Thread: flipping on the side

Yesterday I was away from the computer. I took the day off to put down a furry family member of 17 years. Today I was out of the office most of the day so I'm sorry I have not responded sooner.

I come back to work this afternoon to an in box full if e-mail from many members on the board encouraging me to act on my own rules/policy because they are sick of the petty personal bickering that continues to go on between a few members of InspectionNews. There is a common thread through most of the e-mails that I received and that is that they come to InspectionNews to learn and/or help others and have a good time and that they would like to so without the train wreck of off topic post and personal attacks that are going on.

I couldn't agree more. In fact, I thought I made that point clear two days ago when I reminded everyone of the rules they agreed to when they registered on the message board and the policy for enforcing those rules.

I went back and read several of the posts that were mentioned. Posts put up after I had once again asked everyone to simply follow the rules. I think it just comes down to the fact that InspectionNews is not the place for everyone.

For those that do not have the social skills to come into my home and discuss topics without defamatory, abusive, vulgar, hateful, harassing, obscene, profane, sexually oriented or threatening remarks towards one another, there are other places you can go. I've read posts that knock InspectionNews and the people who post here. I have opened up my home and allowed you to come in for free. If you don't like it here, leave. It's as simple as that.

InspectionNews was developed for mature business professionals. Entrepreneurs who are interested in discussing all aspects of the inspection business, to help educate one another and collectively improve the quality of the inspection industry and to help individual businesses succeed. If you do not have the social skills to voice your opinion without tearing into someone else then InspectionNews is not the place for you.

InspectionNews is for the new inspector, established inspectors and those just thinking about getting into the business. Everyone should feel comfortable asking any inspection related question without the fear of being ridiculed. This is a place where people come for answers and help. Even if you think that the question is remedial either answer the question and try to help the person or don't answer at all.

I have spent more time then I care to on this subject. I have done all that I can to reiterate the rules & policies and let adults police themselves. For those of you that don't agree with InspectionNews, I thank you for stopping by and wish you the best in where ever you go. The professional business men and women will remain and help one another to succeed.

Well said. Wes asked a legitimate question. A few people answered, and a few people jumped on their soap box.

First of all, partners are nothing but dead weight. If it is at all possible to do it on your own you'll be alot better off, not to mention keeping all the profit. That way all of your time and effort is an investment in YOU.

Mike Farha,
A Plus Inspections, LLC
Edmond, OK.

Wes,
If you were going to do this, I would charge a set fee as a "retainer" for any work performed in the first 3 days.

After that, I would be compensated 50% of the net profit minus the retainer fee. I wouldn't pay for any materials, the "investor" should do that. I would also get everything in writing including notification of when the closing is, where it is, etc.

You and the investor will split the profits, however, he will be on the hook for the materials, which should motivate him to make the deal happen. You are just out your time, which may have been spent watching Judge Judy and Dr. Phil.

One other thing, "Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest". That is a very ambiguous statement and could be read several different ways.

Wes,
I would agree with the last post re: partners. For Flips, go it alone. You want to be in control of the quality of work and in control of the overhead.

Where you are the inspector, I suggest that you stay out of all other roles. Make your profit on the Inspection. Give the Investor a break based on quantity of work, if you wish, but don't make your profit in any way based on the profitability of his business accumen.

Where you are the Investor/ Flipper, locate the person with the reputation as the Inspector from Hell to inspect it when you think you're ready to market it. Make that report available to all prospective buyers.

Thom, thanks for recommending my services. That was one of the more complimentary names I have had from realtors over the years.

locate the person with the reputation as the Inspector from Hell to inspect it when you think you're ready to market it.

Thanks guys.

"Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest".

I think that statement means that if you, the HI, had a financial interest in the home (ie: part owner) AND you were then hired by the potential buyer to perform an independant home inspection.... there-in lies the conflict... There is no harm in inspecting a home you are planning to buy, repair and flip. As long as anytime during the process you remain the vendor and NOT a HI representing the buyers.

Originally Posted by Joe Klampfer

"Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest".

I think that statement means that if you, the HI, had a financial interest in the home (ie: part owner) AND you were then hired by the potential buyer to perform an independent home inspection.... there-in lies the conflict... There is no harm in inspecting a home you are planning to buy, repair and flip. As long as anytime during the process you remain the vendor and NOT a HI representing the buyers.

I have always had a problem with that part of the SOP. Here is why. If you inspect every home the same way, to find everything wrong that you can, then it shouldn't matter who is paying you. There isn't a conflict of interest if your interest is to find everything wrong that you can. Do the job first, then get paid.

If the associations think that adding one sentence to the SOP is going to stop those who "look harder for themselves or relatives or friends" than the clients, they are acting very naively.

I had a Seller tell me that I was being picky because it was for a friend. I responded "so what you are saying is that I short-changed the other 4,000 clients?"

I think it is a matter how "ethical" you really are.

Hmmm.... let me put it another way... you may be the most ethical person in town but if you owned a house that was for sale (or had a financial interest in it) and you REALLY wanted it to complete at sale, IF the prospective home buyer called you from the phone book to perform the home inspection and did not know of your financial interest in the property... you might hesitate in your choice of wording used (or lessen the impact) in your report for fear of losing the sale. There's where the question of ethics comes into play and why most SOP's disallow it.

You need to distance yourself from the financial gain side of the transaction if you represent the buyer and hope to provide an unbiased / honest report, because without a doubt, if your financial interest in the property is revealed at a later date, your ethics or motives will forever be suspect regardless of how honest you are.

Why would you even want to be in that situation... it just isn't worth the aggravation.

Originally Posted by Joe Klampfer

Hmmm.... let me put it another way... you may be the most ethical person in town but if you owned a house that was for sale (or had a financial interest in it) and you REALLY wanted it to complete at sale, IF the prospective home buyer called you from the phone book to perform the home inspection and did not know of your financial interest in the property... you might hesitate in your choice of wording used (or lessen the impact) in your report for fear of losing the sale. There's where the question of ethics comes into play and why most SOP's disallow it.

You need to distance yourself from the financial gain side of the transaction if you represent the buyer and hope to provide an unbiased / honest report, because without a doubt, if your financial interest in the property is revealed at a later date, your ethics or motives will forever be suspect regardless of how honest you are.

Why would you even want to be in that situation... it just isn't worth the aggravation.

If I were selling my home, it would be able to pass any inspection, so that isn't a concern. If the Buyer called me to perform the inspection, I would inform him that I own the home, and he would be advised to pick another inspector. By informing the Buyer, you remove this part of your statement: you might hesitate in your choice of wording used (or lessen the impact) in your report for fear of losing the sale. There's where the question of ethics comes into play and why most SOP's disallow it.
It also removes this part of the equation: if your financial interest in the property is revealed at a later date, your ethics or motives will forever be suspect regardless of how honest you are.

As for being in the "situation", as I said above , if you inspect every home the same way, perform the inspection in an unemotional way, you should be fine. At least, from an ethical standpoint!

The error I see in the above discussion is that it is about 'conflict of interest and how one can avoid it'.

However, the real question with ethics is ...

"the appearance of a conflict of interest and how one can avoid it"

One may be the most ethical person around and may indeed *do nothing they would not otherwise do, and would do everything they would otherwise do*, but, ... it is "the appearance of" that cannot be totally shaken off.

It's not really a question of that "conflict of interest", but "the appearance of" that conflict of interest ... that is what is to be avoided whenever possible.

Originally Posted by Jerry Peck

The error I see in the above discussion is that it is about 'conflict of interest and how one can avoid it'.

However, the real question with ethics is ...

"the appearance of a conflict of interest and how one can avoid it"

One may be the most ethical person around and may indeed *do nothing they would not otherwise do, and would do everything they would otherwise do*, but, ... it is "the appearance of" that cannot be totally shaken off.

It's not really a question of that "conflict of interest", but "the appearance of" that conflict of interest ... that is what is to be avoided whenever possible.

That is the bigger problem, the "appearance" of anything!

Just because it looks a certain way, doesn't make it so, and, I believe that there are things you can do to remove the "appearance" of a conflict.
Besides, I don't deal in "appearances". I deal in facts.

As an aside, I was at a friends 40th birthday party. Someone came up to me and said "Do you remember me?" I said, to be honest, I don't. The person informed me that I inspected his home 5 years ago. We had a discussion and he went off somewhere. At that time, I looked around and discovered that of the 50-60 guests at this party, I had inspected almost all of their homes, including the one where the party was held.
Conflict of interest? Not with me!

I must have done a good job because no one tried to kill me!

EC Jerry is right:

"Relativity applies to physics, not to ethics." - Albert Einstein

Aaron

I don't think there is any way in the world that a person could inspect their own home and not give the appearance of a "conflict of interest".

In the same light, if I was a seller, and someone came to inspect my house, and he was a partner with the buyer, or had a "dog in the fight" with regards to the future of the house (defined as flipping), I would certainly question his findings and ethics. My first impression would be, "this guy is here to make mountains out of mole hills".

A good filter to use when trying to figure out ethics is....If it looks like a duck, and walks like a duck, and quacks like a duck, and smells like a duck....it is probably a duck. A shorter version is...If you are questioning yourself if something is ethical, it will probably be viewed by someone else as NOT.
Eric said.."One other thing, "Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest". That is a very ambiguous statement and could be read several different ways."
I guess I have to disagree. I see nothing ambiguous about the part that says have or expect to have a financial interest. Are you planning on making money on something other than the inspection? If yes, then in my view, there is a conflict of interest. Pretty clear in my opinion.
JF

After reading the original post........again, what I'm thinking the scenario he's trying to relate would be:

He is going into partnership where he would provide labor and the partner would provide the funding. In that case, he would theoreticaly be performing the service for himself and his partner. In that case, he would be simply drawing a wage for time spent ( billable hours ) applied toward the total expense of the joint project which would then be deducted off the profit.

If I'm reading this correctly.

“An ethical person ought to do more than he's required to do and less than he's allowed to do” - Albert Schweitzer

Aaron

Originally Posted by Jack Feldmann

I don't think there is any way in the world that a person could inspect their own home and not give the appearance of a "conflict of interest".

In the same light, if I was a seller, and someone came to inspect my house, and he was a partner with the buyer, or had a "dog in the fight" with regards to the future of the house (defined as flipping), I would certainly question his findings and ethics. My first impression would be, "this guy is here to make mountains out of mole hills".

A good filter to use when trying to figure out ethics is....If it looks like a duck, and walks like a duck, and quacks like a duck, and smells like a duck....it is probably a duck. A shorter version is...If you are questioning yourself if something is ethical, it will probably be viewed by someone else as NOT.
Eric said.."One other thing, "Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest". That is a very ambiguous statement and could be read several different ways."
I guess I have to disagree. I see nothing ambiguous about the part that says have or expect to have a financial interest. Are you planning on making money on something other than the inspection? If yes, then in my view, there is a conflict of interest. Pretty clear in my opinion.
JF

I knew it was only a matter of time before the infamous "Duck" showed up!
I agree with you on that part. That is why communication is key.

The other issue (this guy is here to make mountains out of mole hills), if your report has pictures, there really isn't much to dispute and people will think what they want. The fact is "it is what it is" and no amount of whining or complaining or thinking about appearances will change that.

Originally Posted by Jack Feldmann

I don't think there is any way in the world that a person could inspect their own home and not give the appearance of a "conflict of interest".

In the same light, if I was a seller, and someone came to inspect my house, and he was a partner with the buyer, or had a "dog in the fight" with regards to the future of the house (defined as flipping), I would certainly question his findings and ethics. My first impression would be, "this guy is here to make mountains out of mole hills".

A good filter to use when trying to figure out ethics is....If it looks like a duck, and walks like a duck, and quacks like a duck, and smells like a duck....it is probably a duck. A shorter version is...If you are questioning yourself if something is ethical, it will probably be viewed by someone else as NOT.
Eric said.."One other thing, "Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest". That is a very ambiguous statement and could be read several different ways."
I guess I have to disagree. I see nothing ambiguous about the part that says have or expect to have a financial interest. Are you planning on making money on something other than the inspection? If yes, then in my view, there is a conflict of interest. Pretty clear in my opinion.
JF

In this case he's an Investor or buyer not a Home Inspector, but as a Investor/Buyer he has the right to Inspect the property for himself, but not for a fee paid by any third party or potential partner in the "investment/purchase", there is no conflict of interest when a buyer chooses to inspect the property himself even if, by profession, the buyer is a Home Inspector, no more than an attorney who chooses to represent himself in court, or a mechanic inspecting a used car he is buying for himself.

"Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws." - Plato

Eric,

No one is, I know I'm not, questioning your ethics, however, if you were to step back and thing of that very same scenario being done by someone else (other than yourself), there always could be a question of "appearance of" a conflict, whether or not there really was a conflict or not.

Regarding the original posters question: Either inspect it for a fee and that's that, or, inspect it for no fee but as part of your 'experience package' the investor is buying with you as a partner.

No profit on the investment and, just like the investor, you make nothing ... if there is a profit on the investment, you share in that profit just like the investor.

That way, it is not really a "home inspection for a fee", it is a "field assessment of the prospects of profitability" for the project.

Do you get paid for that "field assessment regardless of whether or not the project succeeds in making a profit? Heck no. That's part of 'your risk' you undertook in the project.

Lewis,
In the original post it was pretty clear he intended to be paid for the inspection, AND then do the work on the house.

In a licensed state. or at least TN, a home inspection can only be done by a licensed home inspector. Sure, anyone can do a visual inspection if they are buying a house, but a "real" inspection, or one that actually would count in the real estate transaction, has to be done by a licensed inspector.

The code of ethics then says that you can not inspect a house you are going to have a financial interest in. You can look around all you want, but you can not perform an inspection.

Jerry's example is really semantics. I did an inspection for a friend of a friend in North Carolina. I'm not licensed in NC to do inspections. So he hired me to be his building consultant. Both of the agents understood and agreed to me coming to the house and do the "consulting", but there was an understanding that my report would not be accepted as a "home inspection report".

I have to say the North Carolina agents were very nice and even took my wife to lunch with them (I took her with me since it was a 3+ hour drive).

Ducks aside, it doesn't pass the smell test for me.

Originally Posted by Jack Feldmann

Jerry's example is really semantics.

Jack,

It's really a lot more than just semantics.

It's in how you address it and treat it.

As a Home Inspector, if I were doing it and getting paid for doing it, then it: looks like a duck, walks like a duck, quacks like a duck and smells like a duck - it's a duck, i.e., it's a "home inspection".

As a General Contractor, if I were doing it, I would be assessing the potential work involved and assessing it's potential for turning a profit after doing that work. I would only make money if the construction project made money. It no longer looks like, walks like, quacks like, or smells like, a duck - it isn't - it's a project assessment, with the answer being 'yea' or 'nay' to the project based on what I saw.

The original poster wanted to combine both of the above. Therein lies the "appearance of", if not an actual, "conflict of interest".

Originally Posted by Jack Feldmann

Lewis,
In the original post it was pretty clear he intended to be paid for the inspection, AND then do the work on the house.

In a licensed state. or at least TN, a home inspection can only be done by a licensed home inspector. Sure, anyone can do a visual inspection if they are buying a house, but a "real" inspection, or one that actually would count in the real estate transaction, has to be done by a licensed inspector.

The code of ethics then says that you can not inspect a house you are going to have a financial interest in. You can look around all you want, but you can not perform an inspection.

Jerry's example is really semantics. I did an inspection for a friend of a friend in North Carolina. I'm not licensed in NC to do inspections. So he hired me to be his building consultant. Both of the agents understood and agreed to me coming to the house and do the "consulting", but there was an understanding that my report would not be accepted as a "home inspection report".

I have to say the North Carolina agents were very nice and even took my wife to lunch with them (I took her with me since it was a 3+ hour drive).

Ducks aside, it doesn't pass the smell test for me.

Jack, I've already agreed with some of your points in my first reply in this thread. If I'm "Inspecting" a house FOR an Investor and will have no other interest in the property other than the Inspection itself, then I am a Home Inspector and will charge a fee for my services.

If I am inspecting the property as a buyer/investor or a partner of of a buy/ivestor, then I'm not a Home Inspector, I'm a buyer/investor, why is that such a difficult concept for some to understand?

Originally Posted by Lewis Capaul

If I am inspecting the property as a buyer/investor or a partner of of a buy/ivestor, then I'm not a Home Inspector, I'm a buyer/investor, why is that such a difficult concept for some to understand?

Lewis,

Not Jack here, but I think the problem is that the original poster was thinking of doing the Home Inspection as a Home Inspection AND getting paid for it ... THEN becoming a partner with the investor ...

Therein lies the problem (in my opinion).

Originally Posted by Jerry Peck

Lewis,

Not Jack here, but I think the problem is that the original poster was thinking of doing the Home Inspection as a Home Inspection AND getting paid for it ... THEN becoming a partner with the investor ...

Therein lies the problem (in my opinion).

I totally agree Jerry!