March, 2007
Feature
Inspection News and Views from the American Society of Home Inspectors



Focus on Ethics

KEITH OBERG

The ASHI Code of Ethics Committee is charged with developing ethics education and awareness for ASHI’s membership, and with answering Requests for Interpretation of our Code of Ethics. Two replies to Requests for Interpretation (RFIs) made within the last year are included below. The first deals with the issue of contingent inspections. If compensation to the inspector is contingent in any manner upon specific inspection results, a serious conflict of interest is created. The second RFI deals with an exclusive referral relationship from a real estate agency without apparent payment to
the agency. The committee was left to wonder what might be hidden within the relationship. In both cases, the
ASHI inspector should be aware of, and guard against, conflicts of interest.

In each of our monthly Focus on Ethics articles, we present one or more RFIs and the responses developed by the Committee since the new Code of Ethics was approved. Our membership is encouraged to submit RFIs to the Committee if serious questions about the intent and applicability of the Code should arise. The necessary form is available at the ASHI Web site under Downloads/ASHI Forms & Documents.

—Keith A. Oberg, Chair, 2006 ASHI Code of Ethics Committee

Request for interpretation

e060426 Billing Through Escrow

Can I bill the inspection fee to be paid upon closing of the inspected property for sale if I have a contract stating that I will be paid in any case should the closing be cancelled for any reason?  

Response

The Code of Ethics states, “Inspectors shall not inspect properties under contingent arrangements whereby any compensation or future referrals are dependent on reported findings, or on the sale of a property.” Since your contract states, as we understand it, that you will be paid whether the house closes or not, your inspection is not contingent on the sale and we see no violation of the Code.

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 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.