I did not realize that a few of my standard professional activities could be perceived as negatively affecting a client. After reading a few posts by consumers on the r/realtor subreddit, I felt the need to write about this topic to add clarity. I can see why they may draw the wrong conclusions, so let's dive in.
What is this topic I am speaking of? Referring professionals such as home inspectors, and contractors. The pervasive myth that an alarming number of consumers believe is that Realtors are incentivized to recommended home inspectors and contractors that will minimize issues to facilitate a sale, and that a way that we do that is by providing kickbacks to these professionals for them to provide a positive evaluation.
This myth could not be further from the truth. I, like many Realtors that I know, like my job. I want to do it for the rest of my life. In order to ensure a long career in real estate, I need to avoid being sued as much as possible. The absolute best time to find problems with a home is BEFORE A BUYER CLOSES ON THE SALE. Regardless of whether I'm representing a Seller or a Buyer in a transaction, I am highly likely to be brought in as a defendant in a lawsuit if a Buyer uncovers a defect with the home they just purchased. And if I am representing the Buyer, I want them to refer my services to all of their friends and family. That will not happen if I collude to sweep major issues under the rug. As if that wasn't enough of an incentive to provide qualified services, providing kickbacks to a contractor or home inspector is illegal and can come with steep penalties up to and including a revocation of our professional licensing. And before you say that proving kickbacks occurred is difficult, I hike with a construction defect attorney that loves suing Realtors because the Errors and Omissions insurance payout is exceptional (he's a great attorney, ask me for his number), following monetary payments to contractors and inspectors is actually very easy; most criminally minded real estate agents do not hide their tracks. (And yes, by sharing this story I am acknowledging that there are bad actors in our industry, taking the time to vet your Realtor is vitally important to your home buying journey).
So, here are four reasons why Realtors love to recommend home inspectors and contractors.
Communication. We attend hundreds or even thousands of home inspections throughout a typical career. One of the most important characteristics we look for in our professionals is their communication styles. How do they articulate the facts of the situation. Are they using industry lingo to explain common issues to first time home buyers? In regards to contractors specifically, are they accurately confirming or rebutting a home inspectors findings in a way that appropriately acknowledges the home inspectors opinion, or is the client left feeling like it is a "they said/they said" situation and no one knows the reality of the issue? We need a home inspector that can relay accurate information in a style that does not either brush a major issue under the rug, or spook a client into making a rash decision, AND we need a contractor that can validate the inspectors concerns and provide a more detailed explanation of the problem or concern. One common issue I have seen is inspectors that are not prepared to review the entire report with clients at the end of an inspection, choosing instead to walk around and point out areas of concern. Recently a client chosen inspector did this and then frantically called several days later after realizing they forgot to point out a huge crack in a foundation wall.
Price. Regarding home inspections, pricing is generally set by the market. A quality home inspector charges pretty much the same price for their services as the next one. There are so many home inspectors in our market, the ones charging exorbitant fees are rare. A good home inspector knows their value and won't discount their rates. So when a Buyer wants to hire their own inspector because they "got a deal and saved hundreds of dollars" GIANT red flags pop up for me. Generally speaking, you get what you pay for. Regarding contractors, we see bids (or estimates) all the time. We know the contractors that are notorious for providing high bids. We also know the contractors that provide low bids, then bump the price up during construction with change orders. More importantly, we know not all contractors perform the same services. Sewer repairs are a great example of this. Let's say there is some significant root intrusion at an offset joint in the sewer line that needs to be repairs. We know contractor number one can provide a competitive bid to dig and replace the line and that work is going to cost $17,000. However, we also know that contractor #2 provides a Cured In Place (CIP) pipe lining that can repair the line without costly digging, and it will cost a fraction of the cost ($4500.00). Both repairs will work, but one is clearly the cheaper option.
Timing. A typical due diligence period for an Oregon or Washington transaction is 10 days. In that time, we need to have the general home inspection done and any follow up inspections by contractors performed. This is not a lot of time to find a qualified contractor to fit the inspection into their schedule and to provide a written estimate for any necessary repairs. It's typical for a Realtor like myself to be locked away for 24 hours frantically calling electricians, sewer contractors, plumbers, etc.. desperately trying to find one that is available on short notice. While we absolutely appreciate if our client knows an electrician that may be able to help identify an issue and provide an estimate for the work, the reality is that those contractors may not be available for weeks or even months out.
Service. We consider these recommendations as a part of our professional services. As I mentioned above, it is difficult and time consuming to find contractors on short notice. We do the legwork for our clients to make it easier on them. It is such a hassle that I would gladly hand off the responsibility of doing this to a client, but most of the time clients don't have thousands of transactions and experience to know what contractor needs to be called and what questions and information needs to be relayed to get the most accurate bid. Do we need a concrete contractor to respray a foundations skim coat, or do we need a foundation contractor first to perform work on the underlying structure? Most buyers and sellers don't know the difference, and that OK, they don't do it for a living.
Across the board, when a client has hired a home inspector on their own, it has been a detriment to the process. Inspectors have failed to provide reports in a timely manner, performed portions of the inspection outside of their expertise (such as sewer scopes and radon testing without proper equipment), or failed to find specific issues that proved to be extremely damaging.
And while I pride myself in doing the best job possible for my clients, it is important to keep in mind that homes are, generally speaking, OLD and even when new will need work. Equipment will break and we cannot change that. As sellers move out and buyers move in, the stresses on mechanical equipment change, it doesn't even need a big change like a husband/wife empty nest moving out and a family of four moving in to be stresses on systems in a way that expedites their failure. Simply having different people with different routines move in can be enough to break a previously operating system like a hot water heater or dishwasher. A home warranty may be helpful for these situations, but that is a topic for another day.