Real Estate Broker Relationships

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.

Two requests received by the committee within the last year appear below. Both are answered based on the new Code of Ethics, approved in June 2004, and relate to home inspector relationships with real estate brokers.

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.

— Bill Loden, chair, 2008 ASHI Code of Ethics Committee

Request for Interpretation

e060605 Exclusive relationship with broker

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 in-quiry 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 facie conflict of interest and may be a violation of law in some states. Given these circumstances, we recommend that home inspectors who find themselves in this type of situation should exercise caution and consult with an attorney.  

Request for Interpretation

e060706 Hiring a real estate brokerage for marketing

If my company were to offer an annualized home inspection (inspect the home every year) to the homeowner with the service unrelated to any and all real estate transactions, closings or estate settlements, could I pay a third party, a licensed real estate broker, etc., to market the service for my company for the marketing and administrative services performed in the placement of the annual home inspection service business? 

The payment to the third party, licensed real estate broker, etc., would be a good-faith estimate of the third party’s expenses for promoting, advertising and soliciting the business.

Naturally, the agreement for payment between the inspection company and the third party, the real estate broker, etc., would have to be disclosed on the agreement between the homeowner and the inspection company.

Response

The Code of Ethics states that “Inspectors shall not … compensate realty agents … for the referral of inspections.” You would, at least in part, be paying a real estate agency for referrals and, therefore, technically in violation of the code.

Any business relationship with a real estate broker that involves payment for referrals can clearly result in potential conflicts of interest to the detriment of the home inspector’s consumer and the integrity of the inspection report when that consumer is a prospective homebuyer. Presuming that you will also be dealing with the same broker with regard to inspections for homebuyers, the intertwining of financial arrangements between the real estate broker and the home inspector can create at least the appearance of a conflict of interest for the inspector’s homebuyer clients.