June, 2006
From the ASHI President.
Inspection News and Views from the American Society of Home Inspectors

Realtorcentric: What Does it Mean to You?


Awhile ago, I saw a word in an online article that neatly describes a segment of our business that each of us has to contend with and that word is realtorcentric. It describes a business model that revolves around services or activities that support the real estate agent community and the longstanding practice of agents feeding referrals to others involved in the real estate transaction, including home inspectors.

Tracking our referral source should be a routine part of our business so we are able to identify our customer base and address its specific needs. On the surface, this partnership seems to be a natural one, complimenting mutual wants: buyers demand inspections and we are in the business of providing them. However, all silver linings have a dark side. In this instance, the dark side stems from the potential for a conflict of interest between the work goals of the home inspector and those of the real estate community. Home inspections shine a light on a building’s condition that can slow, stop or cancel a sales contract. The real estate community matches the needs of a buyer with a building, then shuffles toward the closing table to finalize the purchase.

Some in our business hold firm to the belief that the two goals can coexist and can do so without consumer harm; therefore, this relationship is part of an acceptable business model. Others argue these activities are mutually exclusive in a marriage doomed to harm the homebuying public.

Unpacking this issue alone will take another president’s message. Realtor-centric relationships have a direct effect on every home inspection business. The conflict is an internal struggle that revolves around a revenue stream of support obtained through referrals. If the referrals stop, the revenue stream dries up, the business suffers or worse. The struggle results over stresses placed on this relationship with each building defect uncovered, each worn or broken component identified.

In my opinion, the real conflict occurs when we attempt to shield buyers and temper their anxiety through carefully filtered report language, recognizing that uncovered defects can result in difficult deal negotiations or a cancelled contract.

Create hurdles on the way to the closing table and the referral source dries up. This is a harsh reality for home inspectors, appraisers, title companies, surveyors, attorneys and others dependent on realtorcentric relationships. It strikes at the heart of the conflict of interest issue that can result in biased inspections. Consumers and the media are becoming increasingly savvy about this relationship. Professional agents understand this distinction and many recognize this conflict.

In my market, I am gratefully witnessing a quiet revolution whereby some agents and agencies acknowledge the role of the inspector and provide no interaction (meddling). They are allowing the buyer unfettered interaction with the inspector without involvement during the inspection…as it should be in an ideal world.

Buyers are adults who have to deal with the surprises of an inspection in a direct way. They can accept the defect, negotiate to a personal comfort level, or not purchase the property. I explain to my clients that I am there to educate them about the building’s condition, not to negotiate defects or determine who does what to whom. To worry about the referral stream by making subtle references to a defect or tacitly providing a light touch approach during inspections is simply wrong, and it can land an inspector in hot litigation water.

According to the 2005 ASHI Business Operations Study, over half of the respondents receive 61-80 percent of their business from real estate referrals, even though 99 percent of them rated word of mouth/past client referrals as their most important promotional tool.

Everyone should have a copy of the study. It contains interesting trends and statistics on what makes a home inspector tick and how we conduct our business. The vast majority of our practitioners rely on real estate agents for their referral leads and business source. To many of us, this comes as no surprise.

As business owners, managers or inspection company employees, we all have days when we wonder if the phones are broken and worry if they’ll ever ring again. On some level, each one of us has to address where our next referral is and how that person came to our company.

Was the client driven to our business influenced by a flashy brochure display in a real estate office, a professionally designed Web site, print or other media ads, or was it that snappy office presentation? Did the referral come from word-of-mouth from satisfied customers telling an acquaintance, friend or office counterpart about the good job your business did when they purchased a home or how much aggravation you saved them during their purchase by identifying those defective items?

Experienced inspectors with years under their tool belts can conclude that if real estate folks are their sole source of referrals, they may need to find out why there are so few satisfied customers promoting their businesses. In the end, we can all agree on the age-old saying that word of mouth is the best form of advertising…our survey confirms it.