An Ugly Side of Home Inspection

True story.

While conducting a home inspection on a particularly large property in Kalamazoo County, a local real estate agent decided to engage in some small talk. About home inspectors. It turns out that this particular real estate agent lives in the same neighborhood as a local home inspector. His opening comment was that this particular home inspector living nearby "likes to engage in politics."

"Politics?" I asked. Yes, politics, apparently. Or at the least, unethical business practices.

As the story was related, the neighborhood home inspector had a friend--who happened to be another home inspector--who wanted to purchase a house. The house was apparently too costly, so the home inspectors entered into an unwritten agreement that the neighborhood home inspector would inspect the house for the other inspector, documenting problems and deficiencies that did not exist, and exaggerating the problems that actually did exist. Thus the home inspector wanting to buy the house in question would be able to ask for reductions in the sale price. It was not revealed whether or not the property actually sold.

The truthfulness of this story could not be verified, but it would seem that this particular real estate agent had little or nothing to gain by relating this story to me. This story is not shared to point fingers at anyone. It is shared to illustrate yet another reason that home inspectors should be licensed in Michigan.

It is unknown whether the inspectors involved are members of any home inspection association, or whether any association they may subscribe to has any code of ethics, nor whether this particular real estate agent reported the inspectors involved to any association. Some might suggest that the real estate agent may have been sharing this story out of frustration that nothing could be done about the home inspectors in question, and that might be a valid point. Historically, home inspector associations have not made disciplinary records available to the public, so it is difficult to ascertain what associations do take action on complaints.

Though it is likely too late for the Michigan House to act, House Bill 4014 (2011) would license home inspectors in Michigan. Introduced by Democrat Richard LeBlanc, HB 4014 has been held captive by the House Regulatory Reform Committee (Hugh Crawford, Chair). A recent conversation with Representative Crawford's office will shed some light on some possible reasons why the committee chairman has neglected to bring this very important legislation to the committee's attention.

Slate Roofing

A caller several weeks ago inquired about inspecting a home with a slate roof.  The caller had been told by previous home inspectors that she had contacted that a separate inspection was necessary, and that it needed to be performed by a specialist in slate roofing.  She evidently had bought this suggestion hook, line, and sinker.

The truth is, any competent home inspector should be able to inspect a slate roof.  In this particular circumstance, the roof appeared to be an artificial, or manufactured, slate roof.  The roof shingles likely contained asbestos, based on the age and appearance of the shingles, and the rear of the house had been re-roofed using laminated asphalt shingles.

Slate roofs are not difficult to inspect if the home inspector is competent and knowledgeable regarding slate and manufactured slate roofs.  The inspection process itself is very similar to the inspection of any other type of roof; investigating for signs of damage or leaks, looking for missing or loose shingles, investigating for signs of improper installation or alteration, and so forth.

If a home inspector is properly trained, there should be no need for an additional roof inspection during the home inspection process.  The roof should be inspected as part of any competent home inspection.  Substantive training in home inspection will include slate roofing, so a good home inspector will be able to inspect and report on the condition of a typical slate roof.

Renegotiation A Problem?

In a recent Market Watch article (The Wall Street Journal), writer AnnaMaria Andriotis discusses the real estate recovery.  According to the article, which quotes the National Association of Realtors (NAR), 36% of real estate agents report "some kind of problem" between the buy-sell agreement and closing.  One item mentioned is "renegotiations of the sale terms."

Renegotiations typically result from new information revealed during the appraisal or home inspection.  The article specifically states "appraisals have been derailing home sales in cases when the appraised value of the home comes in lower than the purchase price the buyer and seller had agreed to."  What Andriotis fails to mention is that this often occurs when the appraiser is actually doing their job, and refusing to inflate the value of a property as was often done in the past, and was a primary cause of the real estate collapse.  The same may be true in the case of home inspections, where the home inspector properly and honestly reports the true condition of the property.

What Andriotis fails to address is the real issue, that the majority of properties on the market at present are in far worse condition than sellers or real estate agents are willing to admit, and when the actual value or condition is revealed to the buyer, buyers are now more willing to insist on renegotiating the buy-sell agreement or walk away.  As is said in negotiations, no deal is better than a bad deal.  Buyers are waking up to that reality.  The twist of the article seems to be that this is a bad thing.

The truth of the matter is that it is a good thing when a buyer attends to the details, which include researching proper permits for work done on the property, having an appraisal done by an honest appraiser, and having a thorough home inspection performed by a competent and professional home inspector who answers only to the buyer.  This is a reminder that, even in this day of high technology and open information, the warning "buyer beware" still holds true.  Honestly, it is more true today than it was in the past.

If you are purchasing a home, pay attention to the details.  It may save you more money than you could imagine.  Surround yourself with professionals with integrity who will focus on your interests only.  And still, beware.

Michigan Supreme Court Ruling

The Detroit News reported on 17 August 2012 that installers of appliances have no legal duty to warn homeowners about observed safety hazards.  The case involved installers of an electric dryer.  While installing said dryer in the home of a Clinton Township (Michigan) resident, the installers observed an uncapped natural gas line.  Some time later, the home owner opened a gas valve supplying the uncapped line.  An explosion resulted, severely injuring the homeowner and her children.

In a 4 to 3 ruling, the Michigan Supreme Court ruled that the appliance installers had no legal duty to warn the homeowner about the danger.  The court apparently did not comment on the installer's moral or ethical duty to warn the homeowner.  Nonetheless, the appliance installer could have avoided a lawsuit, and done the morally correct thing, by putting in place a policy that any uncapped natural gas lines be capped when installing an appliance.

Who Are The Stakeholders?

Many home inspection firms are operated as sole-proprietorships or owner-operated limited liability companies. The differences are minimal, but the point is that home inspection firms are typically small companies. So this narrows down who the stakeholders are relevant to any decision made by a home inspection firm. The stakeholders become the home inspection firm, and stockholders or investors, and the clients that the firm serves.

Over the years, many professional home inspection associations have suggested that stakeholders include the seller of a property, the real estate agents involved, and the mortgage broker in addition to the home inspection firm, investors, and the firm's clients. This is improper and wrong. Real estate agents have no interest in the home inspection firm, therefore they are not a stakeholder. Likewise with the seller of a property, or a mortgage broker. While these parties may be indirectly impacted by decisions made by the home inspection firm, they have no legal or financial interest in the firm. They should not be considered stakeholders.

Home buyers should be wary of home inspection firms that consider parties that do not have a financial or legal interest in the firm as stakeholders. This will more often than not muddy the agency dilemma faced by the home inspection firm, and could create a scenario where the client's interests are not a priority. As the saying goes, buyer beware.

Radon Action Month

Michigan Radon Action Month is January, and this year it seems to have passed by without a lot of attention. Radon gives off radiation as it deteriorates. As a gas, Radon is easily inhaled, and tends to attach itself to dust and other particulates in the air. Once Radon enters the lungs, radioactive solids are formed as the gas deteriorates. As these solids sit in the lungs, they give off radiation, which can alter the makeup of lung cells, thereby causing cancer. The only way to know if your home has elevated Radon levels is to test for Radon. There are many ways to do this. Some methods are free, such as procuring test canisters from your local health department, exposing them as directed, and sealing them and sending them to a lab for analysis. For more reliable tests, professional testing can be done. This typically costs between $95.00 and $130.00, depending on the testing agency and method. If you have not tested your home for Radon, please consider doing so. It could save your life.

Field Notes: Real Stories from Home Inspectors

1. A home inspector found termites in the garage of a home that was going to be purchased and renovated, then used as a rental. The bank refused to underwrite the loan for the buyer on account of the termites. Both the buyer and the buyer's real estate agent asked the home inspector to falsify his report, and retract the information in the report about the termites in the garage. The inspector refused.

2. A home inspector arrived at the house to be inspected, and received a telephone call from the bank employee doing the paperwork for the buyer's loan. The banker tells the home inspector that there can be nothing negative in the home inspection report, or the loan will not go through. The banker is married to the real estate agent representing the buyer. The home inspector refuses to compromise his integrity.

3. The home inspector performs a Radon test along with the home inspection, and the results come back high. The real estate agent suggests that the home inspector falsified the results. The inspector uses a continuous Radon monitor that is calibrated annually. Falsifying the data would be hard to do.

4. A home inspector performs a home inspection while the buyer is detained by the real estate agent in the living room. The buyer's son accompanies the inspector through the inspection. Several problems were found and reported, both verbally and in writing. Months later, the real estate agent is caught lying about the home inspector, claiming that the inspector failed to find various items, in an effort to dissuade a buyer from using that inspector. The real estate agent is successful in her efforts to manipulate the buyer. The home inspector is preparing to sue the real estate agent for slander and defamation of character.

5. A real estate agent has been working with a young family on finding a home. After the third home does not proceed to closing, the real estate agent suggests to the home inspector, on the fourth home, that the home is in very good condition and should not have any thing wrong with it. This is the third inspection that the inspector has done for this buyer. One of the previous inspections was done by an inspector claiming to be HUD certified. HUD does not regulate home inspectors. The real estate agent had been successful in lying to the buyer that they needed a HUD certified inspector for that inspection.

Not all real estate agents are deceivers and cheats. But many of them seem to be. The writer does know of one real estate agent who will not compromise his integrity under any circumstances.