e060605 Exclusive relationship with Broker

Identifier: e060605

Date: 06/05/2006

Question

Is it ethical for an inspection company to be listed on a real estate firm's preferred vendor list when no other inspection companies are listed, and to receive all of the real estate firm's inspection referrals, if no payments are being made for the privilege?

Response

The circumstances presented in the inquiry do not constitute a violation of the Code of Ethics.  It is not unethical under the Code to be the sole inspection company referred by a real estate agency.

However, it is highly unusual for a real estate agency to take on the liability associated with referring a single home inspection company to its clients, unless significant financial incentives exist to do so.  Such inducements might include inspection reports that “go easy” on the house, routinely fail to disclose defects that could derail real estate sales, or intentionally fail to meet the requirements of ASHI’s Standards of Practice.  There may also be contingent arrangements, where future referrals are dependent on specific findings, or some other form of hidden or indirect compensation to the agency.  These inducements or arrangements would clearly violate the Code of Ethics.

In addition, an exclusive arrangement may appear to the public as a prima fascie conflict of interest, and may be a violation of law in some states.  Given these circumstances, we recommend that any home inspectors who find themselves in this type of situation should exercise caution and consult with their attorney.

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