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The Perfect Storm
by Stan Bajerski
Right now, we are in the most unusual real estate market that I have ever experienced in 37 years as a home inspector. I have been through two stock market crashes, several waves of foreclosures and a pandemic. Yet here we are. Many areas of the country have low inventory. That, combined with high interest rates, multiple bids, and lots of buyers—havoc is running amok in the real estate market, especially for home inspectors—creating the “perfect storm”.
It’s not a perfect storm for the buyers—they get involved in bidding wars where they offer over the asking price. It’s not good for the home seller even though their home value has risen, because now they have to enter the same crazy market. It’s certainly not good for home inspectors either. So, who benefits from this perfect storm? Real estate agents. How can that be if they sell fewer houses? Through the waiving of the home inspection.
It is the real estate profession driven under the guise of supply and demand. It has been estimated that at a minimum one out of every four buyers is waiving their inspection. It all boils down to an addition to the real estate tactics to maintain control and run interference and counter offensives to combat the home inspection profession as it’s developed over time.
First, I need to set up a history of my experiences in the home inspection profession to shed some light on what’s now going on and how it developed over the years. Folklore has it that the first fee paid for a home inspection performed in Connecticut was in the late 60s. A friend of a contractor was buying a house, and he asked his contractor friend, we will call him JG, to come walk through the home and tell him his thoughts. I guess we can call that the first “walk and talk”. After a cursory evaluation of the home, JG gave the thumbs up, and the friend purchased the home. He was so happy with JG’s walk through; he began telling friends who were purchasing homes about him. Not too long after, JG performed the first fee-paid home inspection.
This first home inspection changed the real estate industry. For the years before its inception, a homebuyer was on their own when purchasing a home. They chose a Realtor® and found a home that they thought would meet their needs. Most often, they really had no idea what condition it was in. The home would be appraised by a bank or mortgage company, and the buyer would secure a loan. The deal would move forward smoothly. The Realtors®, who were in complete control, would get their commission checks for marketing a home and shuffling papers and the buyer was cleared to move in. Soon after that, a roof could leak, a heating system or water heater could fail, or the basement could flood, and the expense would fall squarely on the shoulders of the new homeowner. The Realtors® didn’t care; they got their commission and were moving on to the next sale.
I can only imagine what went through Realtors®‘ minds the first time they heard the term “home inspection”. There was likely a buzz in every office within the distance of a local phone call. The real estate industry must have waited with bated breath to see how the scenario would develop. Early home inspection appointments were made by the inspector with the owner of the home. Neither the buyer nor the Realtor® was in attendance. A written report was issued after several days. It was written on a typewriter and delivered by “snail mail”. Reading about defects in a report and not being there to see the actual problem or condition could minimize or over dramatize a concern. Sometimes buyers accepted defects that were major because they did not understand the severity of the comments. Others would panic over every detail in the report and would pull out of the deal.
Prior to the first home inspection, if your bid was accepted and you were able to secure financing, you were legally bound to purchase the home. No cold feet allowed. Now people have reasons to back out. The real estate profession was not happy because they were going to lose some of their control.
My first encounter with the term “home inspection” was during the purchase of my home in 1988. My wife of four months and I stumbled across a house that we both fell in love with. We called the agent and there were no pressure tactics, she let the house sell itself. On our first visit, she led us to the rear entrance of the home, I noticed the oversized two car garage, and my wife noticed the oversized kitchen addition. We wanted to put a bid in right then and there. But, before we got any further, she told us that there was another couple interested in the home.
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This little tidbit of information created panic, although unwarranted, and caused us to think a little harder about our bid. This was a Realtor® tactic even back then!
As you may have guessed, our bid was higher than we first intended it to be. Was there really another couple interested in our home? We couldn’t care less after hearing the good news that our bid was accepted. We jumped for joy and celebrated the victory. When we calmed down, we heard the words that changed my life forever, “Now you must schedule a home inspection.” Our Realtor® told us there were companies out there that would check the conditions of the home and then issue a report to us. If we had a problem, we had the opportunity to renegotiate the price based on the findings. After the brief explanation of the process, our Realtor® gave us several names of home inspectors she had worked with over the years—another tactic; control who inspects. However, as much as we liked our Realtor®, I asked my good friend, who recently purchased a home, who he used. He told me of a local company that performed his inspection. It was a multi-inspector company, and I called them and made an appointment. It just happened to be the company that was started by our contractor friend, JG, years prior. Small world, isn’t it?
The inspection of our small, vacant Cape Cod home lasted about 45 minutes. At the end the inspector handed us some preprinted propaganda, asked for his fee, and was in his car and driving off before the ink on the check had dried. A four-page type written report followed in the mail about three days later. The report was general in nature, pointed out the items in need of attention, and made some routine maintenance recommendations. There were some small issues, so we negotiated $5000 off the price and bam, we were homeowners! Wow, it sounds like things were simple back then.
The entire process intrigued me. Having a carpentry background and currently working in the mechanical trades, I immediately saw home inspections as something I could be good at. One job a month in the afternoon as a part-time income after my “real” job and I could pay off my truck loan. So, I began the mission and started gathering information on home inspections. With the help of my Realtor®, who passed my name around, I began my home inspection business. It was easy back then. There were no regulations, no licensing, no formal training needed—Just think up a name, get yourself some business cards and brochures and you’re in business. Anybody could be an inspector.
When I began my business back in the late eighties, the going rate for a home inspection was based on 1/10 of a percent of the sales price. An inspection of a home that sold for $150,000 cost $150. An inspection for the same home would cost at least three to four times that nowadays. Still working my full-time job, I began inspecting homes in 1989. It was then that I realized just how much Realtors® controlled. The first time I got past the front desk at a Real Estate office, I saw a small nook where the brochures and business cards of the office’s favorite service providers, including inspectors, were kept. Since most people never even heard of a home inspection before they bid on a home, the Realtor® could easily finagle the inspectors they felt worked in their best interest. Yes, that’s right, in their best interest, not their client’s. “Alarmist” type home inspectors were not welcomed at home inspections. Realtors® thought alarmists celebrated finding a defect and would over dramatize them and therefore were avoided like the plague. Realtors® instead would endorse the inspectors they found soft-hearted and sugar-coated everything. However, when the internet became a marketing tool for inspectors, Realtors® began to lose control over who was inspecting the homes they were selling.
When I entered the home inspection arena it was still a small cottage industry. But it grew fast. When I first started my business, there were many homes for sale and not a lot of buyers—commonly referred to as a “buyers” market. The inspection profession was still being figured out by the Realtors®, and honestly, by home inspectors as well. A problem emerged—buyers would receive their reports in the mail and mysteriously back out of a deal. However, to the Realtor® the home appeared to be in good shape, and the inspection should have gone well. This facilitated the presence of the Realtor® at home inspections—the “interference” tactic. Realtors® began participating in the inspection to see the issues for themselves and to attempt to get back in control by qualifying what these inspectors were saying.
They began developing “counter offensives.” They set conditions for the sale to fight the home inspector as the inspection became more refined and detailed. “As is” became a battle cry for homeowners. The term means you are welcome to inspect the home and determine if there are any problems, but we will fix nothing. “The price is based upon the condition of the home” was also frequently uttered by the listing agents. This means yes, the home needs a roof and a furnace, but the price would have been higher had the sellers replaced them before putting the house on the market. When a buyer tried to negotiate an old component, the seller’s agent would respond, “this is an older home, and the price reflects that it needs work”. However, the exact work that was needed was never disclosed ahead of time. I remember the first time I heard the term “as is” applied to a home sale. I pulled in the driveway of the home I was about to inspect and the listing agent said, “Hi Stan, you know that this is an ‘as is’ sale right?” I said, “Sure, and I will inspect it just as it is.” I don’t think she was very happy with that response.
The home inspection process continued to grow and become more refined over the 37 years of my career. What started out as a short and cursory walk-through developed into a longer, more precise, and sometimes technical, adventure. Every time a complaint was lodged against an inspector, they would add something to the report to try and prevent a future complaint. As more inspections were performed, more people became interested in becoming home inspectors. Home inspection entrepreneurs began to develop and market report forms, handouts, software, tools, schools and more.
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One would think the process of buying a home was relatively simple. In most cases buyers would get compensated for the findings of a home inspection by reducing the price, getting repairs done, or getting credit for repairs. Win-win, right? No way! I had lunch with a Realtor® early on in my career that I personally liked. I wanted to bounce a few ideas off him, get some insight from the other side of the aisle. During our lunch conversation he stated, “I do not feel that a home inspection should be a means of opening a second round of negotiations”. Jaw-drop moment. I asked him “what was the first round?” He said that they first had to negotiate the sales price, which obviously happens before the home inspection. I asked what that was based on, and he said the good faith seller’s disclosure and a visual walk-through. He also stated that the home inspection was only to determine the condition of the home. As you can see, the real estate profession developed its own perception of the home inspection and how it fit into the home buying process.
Another agent, back in 2014 stated in her opinion that the “subjective” nature of inspections left the door open for buyers to walk away from a contract and get their money returned. The inspection process can be abused. The buyer can simply change their mind and will not be penalized. When a buyer chooses to bail on a contract due to an inspection, the seller should (at the very least) get a copy of the report. Further, she suggested, perhaps it’s time to tighten up the language in the response document. When buyers change their mind, the penalty should be the loss of their binder money. Interference tactics once again. They still were looking to cut us off at the pass.
Here in Connecticut, prior to the passing of the licensing law for home inspectors in 2001, Realtors® were complaining about the inconsistency of home inspectors. For example, some inspectors were removing electrical panel covers, some were not. Some were getting on roofs, others were not. Some inspections were 45 minutes; others were five hours. So, the Realtor® Association petitioned the state and pushed for regulation and licensing. If they themselves could not get complete control, let’s get the state to control them. The state, in its infinite wisdom, knuckled under to the powerful Realtors® Association and their lobbyists and instead of doing the heavy lifting and developing a standard of practice of their own, they adopted the ASHI standards. However, after all that, there was still inconsistency because the standards were thin, vague and open to interpretation. 24 years later they still are.
The home inspection process got even more detailed. Inspectors equipped with drones, infrared cameras, laser levels and sewer line cameras were trying to find things that were never dealt with before. The Realtors® continued to push the term “as is” to circumvent the laundry lists that some inspectors were preparing. “As is” turned into “health and safety” which turned into “for informational purposes only” which turned into “walk and talks” and now “waiving home inspections”.
Even if Realtors® are telling you they don’t advise the waiving of a home inspection, they are. To earn a living, they will continue to do so in this market. We went backwards, all the way to the first walk and talk performed by JG in the 60s. This practice, as well as the waiving of the home inspection, is dumbing down our profession. Testing for radon, water testing and other ancillary services are becoming difficult to sell. If these walk and talks and waiving home inspections continue, they may become the norm when the market changes and we may never get back to selling a full inspection with ancillary services and testing.
Today in Connecticut, we are working with buyers who are being asked to or advised to waive the inspection contingency, refuse, and ultimately lose bids, as others desperate to buy a home will. They find a Realtor® who will work with them to have a home inspection. However, they wind up purchasing less desirable, picked over homes that need work. We are also inspecting homes “post-sale” for buyers who waived inspections. After they paid more than the asking price, we find they end up needing roof repairs or replacements, termite problems, septic issues, etc. I have a friend who was a home inspector for nineteen years whose numbers were down so low, he closed his business and went back to a full-time job. Another 10-year veteran has stripped down his operation cost to a minimum, closed his website and is on the verge of closing shop. The smarter we become, or think we are as home inspectors, the harder they push back.
There is a “changing of the guard” in our profession right now. Most of the dinosaurs who were instrumental in forming and shaping this profession are either gone or on the verge of extinction. The only connection between what was and what is will soon be gone and it will all become hearsay. I would venture to say that besides a couple of lifers like me sprinkled here and there across the country, those with 20 years in are the new veteran inspectors. To the “new guard”, there has always been this invisible tug-of-war between Realtor® and home inspector. Many old timers viewed the Realtor® as an adversary, the enemy. In many cases that could appear to be true. My advice: stop, look around you, connect the dots, take a deep breath and fight for your profession.
I realize that when you’re hungry, a half a loaf of bread is better than no loaf. What we don’t want to do is be forced to learn how to live on half a loaf.
About the Author
Stan Bajerski has been inspecting homes in Connecticut for 37 years. He is the President of
Houseworks Home Services, Inc. He is a sixteen-year board member and six-time president of the Connecticut Association of Home Inspectors (CAHI), as well as the Co-owner of Cornerstone Home Inspector Education Center, LLC.
Published by OREP Insurance Services, LLC. Calif. License #0K99465