Home Buyers Beware- By: Hank Jaworowski
We are strong believers that people looking to buy a home should hire their home inspector who is independent of their real estate agent and mortgage company. These people want you to buy the house so we feel there is a bias towards achieving that goal.
Most real estate agencies work on an average commission of 6% paid by the seller of the property. On a house selling for $350,000 there is a potential commission of $21,000. 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 $21,000 commission? Unfortunately, some real estate agents view a thorough and non-bias home inspection as a threat to their sales commission.
Shouldn't a prospective home buyer 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. (You should also wonder why they don't want you using an independent inspector of your choosing.) 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, 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 $150 or $200. By advising homebuyers to expect these low (unrealistic) fees, agents are trying to steer homebuyers to certain inspectors, because the prospective homebuyers 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 can schedule an inspection on a day's notice" 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 has been 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 amends 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?
Very simple answer, money! Look at the real estate section of any local or regional 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? Almost none. Do you think a newspaper is going to bite the hand that helps feed it?
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Author Resource :
Hank Jaworowski co-owner of Precision Home Inspection of America, http://www.longislandhomeinspection.org. Long island based home inspection company.