The first thing I tell clients is I do not have X-Ray vision or a crystal ball,but I suppose you could see that as one possibility of many.

How about an appraiser inspection combination Dave?

Some inspectors are going into consultation so they can expand services,so anything is possible.

"How about an appraiser inspection combination Dave?" 

Hi Bob,

Actually, I could see that as part of the package too. 

In Texas, the various real estate service providers are fragmented by licensing requirements.  It's very difficult for someone to become licensed as both an appraiser and an inspector.  In fact, separate licenses are require to do home inspections (licensed by the Texas Real Estate Commission), and termite inspections (licensed by the Texas Structural Pest Control Board).  Appraisers are licensed by yet another state agency.  The service providers may like it this way, but consumers don't, and I think consumers will win.

I've seen various comments from Jimmy Breazeale about "big capital" taking over the home inspection biz.  I think he is probably right, but I don't think it will be big inspection firms squeezing out the independents.  Rather, it will probably be large companies that consolidate a variety of services as part of an insurance package. 

I don't see it that way.  When I started in the HI profession in 1995, the large home inspection companies were the rage.  We were told that they would take over all of the independent inspectors across the country.  It did not happen.  A large company (like US Inspect) would come into a city.  They would buyout the largest home inspector company in that town and attempt to monopolize the market with marketing and lower cost inspections done in a shorter period of time.  It is a numbers game.  After a few years they end up with a bad name and folks stop using them.  They then closeup shop and head to an new city and repeat the process.  Eventually lawsuits and bad PR slow the machine to a crawl.

We have seen a reemergence of the solo inspector in the past few years, from what I have seen.  Consumers want to deal with a person and not an order taker. This is the same reason that the mega malls are failing all across the country.  The mom & pop speciality stores are making a comeback because of this.

Hi Scott,

I agree that the large inspection companies (US Inspect, Pillar to Post, etc.) will not be the wave of the future.  I do think these companies appeal to some realtors who see the home inspection as "just another hoop to jump through."  And, since many buyers rely on their realtors to recommend an inspector--at least they do around here--the big HI companies have some advantages.  However, like you said, bad PR and lawsuits take their toll.

Ultimately, however, I think many buyers expect a home inspection to protect them from financial risk associated with unseen defects.  Home Inspectors just cannot provide that level of financial protection for the price of a home inspection.

I can visualize companies being formed to roll a variety of real estate services into one package (appraisals, inspections, surveys, title searches, warranties, etc.)

Then, again, I could be full of it. :)     

Howdy David

Congrats on a very very good and helpful post.

I do not see big companies getting back in the game. I believe the consumer is smarter and more educated about the home buying process. I know in my area of western new york, people like the fact I am independent and give them a non-sanitized report on the home they want. I will never be a shill for a real estate agent.

Good Post Dave, I'm not sure about the insurance part but I agree that the big companys will not take over. Most people remember the inspector rather than the company.

Some of the big franchises are still big players in many towns.  A lot of realtors like to refer them because they are, generally quick, not thorough, and don't make waves.  To the franchises, it is a numbers game and they don't seem to particularly worry about liability.

Gee, Scott, those are encouraging words indeed, and I sure hope you're right.  As for Pillar to Post (and I mean no offense to anyone who happens to be so unfortunate as to be one of their franchisees), they are low-balling caterers to the lowest common denominator among agents, and they crawl lower than a snake in a wagon rut.  Just my opinion.  But Big Capitol has a way of waiting, watching, and learning.  It has the means to provide the kind of assurances noted by David.  They still concern me, because they are always lurking.

Out of curiosity....

Isn't an Insurance agents license required to issue/sell a Home warranty/insurance?

On another note;

I believe that there are three models when home buyers chose a Home Inspector.

1.  They allow the Real estate agent to chose for them.  (numb from the neck up)

2.  They go with a large firm because of the "deep Pockets"  (tingling back pocket)

3.   They chose an Independent Inspector to ably represent their best interests. (firing on all cylinders)

Which Inspector would you rather be?

I don't know if an insurance agent's license is required in Texas, but it probably is.  That's a good question though.  I'll have to look into how title company folks are licensed in Texas.  As I've mentioned, I think the inspection biz will eventually look something like the title company biz.  A good title company will do everything within reason to make sure there are no defects in the title, and then they provide insurance (probably from third-party underwriters) in case there is a undiscovered problem.  In the future, I think a good inspection company will do everything within reason to identify defects in a home and then provide insurance to cover any undiscovered problems.  Then, again, inspectors might remain independent and function in a role similar to insurance adjusters.  (It sounds like the work Brad is doing might be similar to that.)

When I was in corporate life, insurance companies did periodic audits/inspections of our facilities and our processes to verify that we were taking appropriate steps to minimize our insured risk.  I'm surprised that the home warranty companies don't do more of that.  David Helm says he is seeing warranty companies doing some inspections on expensive homes, so apparently they are seeing the value in inspecting high-risk properties. 

There seems to be a lot of concern about liability and risk among everyone; buyers, sellers, agents, inspectors, etc.  The obvious way to deal with this problem is to develop standard products and services to identify and minimize risk and then insure against unknowns.  That way, all parties (who have acted in good faith) can relax, knowing that nothing will come back to haunt them.

David

I love beating dead horses.

1. Until the government steps in and forbids Realtors from recommending home inspectors nothing will change. 
   
2. And since the NAR has solidarity and we have crap nothing will change.
3. When one of the big two put it in their COE that they will not allow solicitation of Realtors for business nothing will change.
   
4. As long as their these side deals between Realtors and inspector nothing will change.
5. As long as the big boys offer chances to win trip and prizes nothing will change.
6. When the home buyer is willing to spend $100 to $200 more for an inspector that sees until then nothing will change
7. When the Realtor choses inspectors by the donuts they bring nothing will change.
8. When a franchise moves into town and the first years he does 400 inspection then nothing will change.
9. When an inspection company after 5 years gets 80 to 90% of it's business from Realtors then nothing will change.
10. As long as inspector pay to play nothing will change.
11. As long as inspectors will change their report for the next referral nothing will change.
12. As long as inspectors use the word appears nothing will change.
13. As long as inspectors say nothing about age and replacement nothing will change.
14. As long as inspectors are willing to compromise their ethics for a referral nothing will change.
15. As long as the major Inspection association don't  enforce  their COE and SOP nothing will change.
16. As long as states have legislation that don't favor the consumer nothing will change.
17. As long as the consumer is keep in the dark about the Realtor Home inspector relationship nothing will change.
18. As long as home inspectors use check list inspection nothing will change.
19. As long as home inspectors reports have more disclaimers that fact about the house nothing will change.
20. As long as the old guard is around nothing will change.
21. As long as the Realtor is in charge of the inspection process nothing will change.
22. As long as the inspector has two client at each inspection nothing will change.

As long as I am in this profession I see the faults of my professions, I see the home inspector married to the Realtor, I see the home inspector that drops off the bagel, donuts and candy, I see the old guard refusing to do the right thing, I see the inspectors who say they are independent  but solicit realtors, I see the certified inspectors who don't know a GFCI from AFCI, I see inspectors that have brown lips, I see report that say nothing, and I get tired of all of this.

Let's all have one client, let's all do the best job for that client no matter what the outcome, let's just write a truthfully meaning report without differing to every licensed trade person, let's write simple clear sentences that our client will understand not technical words they will not understand, have proof of everything you say, be respectful to everybody in the transaction  but always remember you only have one client. 

Hi Mitchell,

I understand the "beating dead horses" thing.  I've spent time "beating dead horses" and "charging into trees" many times in my life. (Score: Trees 100, David 1 -- the Banana tree fell pretty quick--Jimmy will understand what that means.) 

I see the realtor / inspector thing a little differently.  To me, it's sort of like the relationship between defense attorneys and prosecutors.  I'm sure defendants cringe when they see their attorney shaking hands with the prosecutor and asking about "the wife and kids."  But, the reality is, it's entirely normal for them.  They operate in the same circles, are members of the same organizations, etc.  At the same time, the majority of them understand their duty.  It's their job to kick each other's _ss in court, and to not take it personally.  Are there opportunities for corruption?  You bet!  Some lawyers take full advantage of those opportunities.  And sometimes they get nailed for it.

Like defense attorneys and prosecutors, realtors and inspectors operate in the same market.  (In fact, in Texas, realtors and inspectors are both regulated by the same state agency.)  I don't think it's realistic to build walls around ourselves; but, like you, I believe we mustn't turn a blind eye to the potential for (and reality of) corruption.  I let realtors know that I will act in the best interest of my client.  I appreciate their referrals, but my engineering license, my inspector's license, and my personal integrity are more valuable to me than their referrals.  I won't risk my licenses or my reputation for a few hundred bucks--even if they have a huge commission at stake.  I'm sure that some realtors have and will continue to direct their customers away from me for that reason.  Oh well.

David

We all use to xxxx in the woods, than we made a little house down the road a piece to xxxx in, now most of us xxxx in our own home.

Things change sometimes for the better. The Realtor home inspector relationship is a potential conflict of interest.  Let's end it, will it hurt me, in the short run yes and in the long run it will help every good honest inspector in the U S.

Extending the defense attorney / prosecutor analogy a little further; it would be weird to think that a defendant would ask his prosecutor for a defense attorney recommendation.  It's just as weird for home buyers to ask their realtors to recommend inspectors,  but that's exactly the way it usually works.

Come to think of it, if I were a defense attorney, I might be a little offended if prosecutors recommended me. :) 

I think that the best thing that could happen to the Home Inspection industry would be for it to be illegal to solicit Real Estate Agents and/or for Real Estate Agents to recommend a Home Inspector. As far as insuring against defects, for how long? 30 days... one year... It sounds expensive to me. Besides the cost of the insurance, it will require a much more in depth... possibly intrusive inspection, And even then it will have it's limitations.

Hi Steven,

I guess the problem is how should buyers find us?  When I bought my first home twenty-five years ago (right out of college), I didn't have a clue.  I remember the realtor asking me which title company and which lawyer I wanted to use.  I didn't have the slightest idea what a title company was or why a lawyer was needed, so I asked the realtor to give me some names.  If there had been an inspection, which there wasn't, the realtor would have picked the inspector too.

Maybe the real answer is to require a license to buy a home.  Before a buyer could get such a license, he or she would have to demonstrate some knowledge of the process.

As far as an insurance period is concerned, I would think six months to a year coverage would be appropriate.  Yes it would be expensive, but at least customers would be getting what they think they are getting now.  If they choose to "opt-out," then there would be a clear record of it.  But I doubt that lenders would allow them to opt out.  (Just like they can't opt-out of getting title insurance or having a survey done.)

You are correct that there will always be limitations no matter how in-depth the inspection.  As a practical matter you cannot tear a house apart to find problems, so there are things you just cannot detect.  Nevertheless, there are a lot of folks out there who think their $200 or $300 inspection is buying a warranty against defects (at least, that's what they'll say in court.)  I say let's offer them that warranty for a cost that is realistic.

What I have seen done... but I do not do, is on the contract limit the amount of liability to the cost of the inspection(this part I do). If someone wants more liability offer it to them at an additional fee. When I asked the person how much to charge for the additional coverage, he stated the amount of whatever liability they want.

Six months is a long warranty. Thing that were not wrong at the time of the inspection could develop in that much time. I think one month is reasonable... for a fee. Lets face it, no matter how hard you try, its impossible to predict everything. A boiler may be working fine at the time of the inspection, who know what it will do even a short time down the road. Even a p trap could be holding water just fine, and a few weeks later it's possible that it leaks.

And lets face it, you can do a very good inspection and simply miss something. Hey, even Moses made a mistake!

This is an interesting discussion.  I like the idea of being able to offer a meaningful warranty, as long as it is limited in scope to a state's SOP and COE (if applicable).  If I were an insurance company, I would not underwrite such insurance in an unlicensed state.  Now, when the insurance boys see dollars flying by them that they can't catch, they'll join in on the licensing bandwagon.  Inspectors MAY gain a valuable ally here, and get licensing laws that take power and control out of the hands of the NAR and the builders.  Food for thought.

If the NAR is really interested in consumer protection, establishing ground rules wouldn't be hard.  Simply make available the business cards, brochures, etc., that inspectors leave at their offices, along with what I consider some good info from HUD.  The link is on my profile, and it is entitled "Ten questions to ask your home inspector."  Of course, realtors (with a little 'r') run the gamut of policies on the matter.  Some say to their agents, "recommend three or four who you know to be competent."  Some say, don't get involved at all.  And some say nothing at all.  There is nothing that I know of written into law (except in Massachusetts, and even that has a loophole big enough to drive a truck through, IMO) on the subject of referrals, and there is nothing concrete written into the NAR COE.  I do know this:  I have had realtors say to me a number of times, "I use (so-and-so)," meaning, of course, that for whatever reason that agent has his/her favorite inspector.  Meaning, most likely, that he/she is driving his/her clients toward that one inspector.  I think it's a dirty, rotten, stinking, unethical shame when a franchise comes riding into town with their realtor-driven marketing plans.  I think it should change...not because it may bring me more business, but because it has the stench of unethical behavior and conflict of interest.  But what do I know?  After all, I'm just one guy wearing a little hat.

We all agree that it isn't realistic to think inspectors can find everything.  Some risk remains no matter how good the inspection.  That's what insurance is all about--mitigating (spreading) the risk.  I don't know if I'll be alive a year from now, and neither does my life insurance company.  But the life insurance company has very reliable data telling them what percentage of 51 year old males will die in the next year, so they know how much it costs them to insure 51 year old males, and they charge accordingly.  It's a kind of perverse bet.  I'm betting I'll die in the next year, and they're betting I won't.  And we're both hoping I lose the bet. :)

In order to provide "home defect insurance", insurance companies will have to know how much risk they are accepting when they insure a particular type house.  They will also need to know how much they can reduce their risk by using various inspection methodologies.  Inspection requirements will be limited to those things that cost less than the risk that is avoided.  This will drive standards and licensing requirements.  It's sort of like the medical standards that say a 50 year old male should have an annual colonoscopy.  It's not that 45 year old males never get colon cancer, it's that cost vs. benefit ratio of testing 45 year olds doesn't work in favor of the insurance company.

Then again, as I've mentioned before, I may be full of sh_t. :)