Collusion between agents and home inspectors isn't the norm
Q. I am a court-certified expert witness in construction defect lawsuits. Many of the cases I see involve home inspectors who fail to disclose defects. One inspector confided that an inspection report with "too many problems" might "kill" the sale, and then the agent would stop recommending him to buyers. Another inspector said he was expected to "work with the agents," not to raise red flags or to be too "nit-picky." This is disturbing, since home inspection referrals come mainly from agents. Perhaps organizations such as the American Society of Home Inspectors (ASHI) and the National Association of Realtors (NAR) could do more to promote professional ethics. What do you think about these issues?
A. Your position as an expert witness exposes you to the worst examples among home inspectors and real estate agents. Without doubt, there are ethical disparities and conflicts of interest among some agents and home inspectors, some of which lead to the courtroom dramas where you testify. Fortunately, there is a brighter side to the world of real estate and home inspection, where the players rarely stand in the shadow of a judge's bench. So let's examine the dark and lighter sides of disclosure practices, beginning with those who recommend home inspectors to their clients.
Basically, there are two kinds of real estate agents: Advocates and hucksters. Advocates are the honorable standard bearers of a profession that is often unfairly maligned. Advocates are those who represent the best interests of their clients; who actively promote defect disclosure; who recommend only the most qualified home inspectors. Advocates would rather kill a sale and find a better property for their clients than have the clients be unhappy after the sale. Advocates treat clients as they themselves would want to be treated, with honest concern for the clients' financial well-being. Advocates know that fair treatment of others attracts future business.
Unfortunately, there are also the hucksters, the snake oil salesmen, as it were, who jeopardize the interests of homebuyers, who keep attorneys busily employed, who denigrate the hard-earned reputations of the honorable advocates, and who boycott the most qualified home inspectors. Hucksters represent their own financial avarice at the expense of their clients. They compromise the disclosure process by seeking home inspectors who are less likely to provide full defect disclosure. They recommend inspectors who are less experienced, less capable, or who are willing to exchange principal for increased business. A huckster would rather close the sale than jeopardize the immediate flow of commission checks. To a huckster, top-notch home inspectors are known as "Deal Killers."
Among home inspectors there are two variables that affect the thoroughness of disclosure. The first is professional competence. Inspectors with higher levels of knowledge, skill and experience are simply more thorough than others. But regardless of ability, we find the same ethical contrasts that define agents: either a total commitment to the client's interests or a greater concern for immediate cash-flow. Hucksters recognize this difference, and some have learned to exert subtle pressures. Nothing overt; just a simple hint such as, "We just want to know that everything is structurally sound, so please don't be nit-picky." Another favorite is, "This deal is important; so we need a really good report." Inspectors who ignore these coded messages needn't expect future referrals from those agents. The choice then is clear: become a "street walker" for unscrupulous agents or rely strictly upon the referrals of advocates.
Finally, there is the question of ethics enforcement by associations such as ASHI and CAR. Professional integrity among home inspectors agents can be influenced and encouraged, but it cannot be forced. Honesty can only derive from a desire and willingness to be honest. The only other inducement to be good is the fear of litigation. We live in the age of frivolous lawsuits, a surreal business world in which McDonald's must serve tepid coffee, lest we victims burn our litigious laps.
In an imperfect world, "buyer beware" remains the essential caveat for those who purchase a home. The best way a buyer can beware is to find an "Advocate" for an agent and a home inspector with "Deal Killer" reputation for thorough, accurate, unbiased inspections.
• Email questions to Barry Stone through his website, housedetective.com, or write AMG, 1776 Jami Lee Court, Suite 218, San Luis Obispo, CA 94301.
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