Is There A Conflict Of Interest With A Real Estate Agent Recommending Home Inspectors Or Controlling Any Part Of The Home Inspection Process?!?
Why do I ask that question in the first place?
Is there a conflict of interest?
Your Real Estate agent wants the absolute best for you and/or your family, right?
Why would 99% of Real Estate agent’s not recommend one of the highest rated Home Inspector’s in the State of Tennessee? As I am currently included on 10-15 Realtor’s “list of three” recommended home inspector’s out of approximately 1500 Real Estate Agents in the area.
As a 25 year+ veteran of the construction and Home Inspection industries and after completing 2500+ home inspections the answers to these questions have disappointed me time and again.
This discussion came up with another Home Inspection Company Owner in the country; Dan Bowers out of Kansas City. Dan’s experience includes being a former Real Estate Broker, a Home Builder, and an Inspector for over 35 years. As I spoke with Dan concerning the frustration of “Real Estate Politics” I mentioned that I was writing a blog post concerning the “list of three” and asked if he wouldn’t mind to contribute to it. Come to find out Dan had beaten me to the punch by over 25 years and shared the article he had written with me. After reading it I knew that I couldn’t come close to doing a better job of explaining the “state of the industry”. The following is Dan’s article in its entirety and it can also be found on his website at: ourkansascityhomeinspector.com
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 6% paid by the seller of the property. On a house selling for $300,000 there is a potential commission of $18,000. Sometimes a selling agent will recommend particular home inspectors to a prospective buyer, sometimes a list of 3 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-biased inspector or is the agent recommending someone who won’t make any waves and will help protect the potential $18,000 commission?
Unfortunately, some real estate agents view a thorough and non-biased home inspection as a threat to their sales commission.
Should a prospective homebuyer use an inspector of their own choosing? If a real estate agent tells you that you can’t use an inspector of your choosing, or insists you use one of their “recommended” or “approved” inspectors, you should contact an attorney (you should also wonder why they don’t want you using an independent inspector of your own choosing). A real estate agent who tries to get a homebuyer to use an inspector of the agent’s choice is trying to control the home inspector selection process. Prospective homebuyers must keep in mind that real estate agents who receive their commission from the property seller, may be working in the best fiduciary interests of the seller – not the buyer. As the prospective home buyer, shouldn’t the home inspector they’re paying for, be working in the buyers 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 walk away and look at other properties. Many real estate agents view independent home inspectors as a threat 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 “that inspector is too expensive”. Another twist on the fee tactic is for the real estate agent to advise the prospective buyer that they should expect a home inspector will charge about $150 to $235. By advising homebuyers to expect these low fees (unrealistic and often from unskilled inspectors), agents are trying to steer homebuyers to certain inspectors, because the prospective homebuyers may 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 may 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 have a list of 3 inspectors who have been carefully screened not to be deal killers. The short list, however, will be long enough to protect an 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.