Code Says “No Can Do” to Collecting Referral Fees and to Inspect & Invest
The ASHI Code of Ethics Committee is charged with developing ethics education and awareness for ASHI members and answering Requests for Interpretation (RFI) of our Code of Ethics.
When serious questions arise about the intent and applicability of the revised code, members are encouraged to review previous requests and responses on the ASHI Members Only Web site under Resources.
If there has not been a request for an interpretation to a similar situation, please submit your question using the required RFI form, which can be found under Downloads/ASHI Forms & Documents.
We will continue to provide the members with the committee’s response to the questions posed by their fellow home inspectors. This response is based on the revised Code of Ethics, approved in June 2004.
— Bill Loden, chair, 2009 ASHI Code of Ethics Committee
Request for Interpretation
E 080527 Can an Inspector Get Referral Fees From a Contractor
Can an ASHI member perform safety inspections or other inspections and use these inspections to generate referrals for contractors who are willing to pay a referral fee to the inspector?
Response
Part of our responsibility to our clients is to provide advice and counsel based on our professional judgment. The client must be able to rely on the inspector to provide that advice based on the best interest of the client, not based on the payment of a referral fee or some other inducement. Limited inspections on homes must still be performed in accordance with the ASHI Code of Ethics. Accepting referral fees in the case described in this RFI is prohibited.
Request for Interpretation
RFI e080822: Does an IRA Loan Make a Purchase at Arms Length?
Can my IRA loan money to an investor to buy a house that I inspected and use the house as collateral on the loan? I can’t see where a positive or negative inspection result could have any influence, but technically, it is a “financial interest” at arms length.
“Financial interest” is very broad. If my IRA loans money, my family and I cannot own, manage or work on the property once the loan is made. The only connection is that my IRA’s loan has the house for collateral – very arms length, but still a financial connection.
Response
As you state, loaning money to a buyer for a real estate transaction does result in the inspector having a financial interest in the property. As the owner of the funds in an IRA, you are not at arms length in the financial transaction; therefore, this is prohibited by the Code of Ethics in Paragraph 1.A. This does not prohibit an inspector from investing in property; however, any inspections would be performed as a part of the inspector/investor’s own due diligence and not as a fee-paid arrangement with a client.
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