By William Decker, CMI
(Note: Please be aware that these circumstances exist in the Chicagoland area and in the state of Illinois and are not directly applicable to all areas of the country. Check your local and state laws for more information.)
When you buy a house, you have to get involved with a number of different Real Estate professionals. I would hope that you would hire a professional, experienced and highly trained home inspector firm, like us, but that is not what this article is about.
You will probably retain a mortgage broker or a mortgage banker. They should work with you to obtain a mortgage at the lowest possible rate and help you to qualify for a mortgage is you have a less than stellar credit rating. Depending upon the area you live in, you will probably also hire a lawyer that specializes in Real Estate law to represent you. You will also probably retain a Real Estate Agent to help you to find the right house for your needs and to help prepare some of the documentation needed to buy the property. All these people are usually professionals, although during the recent Real Estate “boom”, sadly, some proved to be real crooks.
Working together, these professionals work to represent your best interests. But there has been a trend, recently, to have the process dominated by one group in particular, the Real Estate Agent and their Brokers.
Most Agents and Brokers are members of the National Association of Realtors. The term “Realtor” is a trademarked name of this association and designates that a particular Agent or Broker is a member of this association. As such, members have requirements for membership which include continuing education and a code of ethics. But, like any industry association, there is also a tendency to try to “control” the entire process. The NAR and its various state affiliates are government lobbyist at the state and federal levels. Lobbying is not, in itself, a bad thing. Legislators need input from industry experts to help them write laws to better protect the public, but sometimes their lobbying is aimed more towards protecting their own interests, at the public’s expense. This is crony capitalism.
As a Home Inspector, I regularly deal with Real Estate Agents. Most are honest, ethical and really work their tails off, representing their clients, and earn every penny of their commissions. But, unfortunately, like any field, there are also some very dishonest agents who will do anything to increase their incomes.
There was a big push, some years ago, to have the states license home inspectors. I agree that setting up minimum standards of education and regulation for a profession is a valid state government function, but in almost every case the guiding force behind these laws was the National Association of Realtors and their lobbyists. Their reason was not to raise the bar on the Home Inspector profession, but to get control over Home Inspectors and intimidate our industry so as to insure that houses “pass” an inspection and sell, thus assuring that the Agents get their commissions. I cannot, for the life of me, understand why anyone would think that Real Estate Agents should have any input or influence over the Home Inspection industry, but political clout seems to set its own agenda regardless of logic.
Here are some thoughts that should guide a potential home buyer or seller when they are picking a Real Estate Agent:
- Is the agent acting, exclusively, as either a buyer’s agent or a seller’s agent? Some agents act in what is called “duel agency”, where they “represent” both the buyer and the seller, thus gaining a commission on both ends. While allowed, by law (there’s that lobbying action again), this is a clear conflict of interest. One agent cannot best represent the interests of both the buyer and the seller, it is an adversarial relationship.
- Does the agent really work to market (for a seller’s agent) your house or do they just “list and forget”? Your seller’s agent should be doing everything they can to put your house “out there” for the public to take note of. This should also include helping you to properly prepare the house to look its best.
- Does the agent look every place they can (for the buyer’s agent) to find the right house for you. Are they looking for a hose that meets your needs, of are they trying to steer you towards a house that is more expensive than you can handle. Do they limit themselves to houses that are listed with their own agency or do they look at every possible house that fits your criteria.
With regards to the home inspection process:
- Does you agent try to steer you towards a particular inspector? If so, this inspector may be “soft” and not inspect the house as thoroughly as they should. Some agents refer to these inspectors as “deal killers”. Are they more concerned with the house’s actual condition, or with their commission? I work with many agents who refer us, pretty much exclusively, but there is never any kind of quid pro quo between us or money exchanging hands. I do my work and the agent does theirs, both to the best interests of the client.
- If an agent provides you with a list of inspectors, ask them if these inspectors have paid the agency a “referral fee”. Sometimes, the agency will charge the inspector to be on the agency’s “preferred list”. They may also refer to the fee as an “advertising fee” and not as a referral fee. In either case, this is a clear ethical violation according to the Code of Ethics of the National Association of Realtors and all the major Home Inspector Associations. It is also against the law in many states. Even so, it is very commonly done.
- Does the agent try to control the inspection? The home inspection process is to be run by the home inspector, not the agent (either the buyer’s or the seller’s agent). Does the agent hover over the inspector or try to explain away any defects that the inspector find?. Does the agent try to speed up the inspection?
- When the inspection report is written, does the agent try to gloss over any of the inspection findings? If there are any questions about the report, the buyer should talk to the inspector and NOT the agent. If a Real Estate lawyer is used, they are the best person to put the inspection issues into perspective.
As previously stated, I work with, and am referred by, many Agents, Brokers and Agencies and I work very hard to coordinate with them for the client’s best interests. That being said, I have also refused to work with some agents who seem to think that I am, somehow, beholding to them. Agents and Inspectors are two different and unique professions, but neither one should control the other.