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Inspectors and conflict of interest

Published Sep. 13, 2005

Fred Eigenrauch has advice for anyone who is buying a house and wants it inspected for defects: Don't choose one of the inspectors recommended by a real estate agent involved in the transaction.

A growing and vocal minority of professional home inspectors around the country agree with Eigenrauch. They call themselves buyer's home inspectors as distinct from Realtor-friendly inspectors who depend on realty agent referrals for the bulk of their business. Buyer's home inspectors refuse to accept clients referred to them by real estate agents to avoid what they consider to be an inherent conflict of interest.

Eigenrauch bought a home last summer in Lavallette, N.J. When he told the agent who listed the property that he wanted an inspection as a contract contingency, the agent suggested that he choose from among three local "recommended" firms. Eigenrauch picked one, and he has regretted it ever since.

He says the inspector declined to turn on the home's heating system to check whether it was operational. "It's too hot in the summer to do that," he said, according to Eigenrauch.

Four months later, Eigenrauch discovered that the system didn't even have water in it because a baseboard heater had a major leak. The inspector also missed multiple window leaks.

The report the inspector prepared "looked terrific," says Eigenrauch, "but if I had known about the problems the house really had I might not have bought it" or might have negotiated a lower price. Eigenrauch says he has no proof that the inspector intentionally closed his eyes to defects that could jeopardize the sale, but he says he later discovered that the inspector regularly does carpentry and other contract work for the seller's realty broker.

In Chicago, one of the leaders of the buyer's inspector movement, Tom Corbett of Tomacor Inc., says the traditional referral relationship between the realty agent and the inspector entails such practices as a willingness "to limit the scope of (the inspector's) services to those that help close the deal, quick-turnaround, checklist-type, lower-cost inspections that are short on the details that buyers really need.

"The vast majority of home inspectors getting work from (realty) agents are under tremendous pressure to use simplified forms and reports," says Corbett. "Terms like "satisfactory' are substituted for the more common finding of "beyond statistical life, needs repair soon, budget $500.' In this way equipment in poor condition can be passed by the inspector."

Edward P. Fitzgerald, the retired president of Hallmark Home Inspections, of Tappan, N.Y., says in his area realty brokers routinely "boycott and blackball" home inspectors who insist on performing lengthy, detailed inspections. "They call them "deal-killers,' " said Fitzgerald, "and they never include them in their three recommendations."

Fitzgerald, who like Corbett and other critics is a member of the prestigious American Society of Home Inspectors (ASHI), lays part of the blame for the referral system on ASHI itself. Founded in 1976, the 4,400-member ASHI requires members to adhere to a code of ethics and pass competency tests, but ASHI, he charges, has "promoted the referral relationship between Realtors and inspectors" and has developed the "checklist inspection forms" and other practices that are at the core of the conflict of interest.

ASHI's national president, John Palczuk of Raleigh, N.C., strongly disagrees. "Since the real estate (brokerage) community is where the buyers exist," he said, "you have to make the real estate community aware of your credentials."

How do you pick an inspector if you don't want to use agent referrals? Some thoughts:

Ask friends, lawyers and neighbors for their recommendations.

Ask in advance to see the report form the inspector uses. How detailed is it?

Ask how long inspections take. From a potential buyer's viewpoint, faster does not mean better or more thorough.

Ask about the testing equipment the inspector uses. "Some of them literally go out with just a flashlight and a screwdriver," says ASHI buyer inspector Dennis Robitaille of Saugus, Mass. Top-quality inspectors bring carbon monoxide detectors, electronic moisture detectors, electronic listening devices (to hear carpenter ants munching) and other high-tech equipment.

Washington Post Writers Group

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