Thread: Maybe an ethics question or maybe a practices question

A few days ago I arrived at a home inspection ahead of the clients. Within minutes I knew this house had monstrous issues. It was an old home, that appeared built on grade. There was significant structural movement, the vinyl siding was in terrible condition, visible wood rot and the gutters were missing. I hadn't looked at the electrical yet. The shingles were new and the only good thing that I could point at.

Over the years, I've learned that there are generally two kinds of buyers for homes like these. Buyers who are prepared to take them on and just want a list of everything they have to fix and buyers who have no idea what they are about to try to take on.

When the buyers arrived, I explained what I'd seen and asked them which category of buyer they were in. They were under the impression that they just had some cosmetic work to and were not prepared for this amount of work I told them that if they wanted me to continue, I would, but if they knew that this house wasn't for them, I'd stop. They could pay me fifty bucks and I'd see them later on their next house. They thanked me for not doing a full inspection and charging them for it when I knew in the first five minutes that they were unlikely to buy this house.

Which leads me to the semi ethical question. Would it have been ethical for me to have completed the inspection for a full fee, even when I knew there was no chance they'd continue the purchase? On one hand, they hired me to do an inspection and that's how I pay the bills. But on the other hand, I like to try to treat folks the way I like to be treated. What do you guys and gals do?

Originally Posted by Lon Henderson

A few days ago I arrived at a home inspection ahead of the clients. Within minutes I knew this house had monstrous issues. It was an old home, that appeared built on grade. There was significant structural movement, the vinyl siding was in terrible condition, visible wood rot and the gutters were missing. I hadn't looked at the electrical yet. The shingles were new and the only good thing that I could point at.

Over the years, I've learned that there are generally two kinds of buyers for homes like these. Buyers who are prepared to take them on and just want a list of everything they have to fix and buyers who have no idea what they are about to try to take on.

When the buyers arrived, I explained what I'd seen and asked them which category of buyer they were in. They were under the impression that they just had some cosmetic work to and were not prepared for this amount of work I told them that if they wanted me to continue, I would, but if they knew that this house wasn't for them, I'd stop. They could pay me fifty bucks and I'd see them later on their next house. They thanked me for not doing a full inspection and charging them for it when I knew in the first five minutes that they were unlikely to buy this house.

Which leads me to the semi ethical question. Would it have been ethical for me to have completed the inspection for a full fee, even when I knew there was no chance they'd continue the purchase? On one hand, they hired me to do an inspection and that's how I pay the bills. But on the other hand, I like to try to treat folks the way I like to be treated. What do you guys and gals do?

Ethical? yes, you were hired to do a job and reserved the time for them which keeps you from making money in that reserved slot. Now, yes I have done exactly the same thing from time to time. But even if you are sure they won't buy, they are still getting knowledge for the next purchase. How much did it cost you to obtain the knowledge you used to make the observation?
Don't sell yourself short. We sell our knowledge... not just time.

Originally Posted by Jim Luttrall

Ethical? yes, you were hired to do a job and reserved the time for them which keeps you from making money in that reserved slot. Now, yes I have done exactly the same thing from time to time. But even if you are sure they won't buy, they are still getting knowledge for the next purchase. How much did it cost you to obtain the knowledge you used to make the observation?
Don't sell yourself short. We sell our knowledge... not just time.

Over the years I've done this 2 or 3 times.
Last time a couple years ago was for a young couple that were buying their mother ,living on SS, an old Mfg. home. It was in baaad shape
I informed them of a couple of the major items and offered to not do the inspection and not charge them.
They decided to pass on the home and gave me $20.00 for gas money
Fast forward... since then I did another one for their mother, one for a friend and one yesterday for the couple.
My return .. apx $1200 , plus possible countless referrals in the future.

I don't think there is an ethics problem either way. Some need the full report to get out of the contract, others are happy to save the money for another house. I probably come into it about once a year, and I have no problem cutting it short and moving on if that's what they want. Most tell me to continue and do the entire house.

When I experience clients who are in over their heads I ask them is they wish me to continue with the inspection. They either say yes and pay full price or they ask me to stop, at which point I charge them half my inspection fee.

However if you feel comfortable not charging, then I see no problem with it nor do I think it unethical. It's a business decision.

I've done the same thing many times.

Pretty much same as everyone else. It probably happens once a year or so. Sometimes it's as much self serving as it is helping my client. They're in way over their head and had no idea what they were getting into and I get to save myself the miserable 6 hours of inspecting and report writing.

There is no ethical problem at all in completing the inspection. You were hired to do a full inspection and have set aside the time for them. If you're able to find enough problems quickly enough, and they want out, and you're willing, it's a bonus for them. Nothing at all wrong with just doing what you're hired for.

Keep in mind that you still need to provide a report to your client so they can execute their contract as required in the contract - without the report most have no way out of the contract.

One of the main advantages of an AS-IS contract is that (for the AS-IS contracts I've seen) the contract is subject to a "Satisfactory Inspection". Period. End of story. With AS-IS contracts the client does not need the report, all they need do is relay information to the seller that the inspections was, or was not, a "Satisfactory Inspection". In cases like that described in the original post the client simply states that the inspection was not satisfactory.

The agents and seller may get all flustered and demanding, but they do not have a right, or a need, to the inspection report (unless there is a state statute specifying otherwise, but I suspect that such a state statute would defer to the legal contractual terms of the individual contract.

I've done the same thing, as it seems most or all of us have, I've also had clients tell me to keep going, they want EVERYTHING documented so they can fight the seller ... so keep going.

Depends on what the client wants and needs.

As stated by others, the only ethical aspect is to do what the client wants and needs and maintain within the minimum requirements of any licensing in your state (most licensing statutes contain options which allow the client to request that not all otherwise required items be done).

Originally Posted by Jerry Peck

Keep in mind that you still need to provide a report to your client so they can execute their contract as required in the contract - without the report most have no way out of the contract.

One of the main advantages of an AS-IS contract is that (for the AS-IS contracts I've seen) the contract is subject to a "Satisfactory Inspection". Period. End of story. With AS-IS contracts the client does not need the report, all they need do is relay information to the seller that the inspections was, or was not, a "Satisfactory Inspection". In cases like that described in the original post the client simply states that the inspection was not satisfactory.

The agents and seller may get all flustered and demanding, but they do not have a right, or a need, to the inspection report (unless there is a state statute specifying otherwise, but I suspect that such a state statute would defer to the legal contractual terms of the individual contract.

I've done the same thing, as it seems most or all of us have, I've also had clients tell me to keep going, they want EVERYTHING documented so they can fight the seller ... so keep going.

Depends on what the client wants and needs.

As stated by others, the only ethical aspect is to do what the client wants and needs and maintain within the minimum requirements of any licensing in your state (most licensing statutes contain options which allow the client to request that not all otherwise required items be done).

Jerry,
That depend on the state. In PA there used to be two options in the HI contingency. One was you agree to buy the house as long as there was not more than X dollars needed in repairs. If more than X the seller had the option of agreeing to complete the repairs or provide a credit. Second option was walk for any reason. The new contract just has walk for any reason-no need to even give a reason. I seldom do this, but actually did this past week. The buyer did not need any report to get out of the contract.

JP's post just reminded me. I also have a pre-written letter I can provide for the buyer that basically says the inspection was stopped at the buyer's request due to numerous objectionable conditions discovered. I'll even state what some of them are briefly, if needed. "Numerous hazardous conditions throughout the electrical system", "Extensive damage from wood destroying insects" and so on.

I also write on a the contract that the inspection was stopped at the buyer's request, adjust the fee and have us both sign under that text.

I certainly don't see it as an ethical or even semi-ethical decision. You were up front with the clients and you came to a mutually acceptable agreement. You have probably earned their future business. It's a good business practice to have the clients acknowledge and agree to the early termination and sign something accordingly. I do see something of a legal issue, however. The clients may have needed something more than a verbal reason to terminate their purchase contract and a your written report would substantiate those reasons. Also, your report gives you a degree of protection in the event you find yourself on the wrong side of a suit filed by the homeowner.

Homeowners often get antsy when an inspector finds issues with their home and often blame the inspector if the deal falls through. The seller's realtor will also blame the inspector, sometimes resulting in loss of referral and business (though sometimes not necessarily a bad thing depending upon the realtor). A report, for all to see, perhaps not as complete as a typical report but highlighting the major defects would give your clients suitable ammunition, should they need it and you, a historical document of record.

Furthermore, the report, if in a State requiring disclosure, puts the seller on notice of certain deficiencies.

I have done this several times over my 20 years in this profession. Experience has shown me that the only folks that have an issue with this are the ones that might not get a paycheck. If I give a client the option of cutting the inspection short, I will always produce a short letter type report that I can peck out in a few minutes. I state that my client ended the inspection based on the major problem(s) that were discovered early on. I will normally list a couple items and that is it. No photos, simple and clean and less than two pages. I charge my normal hourly fee or trip charge of $175.

Colorado has an "as is" contract, but of course, most buyers will ask for remedy from the sellers for defects found during the inspection. In the inspection I described in my op, I wrote a quick and very short summary of major problems for the buyer even though, all they have to do to terminate the contract is report in writing that the inspection results were not satisfactory and they are terminating the contract. The Colorado contract does not require the buyer to describe specifics for termination although, if a seller should challenge termination in court and it was learned that the buyer used the inspection clause to terminate the contract in order to purchase a home they liked better up the street, the judge (at least in the few cases where this has actually been adjudicated) awards damages to the seller.

It looks like we are basically in agreement here. It's not unethical to continue the inspection you were hired to do, even if you know you've found a "deal killer" defect. But it may be good practices, to offer the buyer a chance to stop the inspection for a reduced fee.

Originally Posted by Matt Fellman

JP's post just reminded me. I also have a pre-written letter I can provide for the buyer that basically says the inspection was stopped at the buyer's request due to numerous objectionable conditions discovered. I'll even state what some of them are briefly, if needed. "Numerous hazardous conditions throughout the electrical system", "Extensive damage from wood destroying insects" and so on.

I also write on a the contract that the inspection was stopped at the buyer's request, adjust the fee and have us both sign under that text.

I like Matt's and Scott's pre-written letter. Good idea....though TREC says that any report would need to be on the 7-3, 4 or 5. :/

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Originally Posted by Matt Fellman

JP's post just reminded me. I also have a pre-written letter I can provide for the buyer that basically says the inspection was stopped at the buyer's request due to numerous objectionable conditions discovered. I'll even state what some of them are briefly, if needed. "Numerous hazardous conditions throughout the electrical system", "Extensive damage from wood destroying insects" and so on.

I also write on a the contract that the inspection was stopped at the buyer's request, adjust the fee and have us both sign under that text.

I like Matt's and Scott's pre-written letter. Good idea....though TREC says that any report would need to be on the 7-3, 4 or 5. :/

A realtor, who showed up just as I was starting my inspection, asked me to stop the inspection if I saw any major deal breakers and call the buyers before they show up. I told him I don't do that. I explained that I have seen houses that, in my opinion, should have been bulldozed, but the buyers went ahead with the purchase anyway. I have also seen homes with no major defects and the buyers run away. Who am I to second guess the buyers. I told him that I always go through the entire inspection process and charge full price.

I have never given anyone a break because of the condition of the house. My thinking is that these fees make up for the fees that I lose when a client cancels an inspection a hour before the allotted time.

Anyhow, I hate being asked by the buyer "Would you buy this house?" and "Do you think this house is worth buying?". Those are lawsuit baits.

I have also learned, sometimes, to collect up front when the buyer arrives at the inspection before I tell them one or all the utilities are not on. I warn everyone at least four different times about utilities.

I almost always have the inspection completed by the time the buyers arrive. I have no idea what their expectations or abilities are.

We are professionals, and although we have sad news, we should be paid as agreed. I've never had any professional, (Dr or Lawyer) reduce their fee because they had sad and or unexpected information for me.

And yes, they will need documentation if they are to cite the inspection as the reason they are declining the purchase of the home.

Originally Posted by Frank Adame

A realtor, who showed up just as I was starting my inspection, asked me to stop the inspection if I saw any major deal breakers and call the buyers before they show up. I told him I don't do that. I explained that I have seen houses that, in my opinion, should have been bulldozed, but the buyers went ahead with the purchase anyway. I have also seen homes with no major defects and the buyers run away. Who am I to second guess the buyers. I told him that I always go through the entire inspection process and charge full price.

I have never given anyone a break because of the condition of the house. My thinking is that these fees make up for the fees that I lose when a client cancels an inspection a hour before the allotted time.

Anyhow, I hate being asked by the buyer "Would you buy this house?" and "Do you think this house is worth buying?". Those are lawsuit baits.

I have also learned, sometimes, to collect up front when the buyer arrives at the inspection before I tell them one or all the utilities are not on. I warn everyone at least four different times about utilities.

Frank,

I may be missing the point in your post, but I don't recall any of the other posts saying that the inspector stopped the inspection and told their client (the buyer) to not buy the house.

What I got from the other posts, and what I've done too, is confer with the buyer when I find something which the client should know (now or later, and if the house is falling down, let them know now, they may still want the house) - it is then in the client's court to make a decision.

I've had clients tell me to continue and give them updates along the way - and after explaining that the roof needed to be replaced, the rafters needed to be replaced because they were all eaten up by power post beetles, and, by the way, remove the insulation, duct work, electrical, and plumbing in the ceiling to allow for that ... so you can see the blue sky above ...

The clients have still wanted me to continue - again, not the inspectors call, but nothing wrong with letting the client know what is found.

Every client has their own threshold of pain, some reach it quickly when they get a paper cut, others are content to lie on that bed of nails for a long time.

I have on rare occasions told a client not purchase the house.

1. The client had no idea how bad the condition(s) of the house were
2. They did not have the financial resources to rehabilitate the house
3. I have even had their agents agree with me because the agents were not savvy enough to realize the house was dozer bait or the extend of issues to an untrained eye.

The last time was a couple of years ago, where the house was full of fruiting mould and another the house was actually sliding down a ravine.

I would think the ethic portion of the question would be satisfied by making certain that the client is well informed enough to make a sound judgement of the suitability of the house for their purposes.

It would be rare for us to know what the client's resources are so we always strive to make certain the client is educated about issues we encounter.

Being in lake country we are frequently inspecting properties for clients who are mainly interested in the structure's foot print but don't want to be forced into a immediate rebuild. This means a complete inspection and report of even the worst POS.

Originally Posted by Jerry Peck

Every client has their own threshold of pain, some reach it quickly when they get a paper cut, others are content to lie on that bed of nails for a long time.

When asked if I would buy this house, I always tell clients that I don't try to assign my values to buyers. "I've done around 15 fix-n-flips and have a high pain threshold for defects but since I don't know what your pain threshold is. All I do is point at problems and let you decide, although I'll emphasis defects that I believe are significant safety or very expensive issues or both."

Originally Posted by Bill Penn

I almost always have the inspection completed by the time the buyers arrive. I have no idea what their expectations or abilities are.

That's interesting to me. Generally, I like to have the clients with me for the inspection. They provide a second or third set of eyes and our conversation, as I inspect, creates a relationship and a confidence with them that I am doing a thorough inspection. Plus, I hate spending an hour, when I've completed an inspection, re-walking the house as I review the report with the client. On the other hand, some clients can be a distraction or bog me down with trivial questions. There's no right or wrong, just interesting how we conduct our business.

Originally Posted by Raymond Wand

I have on rare occasions told a client not purchase the house.
The last time was a couple of years ago, where the house was full of fruiting mould and another the house was actually sliding down a ravine.

On rare occasions, I've told a client that something is scary. I was in the crawlspace of a hundred year old house that didn't seem to have more than a handful of bricks holding it up. I think that I too, would discourage a client from buying a house that was sliding down a hill.

Originally Posted by Dan Harris

Over the years I've done this 2 or 3 times.
Last time a couple years ago was for a young couple that were buying their mother ,living on SS, an old Mfg. home. It was in baaad shape
I informed them of a couple of the major items and offered to not do the inspection and not charge them.
They decided to pass on the home and gave me $20.00 for gas money
Fast forward... since then I did another one for their mother, one for a friend and one yesterday for the couple.
My return .. apx $1200 , plus possible countless referrals in the future.

Wow, houses must be some kind of crappy here..I do this all the time.

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Originally Posted by Dan Harris

Over the years I've done this 2 or 3 times.
Last time a couple years ago was for a young couple that were buying their mother ,living on SS, an old Mfg. home. It was in baaad shape
I informed them of a couple of the major items and offered to not do the inspection and not charge them.
They decided to pass on the home and gave me $20.00 for gas money
Fast forward... since then I did another one for their mother, one for a friend and one yesterday for the couple.
My return .. apx $1200 , plus possible countless referrals in the future.

Wow, houses must be some kind of crappy here..I do this all the time.