Deal killers: A touchy subject

Q: I’ve inspected homes in the Midwest for over 15 years and have performed more than 7,000 inspections. My reputation for thoroughness is widely known among local real estate agents, but this has not always been good for my business. Instead of referring me to their clients, many agents have labeled me as a “deal killer.” The inspectors they prefer are not nearly as experienced or qualified and tend to miss many of the defects that I routinely include in my reports. Homebuyers and investors should know about this unethical practice, so how about taking it on?

A: This may be the most controversial of all home inspection topics. First of all, the fact that agents are the primary source of home inspector referrals is a clear and obvious conflict of interest. Yet most homebuyers never seem to give this a thought. Instead, they routinely hire their agent's favorite inspector, without asking if this is the best one available.

The dilemma for agents and brokers is obvious: They make money when transactions close escrow. Transactions close when buyers are satisfied with the condition of the property. The best home inspectors find more of the conditions that raise dissatisfaction. Less experienced inspectors don't disclose as many of these conditions. For many agents, the temptation to recommend a less thorough inspector is hard to resist. When temptation prevails, the lesser inspector gets the job, while the thorough inspector is labeled a “deal killer.”

So what exactly is a deal killer? The name itself suggests someone who routinely causes deals to fall through. That would be a fair description of an inspector who reports nonexistent problems or who describes defects in an alarmist fashion. Inspectors of that kind exist, but they are not typical. Instead, the deal killer epithet is more commonly applied to those with the greatest ability to discover problems in a home.

Once an inspector has been branded with the DK label, the disrepute spreads like cheap gossip through the grapevine of local agents. When new agents join a real estate office, they are advised by the veteran agents not to use Inspector X, because of his deal killer status. Eventually, no one who does business with that real estate company has the benefit of the best inspectors available.

Some agents whitewash this exclusionary process with a clever sleight of hand. Rather than recommend a particular inspector, they provide their buyers with a list of local inspectors from which to choose. If undisclosed problems are discovered after the sale, the agent can plausibly deny having selected the inspector. By sheer coincidence, the agent's preferred inspector is conveniently placed at the top of the list, hints are dropped as to which inspector is the best choice, and so-called “deal killers,” in most cases, are absent from such lists or are added for good measure at the bottom.

Is this the common practice of all agents? Absolutely not. Is it the practice of many? Sadly, yes. What then is the solution? Essentially, there are two answers: one for agents and one for homebuyers.

Agents should realize that they are not in the business of selling property. If that were the case, their title would be “salesperson,” not “agent.” The proper job description of an agent is “representing the interest of clients.” The highest expression of true representation is to provide total, complete and unabridged disclosure. When a buyer asks an agent to recommend a home inspector, the actual question, regardless of how it is stated, is “who is the best home inspector available?” Agents who recommend someone they do not regard as the best are not representing the client’s interests and are thereby guilty of misrepresentation. If commitment to ethics is not sufficient motivation, agents should consider the matter of personal liability. Every defect that is overlooked by a marginal inspector is a potential lawsuit at some time in the future, and such suits are commonly filed against agents who compromise the disclosure process.

Homebuyers, for their part, should practice due diligence. Trust others for suggestions. Trust yourself for decisions and choices. Your agent may be one of the truly honest professionals who recommend only the most thorough home inspectors. But you don't know that for sure. So compare the qualifications of inspectors. Ask who are the most thorough, most experienced, most qualified home inspectors in the area. You might even come straight out and say, “I want the one they call Deal Killer.”

• Distributed by Action Coast Publishing. Questions to Barry Stone can be emailed to barry@housedetective.com.