Bruce,
I think you misunderstand the concept of basing the cost of your inspection on the sales price of the house. There is a contract in place when you take the job. It's that price, not the price after negotiations that may be based on findings in your report. There is no conflict of interest.

Kevin,
I have played with the concepts of inspection cost based on sales contract price, based solely on sq ft, and based on an hourly rate. I believe that all possibilities are the correct strategies depending upon market conditions and on types of Clients. I am assuming that you inspect to greater than the minimum criteria of your SOP.

If you base your pricing solely on square feet and you try to stay in line with your competition, you are destined to do jobs where you're only half way through and you begin beating youself up because you know you underpriced the job. Basing a job on square feet assumes that you will be taking a certain amount of time to do that job. That theory goes into the dumper as soon as you encounter the first problem. By the time you get to the 10th problem, you are working at a serious loss. Using this strategy, you'd better have one heck of a volume.

If you base your pricing solely on sales price, it's very sweet at the high end and during boom times. The down side is that it makes it less than appealing to do the smaller homes and over time you will lose that market as new guys and sq ft inspectors control that market. Granted, if you are successful in gaining the high end market, you would lose that market anyway; willingly. But then comes a downturn and the high end stuff comes to a screeching halt for a while. Those small houses you didn't used to want suddenly are more appealing. I think you get the idea. Basing your pricing on sales price alone can really cause your income to yo-yo. But during good times, you can live very well doing many fewer inspections.

Basing your pricing on an hourly rate is, I think, the hardest to accomplish until your reputation is well established. And to get that reputation you may find yourself alienating many Realtors. It's a perception issue. You will be perceived as a deal breaker or nit picker, or whatever they call you in your area. But over time that perception changes and you will hear feedback where you are known as the person the buyer wants to see, but the seller hates to see. More time passes and you become known as "that really thorough guy." Using this pricing strategy I have found most helpful in terms of feeling fairly compensated for the work I do. How could I not? I set the rate. The down side is that when I use the hourly rate, I lose a LOT of work to the sq ft guys at the lower and mid price range. However, I have found that I have picked up a lot of the higher end work, and that's where I want to be. I also have seen an increase in my seller presale inspections since the down turn.

You'll find what works best for you if you'll keep an open mind and not stay married to one system for pricing. Sometimes we work so hard on our inspection skills that we forget this job also involves sales and marketing. Every house is different because every house has a different history. I think you are cheating yourself if you base your pricing on square feet alone.

Don't fall into the trap of thinking you know "what the market will bear." Until you test it, you do not.

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The only reason some people get lost in thought is because it's unfamiliar territory.
- Paul Fix