Dear Barry,

As an expert witness in construction defect lawsuits, I see many cases involving home inspectors who fail to disclose defects or who minimize the findings in their reports. In most cases, these inspectors are members of the California Real Estate Inspection Association (CREIA) or a similar association. One inspector confided that too many problems in his report might “kill” a sale and the agent would no longer recommend him to buyers. Another inspector said he was expected to “work with the agents”–not to raise red flags or be too “nit-picky.” This is disturbing, since home inspector referrals come mainly from agents. It also indicates that inspector organizations are not policing the industry very well. Perhaps CREIA or their insurance carriers could maintain a database of court rulings against inspectors and agents. The industry needs to do its job before the government steps in. – Ray

Dear Ray,

Your position as an expert witness exposes you to the worst examples of the home inspection and real estate industries. Without doubt, there are ethical disparities and conflicts of interest among some agents and home inspectors, and it is these unprincipled relationships that engender so many of the courtroom dramas in which you testify. But fortunately, there is a brighter side to the world of real estate; one whose characters 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 professionals who recommend home inspectors to their clients.

Basically, there are two kinds of real estate agents: Advocates and “used car salesmen.” Advocates are the honorable standard bearers of an often unfairly maligned profession. Advocates are those who truly represent the very best interests of their clients; who actively promote the defect disclosure process; and who recommend only the most qualified home inspectors. Advocates would rather kill a sale and find a better property for their client than to have the client be unhappy after the sale. Advocates know that doing the right thing attracts future business.

Unfortunately, there are also the “used car salesmen”–the hucksters, as it were–who jeopardize the interests of home buyers; 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 those 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 also two basic varieties: experienced practitioners and developing practitioners. But even within these divisions, we find the same ethical contrasts that define agents: either a total commitment to the client’s interests or a general disregard for same. Adversely affecting this critical choice is the general reliance of most home inspectors upon agent referrals for the majority of their business. Agents understand this, and some have learned to exert subtle pressure. 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 don’t accede to these coded messages or who are fully committed to the buyers’ interests needn’t expect future referrals from those agents. The choice then is well defined: either become a “street walker” for unscrupulous agents, or rely strictly upon the referrals of advocates.

As to the consumer advocacy of CREIA and similar organizations, professional integrity among member inspectors can be influenced and encouraged, but it cannot be forced. Honesty can only derive from a willingness to be honest. A database of inspectors and agents who have been successfully sued could be published, but would this truly be a reliable determinant? We live in the age of frivolous lawsuits, a surreal business world in which McDonalds must serve tepid coffee, lest we victims burn our litigious laps. If the seller of a home fails to disclose a defect that was unknown to the agent and concealed from the home inspector, the attorneys still name the agent and the inspector as defendants in the suit. And sometimes the juries rule against them.

In an imperfect world, “buyer beware” remains the essential caveat for those who purchase a home. And the best way a buyer can beware is to find an “Advocate” for an agent and a home inspector with a reputation for thorough, accurate and unbiased inspections.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

***

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