How can a buyer that cannot afford an inspection afford a house?
It is my understanding, that in some areas of the country, it is common, or becoming common, for the home inspector to not get paid until closing. I am doing my best to understand the reasons for this practice. Where is the money coming from if it is not ultimately coming from the buyer?
What I am seeing all too often is a lot of first time home buyers that are buying homes—-usually foreclosures and short sales—–and they have “0” reserves to handle the many repairs associated with these homes.
While the “Dream” of owning a home may be strong, if it just creates more houses that end up in even more houses deteriorating and/or ending up in a second wave of foreclosures and short sales, have we “really” served the buyer well? Aren’t we just adding to the “Nightmare?”
These buyers used to be called “Renters”—–why are we so intent on turning them into “Home Owners?”
I find it difficult to not think that somehow the sale has become more important than the people involved in the sale.
I can easily argue that if a buyer can’t afford the inspection fee—-they sure as hell can’t afford the house.
By Charles Buell, Real Estate Inspections in Seattle
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Mark Parlee says
Charles
Good points as usual.
I make the point with some of my clients “so this is your dream home” remember a nightmare is also a dream. Sometimes the “dream” is so strong they will only see the chocolate coating and not realize what is at the core.
Kevin O'Hornett says
An agreement to defer payment for the inspection until closing only benefits customers and real estate agents, not inspectors. Agreeing to such an arrangement leaves inspectors open to several potential concerns. What happens if the transaction falls apart and closing doesn’t occur? It doesn’t matter if the customer agrees to pay an additional fee to defer payment until closing nor does it matter if the customer has signed a contingency agreement to pay the inspection fee should the transaction fail to close. The inspector still has to invest additional time and keep additional records to track closings and may have to “chase down” the customer for payment closing doesn’t occur. If no such agreement has been made between the buyer and the inspection company and the transaction fails to close, the inspection company often never receives payment for the inspection.
Keep in mind that an agreement to “escrow” funds tendered by the buyer to the seller and typically held by the title company or by an attorney in an ”escrow account” is an agreement between the parties to the real estate transaction – the buyer and seller. The inspector has nothing to do with this agreement and is not a party to it. However, when inspectors agree to defer payment until closing, they create a situation which could have the appearance of a conflict of interest. A case could be made for such a conflict of interest by pointing out that inspectors who tie payment for inspections to the closing are no longer disinterested third parties. Such inspectors have a financial interest in having the real estate transaction successfully close and, therefore, might weight their findings to reduce the potential for the transaction not closing.
Charles Buell says
Kevin, very well put.
Thom Walker says
I follow the philosophy that I am not supposed to take every job I am offered. Not going to escrow has cost me very few jobs over the years. I will not be a party to selling someone a house they can’t afford; and as you all have said if they can’t afford the inspection, how can they afford a house. It’s unbelievable to me that the housing bubble is partially inflated already. The cycles are getting shorter.
Ross Neag says
We are lucky that its a practice uncommon in Illinois, or very very rare. To add another layer of complexity to compensation would be a nightmare at our volume. We’ve toyed with adding a small discount to pay upfront prior to the inspection but felt that might push even the see-sawers to another vendor.
Simply put, we add a force pay feature to the report that prevents them from viewing until we are paid. About 1 in 20 pays by check today and that’s fine by us b/c checks are just one more thing to take care of.
Charles Buell says
Ross, I get paid by check 99 percent of the time—the other 1% pay with actual green money 🙂