e010925 Can an inspector do inspections paid for by real estate agents?

Identifier: e010925

Date: 11/06/2001

Question

1.) Is a program, set up by a real estate company, that offers free home inspections paid for by the real estate company a conflict with section 5 of the CoE. 

2.) if, on the application to participate in the program, the inspector is asked to give discounted fees based on the number of referrals they receive to perform inspections for the program? 

3.) Also, is it a conflict if the real estate company [or other entity] only pays for the inspection if the deal goes through, otherwise the buyer pays?

Response

1.) It does not necessarily conflict with section 5 as long as the real estate company reimburses the client after the client pays the inspector or the inspector's client is the real estate company. 

Under this later arrangement, the inspector would typically be responsible to the real estate company as the client, not to another party such as a buyer, and the inspector should be mindful of second paragraph of CoE and section #1 to avoid slanted reporting. 

However, if the real estate company is not the client and the real estate company is dealing with the inspector's client, then accepting payment from the real estate company would conflict with section 5. 

2.) Discounting fees paid by a real estate company based on referrals would conflict with section 2 because such discounts would be de facto payments for referrals to clients (other than the real estate company). Such de facto payments are a deception of the consumers who would expect referrals to be based on competence, not on hidden benefit to the real estate company. However, if the real estate company is always the client and pays the fees, then such discounts would not conflict with section 2.  

3.) See answer to question 1 above. It is not a conflict if the buyer is the client and the buyer pays the inspector regardless of whether or not the real estate company reimburses the buyer. Similarly, it is not a conflict if the real estate company is the client and pays the inspector regardless of whether or not the buyer reimburses the real estate company. 

However, it is a conflict with section 5 if the buyer is the client and the real estate company pays the inspector or if the real estate company is the client and the buyer pays the inspector. 

Additionally, having any inspector compensation directly or indirectly contingent on the inspection results, such as whether or not "the deal goes through", is contrary to second paragraph of CoE to avoid conflicts of interest and contrary to section #1 against slanted reporting.