Editor’s Note: The following is reprinted from Working RE Inspector, a nationwide print magazine delivered to 20,000 home inspectors nationwide. OREP insureds get guaranteed delivery. If you are not a subscriber, you can read it here.
History of Home Inspection
By Isaac Peck, Editor
The motivations of the pioneers of the profession nearly 50 years ago to begin inspecting homes are probably not much different than your own: a desire to help—to offer your expertise to those who lack it, combined with the drive to recognize an opportunity and pursue it.
How the profession was born and evolved into what it is today will be of interest to all home inspectors, new and established alike.
Ask many of the old timers and they will tell you that it began in the early 1970s. In 1976, the American Society of Home Inspectors (ASHI) was formed. The California Real Estate Inspection Association (CREIA) was also formed in 1976. The formation of these first home inspection associations led to the first inspection Code of Ethics and “Standards of Practice.”
It wasn’t until 1985 that Texas became the first state to regulate home inspectors and pass a home inspection licensing law. Other states followed and now more than 30 states have home inspector licensing laws, with many of the remaining states exploring options on how to regulate the profession.
Retracing the timeline of this relatively young profession raises an important question: what was the impetus that kick-started the industry and how has the role of the professional home inspector changed over time?
In the Beginning
Marvin Goldstein, President of Building Inspection Services, Inc. and a founding member of ASHI, reports that his father first began performing home inspections for prospective homebuyers back in 1938, after graduating with a degree in engineering. “My dad worked full-time as a professional engineer but people would ask him to do a home inspection before they bought a home, so he formed Building Inspection Services and ran the business as a part-time venture. But at the time, the industry was still very young, and very few homes were being inspected before the 1960s,” says Goldstein.
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It was during the late 1960s that the home inspection industry finally began to take form. Goldstein entered in 1969, being trained by his father by going along on over 50 home inspections to learn the trade. To put things in perspective, Goldstein estimates that in the late 1960s only about five percent of total home purchases used a home inspector in the U.S. Today, roughly 80% of all homes are inspected by a professional inspector.
One event that helped kick-start the industry, according to Goldstein, was a requirement by the Federal Housing Administration (FHA) that all FHA insured loans receive a plumbing, heating, electrical, roofing, and termite certification prior to the loan being funded. “FHA’s requirements created substantial demand for home inspectors, in part because mortgage interest rates were very high in 1969 and 1970, and conventional lending institutions that would normally lend to buyers wouldn’t get involved. The percentage of FHA insured loans became a very large part of the market,” says Goldstein.
This created incredible demand for a single professional who could provide a certification for each system of a home with just one inspection. “At the time, Realtors would call a plumber to do the plumbing certification, an electrician to do the electrical certification, a roofer to do the roofing certification, a termite professional to do the termite certification, and so on. I cut my teeth when I was going through college doing termite inspections and treatments. My father told me he thought there was a future in the home inspection business, so instead of pursuing a career in law, teaching or investment banking, as I was considering, I chose to go into the family business,” says Goldstein.
Riding the wave of demand for home systems certifications due to FHA requirements, Goldstein says he incorporated his father’s company, Building Inspection Services, Inc., in 1971 and the rest is history. “To spread the word about our services, I went out to real estate brokers initially and told them of the service that I provided. I saved them the trouble of having to arrange four or five different people to inspect the house because I could provide all the required certifications with just a single inspection. Within six months of incorporating, our company was doing a tremendous volume of business. That led to other inspectors in the Philadelphia area getting into the business, and the practice of home inspecting in our area grew from there,” says Goldstein.
Following the demand created by FHA requirements, Goldstein says another factor that drove demand among the general public was that many inspection companies developed the idea of guarantees and warranties to go with the home inspection. “Guarantees and warranties were used early in the inspection profession as a means of enticing homebuyers to purchase a home inspection. While my company has never offered guarantees, those warranty companies were a significant part of the foundation of ASHI in 1976. The public was very receptive to the idea of a guarantee as a value proposition when purchasing a home,” reports Goldstein.
Finally, a third motivation that Goldstein believes increased the demand for inspection services during the 1970s was publicity about corruption among real estate agents who were selling homes, especially FHA repossessed homes. “It was caveat emptor back then—the idea that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made. There were a number of corruption and fraud cases involving real estate sales professionals at the time, and this raised awareness among the general public and established the need for homebuyers to have someone on their side representing them and telling them the truth about the home. The home inspector became the go-to person because of the lack of trust for real estate agents,” says Goldstein.
Formation of ASHI
The American Society of Home Inspectors (ASHI), which many say was the very first home inspection association, was formed in 1976. Ronald Passaro, whose member number is 0000001, is the founder of ASHI and played a key role in organizing the inspection profession as we know it today.
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Passaro started as a builder in Stamford, Conn. and got started in home inspections in the early 1970s because people would sometimes ask him to “inspect” a home prior to their purchasing it. “When I got started, I had never met another home inspector. The term ‘home inspection’ did not even exist. I started ‘inspecting’ homes for friends and relatives, and then strangers started asking me to look at their homes. One day I sat down with my staff and we started writing up an outline of what we can tell people about a home they were buying. We developed our first set of home inspection forms from there,” says Passaro.
At the time, Passaro says there were no books, no schools, no standards, and he had no idea there were any other “home inspectors” out there. “I set out in 1973, trying to find other home inspectors and form an organization. My daughter, Donna, was a teenager at the time and worked in my office part-time in the summer, so I asked her to search the reference books in the office and call around to find other home inspectors. She found a half a dozen in the Tri-State area (New York, New Jersey, and Conn.). For our very first meeting, six inspectors showed up at my office in Stamford. Norman Becker was there, who wrote one of the first books on the topic of home inspection,” says Passaro.
As ASHI began to take shape, Passaro began hearing from other home inspectors across the country. “By 1975, our numbers had grown to the point that we had to stop meeting in our offices. We organized a large meeting in the School of Engineering at Rutgers University. The building could only accommodate 100 people and we sold out. Many in the room had never met another home inspector. Imagine being a writer, and never having met another writer? Or being a doctor and never having met another doctor? The energy in the room was incredible. One of the first things we worked on was to identify what a home inspector was. We also began collecting data and defining our Standards of Practice (SOP) and Code of Ethics,” reports Passaro.
ASHI issued its first SOP and Code of Ethics in 1976, and the rest is history. ASHI has served to advance the profession in two critical ways, according to Passaro. Not only did ASHI serve as a vehicle to spread the word to the public, but it also allowed for a sharing of information, knowledge and training within the young profession. “Home inspectors are required to be knowledgeable of so many systems and parts of a house, so it was absolutely critical to have a means of educating ourselves and training each other. ASHI has always been big on education. ASHI allowed us to share our professional knowledge, learn about new technology, high-end equipment, and keep up with the latest advancements in plumbing, electrical, air conditioning, carpentry, roofing, and more. The training, the education, and the knowledge sharing that ASHI facilitated helped drive the industry forward,” argues Passaro.
As the home inspection profession developed and grew, it resulted in a dramatic improvement of the housing stock in the U.S., according to Passaro. “Few people ever talk about how the home inspection profession has improved the housing stock to the incredible degree it has and the number of lives that have been saved due to home inspecting. I have found more heat exchanges and water heaters leaking carbon monoxide than you could believe. There are so many potential safety issues within homes. Before we came along, the only time a professional looked at the house was when it was built. Now inspectors serve as an additional check to help protect the buyer’s investment and ensure the safety of the home-buying public,” Passaro says.
With marketing being such a central focus for many home inspectors today, a reasonable question is how the early home inspectors marketed their businesses back in the 1960s and 1970s. Passaro says that most home inspectors back then, just like today, were technical people, not marketing professionals. “We didn’t know how to market professionally. In the beginning, all my brochures were printed in black and white, and I used to hire kids to go to apartment complexes and drop them off at people’s doorsteps. I also went around myself as a salesperson to real estate offices. I was asked to leave a lot in the early days, but I would always go dressed up to the hilt, always with a rose in my lapel. That way they would remember me,” says Passaro.
Once his business got off the ground, Passaro started ramping up his marketing. “As my company grew, I started making good money and our marketing became more professional. I had a poster for my company at every railroad stop from New York City to Stamford, CT. Stamford was the relocation center of the country, so a lot of people were relocating to the state via railroad so it worked very well for me. I also advertised in the railroad program books, so every program they picked up for the train station, we had an ad in there. There was incredible demand for what we were offering at that time. If you wanted an inspection done by me, you went on a waiting list. There were only two home inspectors in the entire state,” Passaro indicates.
A later catalyst that helped to further advance the profession was a 1984 court ruling, Easton vs. Strassberger. After purchasing a property for $170,000 in 1976, it was discovered that the property had soil issues and experienced extensive damage due to a slide just prior to the sale. The buyer, Easton, sued the seller and the seller’s agents for “fraudulent concealment and intentional and negligent misrepresentation.”
The California Court of Appeals ruling sent a message loud and clear that agents and brokers had a duty to conduct due diligence and disclose facts materially affecting the value of the property. The Court ruled that real estate agents and brokers have “the affirmative duty to conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective purchasers all facts materially affecting the value of the property that such investigation would reveal.”
The ruling not only increased the responsibility and liability of real estate agents, but also led to the realization that they could better serve their clients and reduce their new liability by referring independent home inspectors to provide a complete and thorough inspection of the property.
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The result was a substantial increase in the demand for home inspectors and home inspections. Many brokerages and Realtor Associations, such as the California Association of Realtors (CAR), now encourage all sales professionals to recommend a home inspection to their buyers. Home inspections serve as a liability-reducing mechanism for real estate brokers and also help to protect buyers in a purchase transaction. After Texas passed home inspector licensing in 1985, states across the U.S. began to explore their own licensing programs and home inspections became much more popular among consumers and agents/brokers. According to a 2009 survey by the National Association of Realtors (NAR), roughly 80% of all homes nationwide are now being inspected.
After Texas’s inspector licensing law in 1985, other states began to follow suit. Now over 30 states have some form of home inspector licensing requirements. Home inspector licensing has been a hotly debated issue among inspectors, with some arguing that it cheapens the profession by formalizing inadequate inspection standards. Others maintain that licensing elevates the profession by setting a baseline for what an inspector is responsible for. (See Inspector Licensing: The Wrong Path?)
Passaro explains that he played a central role in the inspector licensing efforts in his home state of Conn., which first licensed inspectors in 2001. “I served as chairman on the first licensing board and I sat in the meeting with Realtors and everybody else involved as we crafted the licensing law. I told the other inspectors in our state: ‘We’re going to get licensed one way or another; do you want the Realtors to dictate how we get licensed, or do you want to be involved in the process?’ We ended up making the requirements very stringent. Home inspectors have to take 40 hours of education, pass an internship that requires 100 actual inspections under the supervision of a licensed home inspector, take two exams, and then take continuing education every two years,” says Passaro.
The key question with respect to licensing is whether inspectors have a seat at the table and a hand in forging the future of their profession. “The law we passed in Conn. is not bad, and so as long as the law is set up with the input of home inspectors, I think licensing can be a good thing. My approach to licensing is that if we don’t control our own destiny, the Realtors will control it for us and they are a lot bigger and more powerful than we are. So inspectors have to stay involved in any licensing effort; otherwise it can lead to poor standards, as it has in some states already,” argues Passaro.
As the profession developed, inspectors quickly began branching out and offering niche services in addition to the typical “visual” inspection. Goldstein says one of the first “niche” specializations was inspecting for lead paint. “Over the years, the various side inspections have become more and more important for home inspectors. The first was in the early 1970s, when I was approached by FHA to help them identify lead-based paint issues. I inspected 100 HUD repossessed houses, and I ended up testifying before several Congressional committees about the lead-based paint hazard in housing, how serious it is and how it can affect the health of the occupants and cause the government great expense over time,” says Goldstein.
After Congress passed a law in 1978, the use of lead was banned in paint and gasoline. “The result of the law is that lead levels in the average American are half of what they were prior to 1978. And now lead paint inspections are offered by home inspectors on older homes. At the time, FHA had over 2,000 repossessed houses in its inventory and they could not sell any house in the state unless the house was inspected for lead paint. My company received a $1 million contract to inspect these homes for lead paint,” says Goldstein.
Adding additional services or “inspections” alongside traditional home inspections is now the norm in the industry, according to Goldstein. “The inspection industry is going in the direction of multiple inspections. In the 1970s, it was leadbased paint. In the 1980s, the Reagan administration made a big deal about radon, and radon inspections are now a service that many inspectors offer. Today we have mold inspections and inspectors are also beginning to use drones. We have sewer line inspections and septic inspections. There are many separate inspections that were never part of the original home inspection and are still not part of the ASHI SOP,” says Goldstein.
Since the beginning of the profession, home inspectors have been using these additional services and specializations to both diversify their revenue streams, as well as build a competitive advantage in the marketplace as they compete for potential clients. As a profession, home inspectors can look forward to continued evolution, as the tools, technology, and services offered in the market continue to advance and improve.
For a relatively young profession, it’s impressive how far home inspectors have come. It will be exciting to see what comes next.
About the Author
Isaac Peck is the Editor of Working RE magazine and the Director of Marketing at OREP.org, a leading provider of E&O insurance for home inspectors and other real estate professionals in 50 states. He received his Master’s Degree in Accounting at San Diego State University. He can be contacted at Isaac@orep.org or (888) 347-5273.