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Editor’s Note: This story appears in Working RE Home Inspector Edition (May 2017) OREP insureds receive guaranteed delivery.
Agent Referrals: How to Succeed Ethically
By Isaac Peck, Editor
Real estate agent referrals are frequently touted as a way for a home inspector to build his or her business and bring a steady stream of work in the door. Proponents of such a dynamic argue that agents are well-positioned to refer quality service providers, including home inspectors, as they can leverage their professional contacts and industry expertise to assist homebuyers, who often have little experience or knowledge of real estate.
Since homebuyers are often inexperienced in matters of real estate, who better to assist in selecting, interviewing and hiring a competent home inspector than an experienced agent, who by law owes a fiduciary duty to the homebuyer, including loyalty, disclosure, reasonable care, due diligence and more?
On the other hand, many inspectors and other industry advocates argue that such an arrangement can have a downside for the homebuyer, as some real estate agents pressure inspectors to not be a “deal killer” and threaten blacklisting should an overly critical report lead to a failed deal.
Of course, not all agents are unethical or attempt to influence inspectors in such an overt manner. Nevertheless, the power dynamic between agents and inspectors means those inspectors who rely on agent referrals for business are often fearful that they may be blacklisted or lose business just for doing an honest, thorough job while trying to protect their client, the homebuyer.
This leaves inspectors in the difficult position of knowing that doing the right thing may cost them business: producing honest, high-quality reports that protect their homebuyer clients can put them at risk of losing future referrals. Can inspectors do honest, ethical and thorough work, while building a network of agents who will continue to refer business? Some inspectors say it’s not only possible but critical to success. In other words, one of the keys to success for inspectors is to do business with agents who are ethical, both to preserve their reputation and keep their client’s interests as the first priority. This is the challenge of the home inspector.
Dealing with Pressure
A recent letter from a Working RE reader demonstrates the pressures faced by inspectors to “perform.” Emilio Bengoa, an inspector from Idaho, writes “I am a new inspector and as I reach out to real estate agents in my territory, I consistently get complaints about inspectors who report on every little thing. Agents do not want us to mention things that could very well turn into a complaint by the homeowner or even a potential lawsuit,” says Bengoa.
In many cases, Bengoa says that agents are asking inspectors to lower their standards. “Why is it that real estate agents get away with putting demands on us to lower our standards and underreport, but all of them expect us to have E&O insurance? In other words they seem to be strict on the insurance part but not on the thoroughness of the inspection,” reports Bengoa.
Citing examples of things he has heard from agents about his reports, Bengoa says he is often told not to report details or to keep his reporting vague. Bengoa says he has heard things like: “Why are you saying anything about polybutylene tubing? Why can’t you just say: no leaks observed. Or don’t write that the furnace is close to the end of its expected life cycle; you can just recommend it be serviced by a qualified HVAC technician,” Bengoa says. “They tell me if I report like that they will never call me to do another inspection. But if I don’t report this way I may get sued.”
Bengoa believes that unless his home state of Idaho adopts some regulations and licensing standards on inspection reporting, inspectors are likely to face continued pressure to underreport. “All I can do is continue to report utilizing my Standards of Practice (SOP) and maintain an ethical practice in my community,” says Bengoa.
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Successful and Independent
Home inspector veteran and President of the Millionaire Inspector Community (MIC), Mike Crow specializes in teaching home inspectors how to market their businesses, including how to market to and network with real estate agents and other industry stakeholders to get referrals. Crow says that over his career his two companies have done over 100,000 home inspections and that when his firm encounters agent pressure, it is the exception rather than the rule. “We have run across agents trying to tell us how to report, but it’s not very common. One of the reasons we don’t see it very much is because we’ve weeded out the agents who try to push us around,” says Crow.
The solution to building a great inspection business while never compromising your ethics, Crow argues, is to effectively market your business so you can pick and choose whom you work with. This allows you to “fire” agents and others who try to influence your report and not have to worry about where your next job will come from. “When you know how to market properly and you know how to make the phone ring, you’re not at the mercy of an unethical agent trying to push you around. Home inspectors talk about the fear of being blacklisted but it also works both ways. We blacklist some agents as well. If there are agents who aren’t working in the best interests of the clients or who aren’t ethical, we turn those appointments down,” says Crow.
Having a strong marketing foundation and diverse selection of leads, referrals, and new business is the key, according to Crow. “Excellent marketing allows you to pick whom you want to do business with. One of the reasons some inspectors succumb to agent pressure is that they think they need the business. But when you know the phone is going to ring and you’re going to be able to replace that time slot with another inspection, you’re not as susceptible to pressure,” Crow says. “Home inspectors who are feeling pressure from agents should get busy finding new referral sources. Put all your efforts into marketing and, if you’re doing it right, you won’t have to work with unethical agents and can pick and choose your clients and partners.”
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Good Agents, Great Service
The best agents want a great inspection for their clients, according to Crow. “One thing that many inspectors don’t understand is that it’s the brand new agents who typically try to influence an inspection. The best agents, the top performers, don’t do that because it’s bad for business. The veterans want their clients to get the best inspection they can because they want referrals. They want the client to be 100% informed so they are happy. If they refer a home inspector who misses major defects or fails to call out important items, how likely are they to get a referral from that homebuyer?” says Crow.
While inspectors should never reduce the quality of their reports or compromise their duty to their clients, Crow says that providing great service to agents is still very important. “At MIC, I teach my students that home inspectors have clients and customers. Our clients are homebuyers. Our customers are anybody who refers us: agents, home builders, past clients, etc. Any time anyone refers us, they want to make sure the person they refer to us is going to get a quality product and great service. They need speed and accuracy. If you’re working with good agents, the agents know what their clients want and need. What people don’t realize is that the agent is actually looking out for the best interests of the client,” says Crow.
Customer service, speed and accuracy, refer to the readability of the report as well. “We tell all our inspectors to stick close to the Standards of Practice (SOP) when reporting. With that said, I don’t know any inspector who only inspects to the SOP. We all exceed it. But in terms of writing a great report, sometimes less is more. Home inspectors over the years have wanted to add more and more to their reports. The average report is 40 pages or more. Our report is 15 pages. Very few buyers or agents want to go through 40 to 50 pages of information. Good reporting is about making your information useful to buyers and agents. Speed and accuracy don’t just apply to our inspection work but to the report and the intended users. The readers of your report should be able to understand and digest it easily and quickly,” says Crow. “You shouldn’t have to sacrifice quality to produce a report that is easy to read and understand. The key is finding the right balance and making sure your clients’ interests are protected and your customers are happy.”
Home inspectors who purchase their insurance from OREP enjoy free training webinars from Mike Crow and his team at MIC, including The Home Inspector Marketing Success Formula and 10 Strategies to Get 10 More Referrals Per Month. How much would 10 more referrals add to your bottom line? Crow shows you proven strategies for getting more referrals and helps you master the latest home inspector marketing techniques.
Take advantage of this and many other business building benefits from the OREP Professional Support Network when you shop OREP. OREP insureds email firstname.lastname@example.org to access these free training courses.
About the Author
Isaac Peck is the Editor of Working RE magazine and the Director of Marketing at OREP, a leading provider of E&O insurance for home inspectors, appraisers, and other real estate professionals in all 50 states and D.C. He received his master’s degree in accounting at San Diego State University. He can be contacted at email@example.com or (888) 347-5273.
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by Jeremy Hall Appraisals - Colorado
Great article. We had an inspector save us from a real problematic home we walked away from, but had not really thought about the importance of using that same inspector when we eventually landed a different home with a different agent some time later. The new agents inspector under reported. This surprised us because the other inspector was more thorough and had a very detailed report, while this second inspector delivered a less detailed report for half the price. The deal went through quickly and low cost which is what we requested. In the end though, it cost a lot to repair concealed utility systems issues which we could have had the seller pay for with a better home inspection. Ever since I do reference the first inspector. Some are very thorough, others are less detailed. Buyers would be better positioned to make these decisions in a short time frame by better qualifying this service before hand. Make sure you’ve got a great inspector before you find the home.-