer's choice is limited to home inspectors who will not hurt the sale, says Robitalle.
On the other hand, there is a strong argument for why an ethical agent’s referral adds value to the buyer and benefits all involved. A seasoned real estate agent has years of experience and expertise in the local market and an agent who is honest and has integrity will save a buyer a lot of time, money and frustration by referring a competent and thorough home inspector. Lenn Harley, a real estate broker serving Maryland and Virginia, says that good agents have learned to recognize good home inspectors and other service providers to home buyers. “Our buyers rely on our experience for matters as important as a home inspection,” Harley says. According to Harley, there is a trend in the real estate industry for agents to avoid risk by not making referrals and not attending home inspections. But her position is that the agent referral actually adds value to the buyer. “When homebuyers ask me for a home inspector referral, I refer them to the most competent and thorough inspector I know,” says Harley.
Serving the Client
Dick Greenberg, a real estate broker from Colorado, says, “We never hesitate to make recommendations, whether they are inspectors, lenders, handymen, carpet cleaners, etc. Our reason is because what we care most about is the client's satisfaction. Our favorite inspector has ‘killed’ several deals for us, and we and our clients were grateful.” In other words, for the ethical agents and brokers out there, it’s a question of serving the clients and building strong relationships. “Our commission comes from our clients, not a particular deal, and it has never made sense to jeopardize a client relationship by recommending an inspector who would do less than serve his client's needs," says Greenburg.
As far as there being a conflict of interest when it comes to agents referring home inspectors, Greenburg says, “For that concern to be valid, you'd need at least two people to ignore their duty to their client - the agent and the preferred inspector. While it’s certainly not an impossibility, those are the same agents who bend or break the law and code of ethics as a matter of routine. The answer is to clean up our act by getting rid of them, not by limiting the service we provide on the presumption that we're all like them,” says Greenburg.
In other words, for the many honest and ethical real estate agents, brokers, and home inspectors—building strong relationships and referral arrangements is a way to help all involved. It provides the home inspector with business, the real estate agent/broker with a knowledgeable, reliable, and thorough home inspector to refer to home buyers and helps home buyers by providing them access to a dependable home inspector.
Of course, not all real estate agents/brokers are honest and ethical, so perhaps the best route a home inspector can take is to diversify. Work closely with and market to real estate agents/brokers and find the ones who want ethical work, while also building up other avenues of business through direct marketing to home buyers, building a presentable website and working to optimize it on search engines, engaging in online marketing, and other marketing techniques that directly target the home buyer. This is the best safeguard against an inspector becoming too reliant on agent-referrals by building a diverse business that is arguably more sustainable and profitable in the long run.
About the Author Isaac Peck is the Associate Editor of Working RE Magazine and Marketing Coordinator at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors, and other real estate professionals in 49 states. He received his Bachelors in Business Management at San Diego State University. He can be contacted at Isaac@orep.org or (888) 347-5273.
Reprinted from www.WorkingRE.com, published by www.OREP.org, providing broad insurance coverage for home inspectors and other real estate professionals at the most competitive rates. Call toll-free (888) 347-5273. info@orep.org. David Brauner Calif. Insurance Lic. #0C89873.
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