Tales From a Home Inspector:
The Good, the Bad and the Weird
Inside Stories From Today's Real Estate Market

Kate Morgenstern, AOL Real Estate

When buying a home, few items on the checklist are as important as the home inspection. Experienced home inspector Bill, who asked that we not use his real name, warns that a buyer is at risk for winding up in a huge mess when he waives his right to an inspection. Bill doesn't automatically assume the seller is aware of the flaws when he finds problems with a home because, "you live in a home for so many years and you get used to things wrong with your house." However, some sellers aren't simply being absent-minded. They're downright deceptive. He says, "It's too easy for a seller to not say anything about the house. They'll pretend, 'We didn't know anything about that leak.'"

Over the years, Bill has seen some weird conditions. He says, "I don't write up anything cosmetic. One time I saw a place with bright blue carpeting and purple walls. I had to ignore it." On two occasions, he saw peanut butter slathered on leaky pipes. "Once it was chunky peanut butter, and the jar was still there. I don't know where people got the idea that peanut butter will stop a leak." On another home inspection, Bill opened a closet and was shocked to see a huge boa constrictor inside. After his scare, Bill found out the snake was the home owner's pet. And he's seen worse.
(Cue scary music.)

Bill says during the worst home inspection he's done, he discovered a dead dog that had been missing from the family. "He had been trapped behind the water heater in the utility room. The living conditions and the stench were horrendous." Bill describes another inspection of a home that was in the most deplorable condition he had ever seen. He says, "The house was literally in a collapsing situation. But a young, single lady with a small child wanted to move in because she loved the back yard."

The woman's parents accompanied her to the home inspection, and her father was alarmed by the dangerous condition of the house. Bill says her father took him out to the driveway and said, "Do anything you can do to talk her out of this."

Bill says, "I told her, 'You're not going to be out here in the yard most of the time, and the house is dangerous to live in." It had major structural damage. The walls were cracked in half horizontally and the top half of the house had shifted off its frame three inches in every room. This meant the top half was sitting off-kilter from the bottom half of the house. I had never seen anything like it."

Potential for Bad Apples

Bill says that home inspection only emerged as a thriving business in the mid-'80s, so it's a relatively new field. "In many states, there's no licensure required yet, so there's greater potential for bad apples. Anyone with a business card and a telephone could go into business as a home inspector."

Bill recommends finding a home inspector who is a member of the American Society of Home Inspectors. He says, "ASHI.org is the best place to get a home inspector who is trained and educated." He says passing a proctored national exam is required to become a member of ASHI, plus yearly continuing education classes are compulsory for members to remain certified.

Bill cautions home buyers if they don't do their research, they could wind up with a home inspector who is, "a Joe blow on the weekend who does this part time. You don't know what you're going to get." Bill had noticed his neighbor across the street was getting his home inspected. The neighbor told Bill that he had to loan the inspector a flashlight, and he neglected to bring a ladder with him.


Bill says that's the sign of a lazy home inspector. "When he went to look at the attic, he just peeked up in there and came right back down. Unfortunately, you've already hired the guy, he's at your house -- how're you going to fire him? It's awkward."

I Would Never Work With That Real Estate Agent

"I was doing a home inspection for a couple who couldn't speak English," Bill says. "Their son could speak good English, and he was there to let his mom and dad know what they were buying. The furnace was rusted, and when it started up, the carbon monoxide detectors went off. I told the son, 'Tell mom and dad they need a new furnace.'"

He says the real estate agent got upset and left. "She went to her car and called me on her cell phone and said, 'You are not to have any more conversations about the furnace with these people.' I would never inspect a home for that real estate agent again."

Bill believes the high liability nature of the business keeps most home inspectors honest. "You have to have insurance. If something goes bad in the house, I have no recourse." Still, it's possible some home inspectors may give lax inspections in order to receive referrals from real estate agents.

How Far Will They Go, and Where Do They Draw the Line?

Bill says inspections are visual and do not entail destructive examining. "Home inspectors are generalists and not experts. We're like the general practitioner who sees the patient, takes blood and refers them to a specialist if there's a problem. When I see a water leak in the roof, I refer it to a licensed roofing contractor. If there's a crack in the foundation that needs attention, we refer that to a structural engineer. They carry the 'expert' behind their name and they can put in writing that a correction has to be made."

When asked what home inspectors hate checking, Bill says, "It's different for every home inspector. Some will charge extra to go into horrible crawl spaces. Most won't go into really nasty places. Some crawl spaces are so small you can't get into them, or they're not safe -- there are snakes, bees, all kinds of creatures. I'm only checking for structural issues.”

Be There or Be Sorry

Bill says the buyer should always be present during the home inspection. "It's your opportunity to learn how to operate the house and where everything is." Bill says once he was busy inspecting a home when the buyer flew down the stairs in a panic. Bill couldn't imagine what the man had seen to cause such fright. The man said to Bill, "I bought the wrong goddamn house!"

Bill explains, "He had seen so many houses with the agent and he got confused about which one it was that he'd wanted. He thought he had bought one with a huge master bedroom and he'd gone upstairs and then realized that this wasn't the house he intended to buy."

Small Bucks, Big Assurance

While there is no set price for home inspection, Bill says the general guideline is 1 percent of the sale price of the house. "Others go buy square footage of the home. It depends on the area and the age of the home."

Bill says, "Every buyer should have a home inspection. It's such a small amount of money for such peace of mind going into such a big expenditure. You're only going spend around $500 for an inspection on a $500,000 house. After everything I've seen, it amazes me that someone wouldn't."

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Eric Van De Ven Magnum Inspections Inc. (954) 340-6615
www.magnuminspections.com
I still get paid to be suspicious when I got nothing to be suspicious about!

I would like it to be 1% instead of .1%.

We have to go by square footage. A 1500 sq ft house can go as little as $50,000 to as high as $180,000 in just a 15 minute drive.

Why do you "have to go by square footage"?

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Jerry Peck, Construction / Litigation Consultant
Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )
www.AskCodeMan.com

I try to base my pricing on hourly wage. There are too many variables to use strictly SF or price. An old, small POS can take longer than a new McMansion.

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Jim Robinson
New Mexico, USA

"Structural engineer... they carry the 'expert' behind their name and they can put in writing that a correction has to be made."

That's nonsense. Why can't Bill the inspector put it in writing that something needs to be repaired or replaced??

We don't have to go by square footage but we feel (and I would think most other home inspectors in this area feel the same since they go by square footage) that it makes it easier to determine what the price we charge. Houses in this area are not complicated for the most part. If we charge a percentage of the sale of the house, then we would be making the minimal amount of money for a larger than normal house in locations such as Gary, Indiana where a 2,000 sq ft house can go for less than $80,000.

I feel it doesn't mater how you come up with the price; the final determination is what services you provide, how you provide those services, what you charge for those services and is there a market for those services at that price.

Kevin,
Most Inspctors here price by square feet, as well. I don't. I think that whole idea is really appreciated by Realtors, but I don't serve them. I engage the prospects with questions to give me a better idea of the property they have chosen. Sometimes I give a price. Sometimes I give an hourly rate. More times than I can recount, I've had prospects say, "but my Realtor said it should cost .....".

My response is always the same. "Maam or Sir, if I were inspecting to benefit your Realtor, that is what it would cost. I inspect to tell you as much as I can about your property as I can. I work solely for your benefit and do not derive my income from Realtor referrals. I appreciate them, but I do not solicit them."

I do lose jobs to discount Inspectors, no doubt. But in the words of Badair, "You don't get the jobs you're not supposed to have."

Each year I have done fewer jobs, while increasing my income and reducing my liability exposure. I feel good about the direction my business has taken.

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

"We don't have to go by square footage but we feel (and I would think most other home inspectors in this area feel the same since they go by square footage) that it makes it easier to determine what the price we charge."

The *easiest way* is to price based on sales price.

"If we charge a percentage of the sale of the house, then we would be making the minimal amount of money for a larger than normal house ... "

No, you price based on sales price should reflect what your true costs are, you need to cover those costs and make a profit.

And, when doing a house in an area where the prices are higher, your liability is higher (think about it), so your higher fee for the same price house is justified.

I started out basing my inspection fees on price, switched to square foot, then switched to hourly.

In the long run, I decided it would have been better to have stayed with 'based on sales price', however, I was entrenched in my hourly rated, and already being well paid, that I never made the switch back. I would, however, go with inspection cost based on price if I had gotten back into the business.

With inspection cost based on sales price, with the exception of a few areas and down market times when price drop, you have built-in raises. Those built-in raises over the years more than make up for a year or so of down market.

If you price based on square foot or hourly, any raise much actually be a raise in your prices.

I.e., I went from $0.10 per square foot to $0.15 per square foot, and my business dropped. If I had been using $100 per $100k, I would not have had to raise my prices at all, and my inspection cost would have quadrupled, because the housed I did went from $150k average to $750k at that time. Later, my average house went to well over $1.5 mil.

When starting out, one must judge their structure by the market, but not get so entrenched that, once established, they cannot change to a sales price based fee. Ultimately, that is the best way.

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Jerry Peck, Construction / Litigation Consultant
Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )
www.AskCodeMan.com

Quite often my clients (buyers) are able to get the sellers to reduce the price of the house based on my inspection and report. If I based my fee on the selling price of the house there may be a perceived conflict of interest on my part. The less I find and report the more I make.

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"Baseball is like church. Many attend but few understand." Leo Durocher
Bruce Breedlove
www.avaloninspection.com

Jerry,

I base my prices on square footage. I feel that in this area, if there is a 900 sq ft house, it take a certain number of hours to inspect and write up the report. Now I figure that I need to charge $50.00 per hour because that is what it takes to operate my business and support my family properly. Now, when I add the amount of time with the amount per hour, that is how I come up with the amount I will charge per square foot. Now, if I feel that there is a market for my services at a higher price, then I will increase the hourly charge and recalculate the amount I will charge per square footage. It's simple and (I feel) fair to my clients.


Just out of curiosity, if you go to the City of Gary that has a 900 sq ft house for $30,000. The same day you go to a town down the road and the same house going for $160,000. how much would you charge both clients?

For me, I'll charge the same since it is likely that the inspection will take the same amount of time. Around here, the quality of construction isn't the factor, it is location, location, location (as it is probably the same in many other places in the U.S).

Jerry, go get your wife so I can tell her to give you a kiss for me. You make this board interesting. Now I have to go because I still have one more report to write up.

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

I saw reference in the threads to a structural engineer. Here is a reference from the Texas Professional Engineers web site concerning enforcement of an "expert" as Neil indicates in his thread. Even the experts make mistakes.

I also recall reading about someone acting as a PE on a roofing inspection job for windstorm insurance. The individual didnt even go into the attic.

It was alleged that .... performed an engineering inspection of a residential structure for a client prior to the purchase of a residence in which he opined, without taking elevation measurements, that a slant in the floor was due to an uneven pour of the foundation during construction. After the purchase of the residence, a different professional engineer hired by the client to again inspect the structure determined that considerable differential movement of the foundation had occurred requiring the installation of numerous piers to stabilize the structure. After the repairs, a third professional engineer hired by the client inspected the residence and determined that .... inspection was not sufficient to form an opinion as to degree of differential movement of the foundation. Therefore, .... structural inspection gave a misleading impression regarding the condition of the foundation and his actions indicate he did not act as a faithful agent of his client. The Board accepted a Consent Order signed by .... and his attorney for a Formal Reprimand and the assessment of a $2,640.00 administrative penalty.