e010112 Can an inspector pay real estate agents a referral fee?
Identifier: e010112
Date: 07/03/2001
Question
Is it inappropriate or unethical for an inspector to pay a fee back to a realty company for work referred by that company? 2.) Is it inappropriate or unethical for an inspector to pay a real-estate company to advertise as a marketing partner/preferred vendor?
Response
1) Yes. Paying a real estate company for referrals generally deceives or misleads clients who would assume a referral is based on competence, not on hidden payment. Participating in such deception is inconsistent with acting in good faith toward each client as required by CoE paragraph #2.
The client is best served when the inspector's relationship with the real estate company handling the transaction is at arms length. Any agreement or understanding between the inspector and real estate company restricting open disclosure to the consumer about hidden referral fees or other pertinent financial arrangements is on its face unethical since it compromises the consumers legitimate interests to know the circumstances behind the referral that could impact on the integrity of the inspection.
2) Yes. Paying for endorsements or paying to be on an "approved" or "preferred" (or similar) listing is generally similar to paying for referrals and inconsistent with CoE for reasons described above even when called "advertising", "marketing", etc. Furthermore, an "up front" payment to a realty company for endorsement or listing is inconsistent with CoE fourth sentence calling for impartiality. Inspectors fidelity to their clients and the interests of their clients are paramount; actual or potential conflicts of interest created by such arrangements should be avoided.
Paying to advertise as a partner or other special relationship with a real estate company or paying to use logos, trademarks, or other property of the real estate company is (a) inconsistent with CoE fourth sentence because it shifts the inspector's allegiance away from serving only the client and (b) inconsistent with acting in good faith toward each client as required by CoE paragraph #2.
Further, such advertising has the appearance of an interest in a business that may affect clients which is required to be disclosed by CoE paragraph #6. The impartiality of the inspector and his absolute duty of loyalty to the client would have the appearance if not an actual conflict of interest from such arrangement. Such an arrangement could also mislead and confuse the client about the distinction between the inspector and the real estate company handling a transaction.
3) And finally, any undisclosed understanding which is hidden or disguised from consumers involving referrals, endorsements, etc. from real estate companies that is quid pro quo for any action or appearance which would compromise full and honest inspection and reporting is inconsistent with CoE second paragraph and paragraphs #1, #2, and #7. The separation and independence of the home inspector from the real estate company handling the transaction is a cornerstone principle intended to protect consumers.