This post should provide insight, for realtors and home inspectors, into changes in Washington State real estate laws. Information in this post is of benefit not only to Washington State home inspectors, realtors and brokers but also it should be read by inspectors, such as those from Oregon or Idaho, who might come into Washington to work.
Let us review. The new section in the WAC mandates that brokers establish policies so agents in their firm will disclose business relationships that might exist between the firm, realtors and the inspectors. If you did not see that earlier post that described this new section in the WAC, read it here.
The topic, detailed in this post, is controversial. The subject is "preferred vendor lists." It is not hard to figure out what they are and the controversy is obvious. Simply do a google search on the topic. You will find states with laws in place that prohibit home inspectors from paying to be on such lists. You will find large home inspector organizations that restrict their members from participating in such schemes. You will find television networks with live online videos quote "exposing" the practice of paid vendor lists. You will also find that some home inspectors, nationally, are reported to pay as much as $2000.00 per year to be included on such lists.
The concept is simple -- those parties on preferred lists pay the fee and, as a result of paying that fee, they are included on the list that is then given out to clients of that real estate firm. This vendor list might be operated by an affiliate of a real estate company and could be called a service, maintenance or home service company. Regardless of the mechanics involved, the firms give out a list of inspectors that have paid to be referred. The common term is "pay to play".
There are other fields -- home stagers or appraisers for example -- that also pay to be on these preferred lists. In this post, I am only addressing paid vendor lists that include home inspection firms. That is the area I am familiar with. This post is not referring to non-paid lists of inspectors that might be given out by realtors because the realtors believe the inspectors do good work. Again, the topic is paid vendor lists.
I was told by DOL staff that, under the WAC, any real estate firms in this state, that refer inspectors from paid lists must disclose that fact to clients. Clients must be told that the inspectors paid to be referred. This is a mandatory disclosure issue for real estate firms that provide paid vendor lists.
That is the situation now but, in this state, these paid lists of inspectors are on the way out. Come September, when the new home inspector licensing law is scheduled to go into effect, the practice of referring inspectors from a paid list will be a moot issue. Real estate firms might keep their paid lists, but they will not be able to have home inspectors on that list. Those of us on the home inspector licensing advisory board feel strongly about this issue and we put language in the law that stops this practice altogether. Any inspector who pays to be on such a list will be in violation of state laws that regulate the profession. You can see that language, in the Standards of Practice and Ethics, here.
Applicable language is explained below:
An inspector SHALL NOT provide compensation, inducement, or reward directly or indirectly, to any person or entity other than the client, for the referral of business, inclusion on a LIST of recommended inspectors or PREFERRED PROVIDERS or participate in similar arrangements. The purchase and/or use of low-value advertising or marketing services or products that does not exceed ten dollars per item, is not considered inducement or reward.
That makes it clear, and DOL staff agrees, inspectors will not be allowed to participate in paid lists. This rule, again, does not stop realtors from giving out lists of inspectors whom they believe have merit and are qualified. It does keep inspectors off paid lists.
For the record, Washington is not the first state in the Pacific Northwest to slam the door on home inspector participation in this type of marketing. When Oregon's home inspection laws went into effect a few years ago, inspectors there were told that they could not participate in such lists. The applicable language in the Oregon law is below.
"An Oregon certified home inspector shall not.....Directly or indirectly compensate realty agents, or other parties having a financial interest in closing or settlement of real estate transactions, for the referral of inspections or for inclusion on a list of recommended inspectors, preferred providers or similar arrangements."
You can read the detailed explanation for the Oregon law at this link. Since some inspectors, such as those in the major city of Portland, OR and/or Vancouver, WA, serve both states, this law should assure that inspectors on both sides of the state line will not be allowed to participate in paid vendor lists.
Bottom line: In this state, at this point in time, real estate firms, or an affiliated firm, can refer home inspectors who are on the paid preferred lists -- as long as the realtors disclose to their clients that the inspectors paid to be referred. But, that is now -- wait until September. At that time, Washington law is scheduled to follow in the footsteps of Oregon. Any inspector, paying to be on a list, will be violating state law and will risk repercussions or even forfeiture of the home inspection license.
The information above has been based on public information that was available to anyone who seeks it out. This last section to follow is my opinion, so accept it as that. It seems that inspectors who are presently paying to be on such lists, could be caught in a pinch if they commit money to these programs. Paying fees, to be on such a list, and then having to suddenly cease participating in the program, could be a financial drain. As for the real estate firms that give out inspector names from paid lists, it is apparent that the lists will be obsolete come September. At that time, those firms will have to devise another way to refer home inspectors to clients.
Anyone who wishes complete details on this topic should contact the Washington State Department of Licensing.
To see additional information on home inspector licensing in the state, click on George's head.
Steven L. Smith
Bellingham WA Home Inspections
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