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Home Inspector Working RE
Summer 2020, Volume 13
INSPECTING DURING A PANDEMIC How to Get Clients on Your Schedule Recession-Proof Your Business Anatomy of a Demand Letter O ATE F THE ST
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Home Inspector Working RE
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Summer 2020, Volume 13
From the Editor by Isaac Peck, Editor
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Readers Respond
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Inspecting During a Pandemic by Isaac Peck, Editor
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How to Get Clients on Your Schedule by Bill Compton, Inspector Call Center
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How to Recession-Proof Your Home Inspection Business by Ian Robertson, Inspector ToolBelt
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Metal Fireplaces and Chimneys—The Science Behind Your Inspection by Tom Feiza, Mr. Fix-It, Inc., HowToOperateYourHome.com
Using Sewer Scoping to Grow Your Revenue By Mark Raumikaitis, InspectorCameras.com
Insurance IQ: Reading Your Policy by David Brauner, Senior Broker at OREP.org
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Home Inspectors & Coronavirus: National Survey Results by Isaac Peck, Editor
Same House, Second Inspection: What Now? by Reuben Saltzman, Structure Tech
Anatomy of a Demand Letter by David Brauner, Senior Broker at OREP.org
Professional Marketplace
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Working RE Home Inspector is published to help home inspectors build their businesses, reduce their risk of liability and stay informed on important technology and industry issues.
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Published by OREP Working RE is published by OREP, a leading provider of home inspector insurance nationwide. OREP has a low cost, broad coverage E&O and GL p olicy. Coverages available include radon, infrared, termite, pest/rodent, lead paint, mold, septic, and more. See inside front cover for more or visit OREP.org today! OREP–Organization of Real Estate Professionals Insurance, LLC. Calif. Ins. Lic. #0K99465
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Working RE Inspector Summer 2020
Editor Isaac Peck: isaac@orep.org
Assistant Editor and Designer Ariane Herwig: ariane@orep.org Working RE Home Inspector is published tri-annually and mailed to home inspectors nationwide. The ads and specific mentions of any proprietary products contained within are a service to readers and do not imply endorsement by Working RE. No claims, representations or guarantees are made or implied by their publication. The contents of this publication may not be reproduced either whole or in part without written consent.
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From the Editor
The Obstacle is the Way by Isaac Peck, Editor
I just finished reading “The Obstacle is the Way,” a book by Ryan Holiday that I would recommend to anyone who is struggling to make sense of our new COVID-19 reality. I actually found the book by reading a blog post put out by Reuben Saltzman, President of Structure Tech, a leading home inspection firm in Minneapolis, MN. Saltzman has been posting diligently to his blog for over 11 years, an example of discipline and consistency for the rest of us, to be sure. As we collectively face the challenges of the COVID-19 lockdown, including the health risks to ourselves and our families, the decline in our business revenue, and the economic contractions in the larger economy, I think it’s important to maintain perspective and realize that no matter the difficulty or challenges ahead, there is a way forward. There is opportunity in every adversity. For example, a study by the Kauffman Foundation found that 57% of all of the companies on the Fortune 500 list were started during a recession or bear market. One of the stories that Holiday retells in his book is that of Dwight D. Eisenhower in World War II. The Nazis, who had used their infamous blitzkrieg tactics to roll through France and repeatedly overwhelm Allied forces, were now threatening to throw U.S. forces back into the sea. In the face of his deflated and nervous generals, Eisenhower declared: “The present situation is to be regarded as opportunity for us and not disaster.” And so, Eisenhower saw that the Nazis’ strategy contained within itself the path to America’s victory. As Holiday puts it, the Allies were then able to see “the opportunity inside the obstacle rather than simply the obstacle that threatened them.” What was the Allies’ winning response? To bend, not break. When the Germans launched their all-out blitzkrieg offensive, the Allies bent just enough to allow tens of thousands of German soldiers and panzer tanks to rush headfirst into a trap, or as Patton referred to it, a “meat grinder.” They bent but did not break. Holiday also tells a rarely mentioned story of Thomas Edison’s life. No, not the “The present situation one where he failed over 1,000 times while perfecting the lightbulb and persevered is to be regarded as until he finally succeeded; although that’s a good one to keep top of mind. At the age opportunity for us of 67, Edison’s entire factory and laboratory caught fire and was unable to be saved. Standing in front of the blaze with his son, he said excitedly: “Go get your mother and not disaster.” and all her friends. They’ll never see a fire like this again.” He wasn’t emotionally devastated, nor did he throw his hands up in defeat. He immediately accepted what had happened and began taking action to rebuild. He was quoted in the New York Times as saying “Although I am over 67 years old, I’ll start over again tomorrow.” Despite losing over $1 million in the fire, Edison proceeded to get his factory back up and running within weeks and his business grossed over $10 million that same year ($200+ million adjusted for inflation). These are valuable examples for us to consider as we face our own challenges and obstacles in today’s trying times. There are many things in life we can’t control, but we can control our attitude, our perception, and the actions that we take in response. Inside this issue, you’ll find feedback and advice from several home inspectors who survived the economic crash of 2008 and came out stronger for it. You’ll also find very timely advice on marketing, operations, and risk management, as well as valuable products and services you can explore to make your company more resilient and competitive. And if you’re shopping E&O insurance and looking for a way to manage expenses, OREP.org is offering low down-payment financing with affordable monthly payments to help you reduce costs and stay protected. You can now compare price and coverage right on our website with a quick application that takes less than five minutes to deliver a quote. Visit OREP.org/inspectors to learn more. Thanks for reading! WRE
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Working RE Inspector Summer 2020
Readers Respond Coronavirus Home inspection and real estate are not essential! Food and medicine are. At great risk to the general public as well as to buyers, sellers, real estate agents, home inspectors and all of their families, showings and home inspections are taking place almost as usual in Massachusetts. This shows a blatant disregard for self and/or others. I feel very fortunate that my employer made a leadership call early on to stop inspecting. Risking the well being of the general public is criminal. —Jack Mason Here in central shoreline CT I have stopped doing inspections due to the current health issue. We are standing by to determine when it may be reasonable to start back up. It was a twofold decision to stop. My wife and I are in our 60s, and she is immunocompromised. That aside, not only do we wish to not be infected, you can be a carrier for weeks and not know it. We would be devastated if we inadvertently took this to innocent homeowners. We usually do 10 inspections a week. Do the math. For now we feel “Stay Home, Stay Safe” is the best for our families, clients, and the country! —Ron Griffith Here in TN it is business as usual. Home inspectors are considered an essential business as a part of the real estate
transaction. I use a lot of gloves, disinfectant, shoe covers, face masks and prayer. —Tim Fuller
Inspecting the Wrong House I did that too and could have gotten SHOT. I was charged with checking out some supposedly “vacant” home, and the house number was wrong, so I was directed to the wrong house. The address had a typo. Fortunately I explained to the occupant what was going on, and got the correct address, which was vacant. On other such occasions I’ve found the houses to be occupied by squatters. So whenever I do such inspections now, I knock first, and if somebody answers, I’ll tell them I must have the wrong address, go on my way, and report the situation accordingly. —Frank Bartlo I had almost completed a new construction inspection when my agent called to ask where I was. Obviously, I was inspecting the home! Unfortunately, the builder had installed the same street address on two houses about three houses apart. GPS didn’t have the street and I didn’t notice the “other” street number farther down! —Keith Rogers WRE
Working RE Inspector Summer 2020
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Inspecting During a Pandemic by Isaac Peck, Editor
Like
many small business owners, home inspectors across the country have been struggling to maintain operations and navigate the dangers of the COVID-19 pandemic. Starting in late March, state Governors quickly began passing “Stay-at-Home” Executive Orders that shuttered all but “essential” businesses. While there was initial confusion over whether home inspectors are considered “essential,” the great majority of states carved out exemptions either directly for home inspectors or for “real estate services” broadly. Pennsylvania is one state that appears to have completely forbidden home inspectors from operating, along with all real estate services. Other states, like Michigan, did offer an allowance for home inspectors, but still failed to exempt real estate agents, essentially shutting down the vast majority of real estate transactions in the state.
Even in states where real estate services are considered essential, business is down substantially as of this writing (mid May). According to ShowingTime.com, in the peak of the lockdown (late March/early April), real estate showings across the country declined in aggregate by 50% compared to the first week of 2020. And compared to the same time last year, the decline was nearly two-thirds of last year’s spring volume (See pg. 8, Figure 1: US Nationwide Real Estate Showings). Looking at the data, it appears that showings have been climbing back since April 10th, and as of late May, showings were up nationally by 3% compared to the same period in 2019. (To see how real estate showings are in your market, visit WorkingRE.com/showings.) In the midst of this decline in business, home inspectors have also been facing the dangers of visiting a property. They are trying to maintain social distancing and avoid putting themselves, their clients, and their own families at risk. Here’s a snapshot of the challenges faced by home inspectors and the inspection industry as a whole. Stopped Work Voluntarily According to the OREP/Working RE’s Coronavirus: National Home Inspector Survey, Over 20% of inspectors reported a complete work stoppage, with an additional 45% experiencing a 50% or greater decline in business. Over 1,000 inspectors have completed the survey at the time of this writing. (The OREP/ Working RE survey is still open; see details below.) In some states, like New York, home inspectors are considered “essential” and have been allowed to continue operations. 6
Working RE Inspector Summer 2020
However, not all home inspectors have chosen to continue inspecting through the pandemic. John Smith (name changed for privacy), a home inspector in NY, says he stopped inspecting on March 23 to protect both himself and his family. “To me, it’s just not worth the risk for yourself and your family. As home inspectors, we are in the dirtiest spots of the house and we are constantly touching things that people avoid in public places. How do I decontaminate myself properly? I don’t think there’s a way to completely decontaminate yourself even between inspections. So I think it’s playing with the lives of others and the lives of myself and my family. If we were doing safety inspections or going in and protecting people, I think it’d be different, but these are just real estate transactions; it can wait a few weeks,” says Smith. The COVID-19 pandemic hit esp ecially close to home for Smith since a local Realtor® he knew passed away due to COVID-19. The Realtor® was in his late fifties. “I knew him personally and it definitely had an effect on me. He was a well-known real estate agent in the area and was well-liked by everyone,” reports Smith. Smith’s firm has several employees, all of whom are now collecting unemployment. In terms of when he plans to reopen, Smith says that he’s waiting for it to be relatively safe for all involved before he starts entering homes again. “My strategy is that you should never be the first with a pitchfork, but never the last to the table. I’m waiting for us to get halfway down the backside of the curve. When it looks like agents are able to go back into houses and people are getting used to it, then we’ll be back out doing home inspections,” says Smith. Lock Down Mark Melton, owner of Huron Inspections, LLC in Smiths Creek, page 8 8
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Figure 1: US Nationwide Real Estate Showings
Michigan is a staunch advocate of continuing operations as a home inspector. “Sheltering in place potentially has many greater risks than the course of the disease. People without work are more likely to become alcoholics, drug users, commit crimes, and hurt themselves or others. Additionally, people do not normally buy homes for the fun of it. They are moving because of work and life changes beyond their control. We should not be attempting to stop their ability to find shelter and a place to decrease the risk of catching the virus. The interactions required for real estate transactions from beginning to end are less than getting groceries or completing other allowed activities. While following the CDC guidelines, inspectors can continue to work and protect themselves and others,” argues Melton. Melton’s willingness to perform home inspections doesn’t mean his business hasn’t experienced a harsh blow due to COVID-19. Starting in early April, Melton says he saw a 50% decline in business, followed by a two-week period where he only performed a single home inspection. This is because real estate agents were not exempt from Michigan Gov. Gretchen Whitmer’s “Stay at Home” Executive Order, so even though home inspections were allowed on properties already in contract, the flow of work essentially dried up within a few weeks of the Order. Melton says his business has slowly been picking back up since late April, and his phone has started ringing again. He hopes to schedule four to five home inspections next week and says it looks like business is back on the rise. “I think by late May and June we will really start seeing an increase in sales and inspections. People are going to be anxious to get back to normal life, including the plans that many had to buy and sell real estate. There’s going to be a big boom because of pent-up demand,” says Melton. Diversification One of the things that helped Melton keep his head above water in April was that he also has a mold remediation business. “A few years ago, I decided to diversify and start a mold remediation 8
Working RE Inspector Summer 2020
business on the side. I haven’t worked hard building it, but it did help even things out. I actually got payment for a job in April and that kept me alive during those two weeks I wasn’t working. It’s been a struggle to keep my head above water with such a big decrease, so I’m thankful for the side work,” says Melton. Dave Klima, co-founder of InspectedHouses.com and President of Aardvark Home Inspectors Inc., says that Aardvark has seen a decline across the board in terms of home inspections, with its Michigan sales falling through the floor when real estate agents were deemed non-essential. Aardvark also has a pest control division, Aardvark Pest Control, as well as a mold testing and remediation business and a radon testing and mitigation business, employing over 40 people—before the Coronavirus pandemic threw a wrench into the businesses. Klima says that the lesson learned from the real estate crash of 2008 was to diversify, and that’s part of why Aardvark offers radon mitigation, mold remediation and pest control services. However, Klima says much of his radon and mold remediation work is dependent on real estate transactions, so those aspects of the business are struggling also. Even pest control has seen a decline because customers are wary about Coronavirus and schools are closed, another source of his business. “I didn’t think this was going to be as bad as 2008 because lenders are in good shape, the mortgage industry is doing well, and interest rates are really low. But in a way, it has been worse than 2008, 20–25% unemployment rates, people are really scared and they’re being told they shouldn’t leave their homes. In 2008, we could at least go and visit real estate agents to try to gain market share,” says Klima. Another service that Klima is offering his Realtor® contacts in Michigan during the pandemic is performing the final walkthrough “re-inspection.” This is because the agents themselves are prohibited from visiting houses. “We let our agents know that we can perform the final walk-through with the client, so we can meet the client there and walk through the house, and make sure everything is looking good. We don’t even fill out any forms or paperwork. It makes our referring agents happy
because we’re providing an additional service for the client,” says Klima.
after the inspection. In essence, we do our best to be sanitary,” says Klima.
Even with the decline in business overall, Klima says he’s still thankful to have the additional income coming in from the other businesses.
Marketing During a Pandemic Klima has a number of very innovative “pandemic” marketing ideas, including passing out branded hand sanitizer bottles to agents and clients, branded reusable face masks for all staff, and “Hang in There” kits for all real estate agent contacts.
Precautions In terms of what precautions he is taking to protect himself and his family, Melton says that he is wearing gloves, using face masks, and trying to encourage his clients and real estate agents NOT to come to the inspection. “I recently had a couple buyers want to be there for the last part of the inspection to review everything with me. I’m fairly flexible, as long as people are taking precautions, but I still try to encourage people not to be at the inspections,” Melton says. According to the OREP/WRE Coronavirus National Home Inspector’s Survey, over 70 percent of inspectors say they are using gloves and masks, with many calling ahead to make sure no one in the home is infected (see page 32). For Klima’s part, he says that Aardvark insists that only one person can come to the inspection. “We believe someone is making the biggest investment of their life so we understand if a buyer wants to come along, but only one person can attend and only at the end for a quick walkthrough. We don’t let them attend the whole three-hour inspection. We also provide them with gloves, booties, and a mask. We also do our best to clean anything that we touch after we’re done, we put a towel down for our tools, we clean surfaces before and
Klima says that in slow times like this it’s important to nurture relationships and reach out to the Realtors® in your area. “We’ve been calling the agents that we work with, really trying just to relate with them and stay in touch. It’s tough for all of us. We’ve even had some Zoom meetings where we get a bunch of agents on and even make it a social thing and share stories like any other social setting. It’s really important to keep the relationships that you have,” says Klima. Not shy about using technology, Klima says he also used his Inspection Support Network account to send out text messages to many of his agent contacts. “I sent text messages just saying ‘hey I know things are rough right now, we’ll make it through this thing, keep your head up,’ and other things like that. The idea is to let them know we care and maybe inspire them a little,” says Klima. “We also still send out birthday cards to agents on their birthdays wishing them well. We are just trying to do things to maintain contact with the agents without a high pressure sales pitch.” page 10 8
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For these resources and more, visit NationalHomeInspectorExam.org Working RE Inspector Summer 2020
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7page 9 Klima says business partner, Joe Mishak, also hand-delivered “Hang in There” kits to many real estate agents which included Corona beers, wine, some snacks, and a little note to lift their spirits. (See Figures 2 and 3.) “Anything to keep up the relationship and maybe start new relationships will help. That includes social media posts, showcasing what you’re doing, and even making educational videos. The goal is to stay topof-mind even in these slow times,” argues Klima. Another great idea that Aardvark implemented is getting branded hand sanitizer bottles and distributing them to his clients and referring agents. “We were handing out hand sanitizer pre-COVID-19 and when we ran out we found some local distilleries in our area to replenish our supply. The hand sanitizers are a big hit,” reports Klima. (Figure 4.)
Figure 2 - “Hang in There” kit
Figure 3 - “Hang in There” kit
Figure 4: Branded Hand Sanitizer
Figure 5: Branded Face Mask
Lastly, Klima’s Aardvark team created branded reusable face masks for all employees, which he says were well-received by his clients. “Our daughters work in the healthcare field, so we gave them our N-95 masks and made our own branded masks. Some real estate agents actually saw them and they wanted their own masks, so we were able to do that for him too,” says Klima. (Figure 5.) Leveraging Technology in a Pandemic and Beyond While many states have already begun lifting their “Stay-atHome” orders, Klima sees the real estate industr y making changes that are here to stay. “More and more real estate agents are going to start using virtual tools; providing virtual tours of homes, and continuing to use technology even after the COVID19 scare passes. Agents have already discovered they can get offers on houses using the virtual tours process. What if another virus comes through or this one reemerges? Agents and home inspectors need to be prepared because things are going to change moving forward,” says Klima. That includes offering additional services and value through technology. “Virtual tours are up 400% and it’s going to continue to grow and grow,” Klima says. “As home inspectors, we need to embrace technology and make ourselves more valuable in a changing real estate market. Anything we can do as inspectors to show more value and use technology. A lot of guys are using 3D cameras now with 360 degree views to use those pictures in virtual tours, and some home inspectors are offering that service as a way to make more money.” InspectedHouses.com, an online real estate platform co-founded by Klima, is another way that home inspectors gain an edge with technology. Klima says that he’s found the service very valuable for his own business as well. The service allows real estate agents and home inspectors to showcase listed homes that come with pre-listing inspections, which not only gives more business to the home inspector, but also protects the seller and the buyer. “When we offer a pre-listing inspection, potential buyers are able to learn a ton about houses without physically visiting them, which limits their exposure to viruses because they have to see fewer homes. Buyers don’t know if someone’s been coughing or sneezing in the house. And it also helps sellers because they don’t have as many looky-loos coming through, he says. 10 Working RE Inspector Summer 2020
It’s also been a useful tool to help market properties with a virtual tour experience and connecting with buyers directly. “We’ve been using InspectedHouses.com and helping sellers and agents market their listings because we can go in and do a prelisting inspection, take pictures of the home, get video from the agents, and load everything to the platform. Then we can put a lead capture sign in the yard, and it allows the agents to really jump-start their virtual marketing of the home, even during lockdown,” says Klima. Looking Forward Like many home inspectors, Klima sees a boom coming for the real estate market once the quarantine is lifted and life begins returning to normal, but it may take a little longer than some think. “Even after quarantine is lifted, the market may not come roaring back until people are secure in their jobs. If people don’t have jobs they won’t be able to purchase homes. But I do think there’s going to be a lot of pent-up demand and we should see a big boost in sales transactions once the dust settles,” says Klima. In terms of how to stay prepared for the real estate comeback, Klima recommends embracing technology. “The companies that benefit the most are the ones who can handle the rush the best. They’re going to do the best long term. If you’re an inspector who gets a week or two out during a boom and you don’t have any help, then you might be forcing your referring agent or client to try another company. The last thing you want to do is lose business because you cannot handle the volume. Our goal is to stay staffed so we can do an inspection within a day or two, certainly within the same week, when the boom comes. We’re gonna to be prepared to handle the rush,” says Klima. WRE
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How to Get Clients on Your Schedule by Bill Compton, Inspector Call Center
The phone rings. But you’re on a ladder or the roof of a home in the middle of an inspection. Or maybe you’re underneath the home in a crawlspace. It’s probably a call from an interested homebuyer. What do you do? A home inspector can’t afford to miss phone calls and lost opportunities—and lost revenue. Missing that one opportunity might mean missing a steady flow of business from a real estate agent. At the same time, taking a call while balanced precariously on a roof adds too high a level of risk. No amount of revenue makes up for falling off a roof or ladder. But the problem goes beyond your personal safety, though that remains most important. You also run the risk of upsetting the person paying for the inspection. Clients get upset when a home inspector stops in the middle of the job to take a call about another job. They depend on the inspector’s attention-to-detail and timely delivery of the home inspection report. Interruptions create distractions that might cause an inspector to miss something. Performing a home inspection requires your complete attention. In today’s hurry-up world, you can’t afford to put off potential customers. Those callers need immediate attention and demand getting on your schedule right away. But you’re busy, so what do you do? How can a single-inspector business, or an inspection business, keep their schedules full and organized? Some home inspectors believe that only they can sell their services and set their schedule. That will cost them many opportunities. Today’s norm is that every company have a backup solution for taking calls. Sure, it’s nice when calls come in one at a time and you’re not busy. But we all know they often come in batches. When you’re on one call, you’ll miss several other opportunities. And when caught in the middle of an inspection, how many times will your client put up with you delaying their inspection? They have schedules to keep, too. We’ve discussed handling your own scheduling and its pitfalls. The control is nice, but the lost revenue is disastrous for your business. What other options do you have? Bill Compton owns and operates several companies in the home inspection industry including the Inspection Call Center. Prior to the home inspection industry, Bill owned a construction company building highend, luxury homes. He holds a degree from the University of Richmond and served proudly in the United States Navy.
12 Working RE Inspector Summer 2020
• Hire a full-time employee • Contract with a call center Having full-time call center support for all of your back-office functions (scheduling inspections, managing the database, scheduling 3rd party vendors, etc.) can be a great enhancement to your business if that level of support makes sense for you. But all businesses, even one-person shops, can benefit by having someone to answer the phone when you can’t. If you don’t have that in place, it’s not a question of whether you missed any calls, but rather, how many calls and how much opportunity you missed. Employee or Call Center? Let’s evaluate the true cost of hiring in-house. You’ll pay an employee somewhere between $15 and $20 an hour. In a 40-hour week, that’s $30,000 to $40,000 annually even before figuring in employer ta xes and benefits. And they’ll have vacation/sick days you’ll need to cover. Also, it takes time to train an employee who likely knows nothing about real estate inspections. This means time away from inspecting for you, which might mean lost inspection opportunities. If this employee leaves, you’ll have to start from scratch all over again. Ask any business owner what is the most difficult part of running a business and they will tell you— managing people! A call center trains its representatives so they understand the inspection industry and the services your company offers. Supervisors keep them on task and work with them to improve their ability to upsell the services that you offer. For about the same cost as hiring someone who works five days a week, you can contract with a call center to operate seven days per week—approximately 72 hours each week. Anyone dealing with real estate understands there’s no such thing as a weekend off. A home inspection call center can take over all scheduling. Inspectors update when they are available for appointments. Calls to the business get routed to the call center, which takes over appointment creation. These call center representatives
know how to handle your incoming calls, so your clients get the best service. Your time in the field remains uninterrupted while more inspections get scheduled. Many people still prefer speaking with a person rather than making commitments digitally with no human contact. A real person can sell add-on services to the client also. And they can get answers from you to get the information they need for a call back. Just like a full-time employee, call center representatives can: • Schedule inspections • Sell inspections • Provide customer service • Sell add-ons • Arranging 3rd party services • Reschedule appointments • Collect payments If you use or want to use the ISN Real Estate Professional Dashboard to allow real estate agents to add inspections to your calendar directly, a call center helps you follow up and confirm. If you are out on an inspection it’s easy to miss completing the order, even with notifications set up in ISN. That’s where a call center helps keep everyone happy by contacting the agent to
upsell, if possible, and to quote a price for the inspection. At the conclusion of the call, the inspection is on the schedule. How Can Taking Calls Hurt Your Business? Getting many calls asking about home inspections sounds great for your business—unless you are taking them all yourself. Every call disrupts the rest of your workday. This puts you behind on inspections already on the schedule. Expect another late night writing up the day’s inspection reports. A professional call center can screen your calls and messages, adding home inspections to open slots in your schedule. By doing this, you and your team can focus on the inspections and building the business. WRE
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How to Recession-Proof Your Home Inspection Business by Ian Robertson, Inspector Toolbelt
With COVID-19 shutting down most of the country recently, and talk of an unprecedented 25% unemployment rate— a recession has become more real for us. News articles make it seem like the end of the world. But while a recession is a big and serious event, it is also what is considered a normal (even necessary) part of the market cycle. Don’t get me wrong, no one looks forward to a recession this big, but I have survived in the inspection industry through “The Great Recession” and learned a lot about how to recession-proof a home inspection business. In fact, a recession can even help you grow your inspection business and thrive (as strange as that might sound). Here are some tips how. Understanding What a Recession Means for Your Inspection Business When we hear the word “recession,” we tend to cringe a bit. But a recession is not necessarily a bad thing for the home inspection industry—if you play your cards right. Instead of viewing a recession as a problem—view it as an opportunity. For instance, I carried one of the home inspection companies that I own through the Great Recession, and started a second home inspection company toward the end of it. How is that possible? Well, it came down to numbers. In my market area, there were about 400 licensed inspectors before the last recession (the state of New York posts this information on their website). After the recession though, there were about 185. That is a huge drop! Over half of the home inspectors in my area gave up and hung up their license. So advantage #1: less competition. But for me, there were other benefits. First, folks were cautious for years after that about starting a business, so there were very few new inspectors for quite some time. Advantage #2: no new competition for many years after the recession. Ian Robertson is a veteran home inspector, owner of three inspection companies, owner of Full View Home Inspector Marketing, and one of the founders of Inspector Toolbelt. Inspector Toolbelt is simple administrative and scheduling software for home inspectors that makes running your inspection business easy and automated.
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On top of that, when the market goes down, it tends to become a “buyer’s market,” which is good if you are a thorough and skilled inspector. For instance, during a seller’s market, there may be five buyers for every house. During a seller’s market, buyers may waive their inspections, hire the cheapest or fastest or get whoever is available first so they can move on things. But things move slower in a buyer’s market. There may be five houses for every buyer, so the buyers tend to be choosier about their inspectors. Buyers and agents who didn’t like how thorough I was before the recession were now calling me to get me on the books because I am thorough. So that is advantage #3: everyone loves a thorough home inspector in a buyer’s market. So don’t view a recession as a problem to overcome necessarily but as an opportunity to grow, improve your business, and increase your worth. But let’s talk strategy now. Besides the information above, how can you “recession-proof” your home inspection business? Recession-Proof Your Home Inspection Company Below are some of the most important lessons I learned about recession-proofing a home inspection company. I am going to be frank about it—a recession requires more work. The market has had low-lying fruit from some time, so reaching to the higher branches takes effort and determination. 1: Market More—Not Less: One of the first things that a lot of home inspectors do when a recession starts is to turn off their marketing or pull back on it. They do this to save money during tight times, but that is counterintuitive. You should INCREASE your marketing, not decrease it. I will give you two good examples of this. During the last recession everyone turned off their Adwords, but I turned mine up and spent more money on it. So now I had almost no competition for Adwords and I had a great budget—so guess who got all the online work? Also, I never stopped doing office presentations, lunch and learn sessions, and more. Agents page 16 8
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7page14 appreciated that I still came around because other inspectors didn’t want to stop by or buy lunch anymore. I built relationships there that are still around today. Those are just two examples out of many. The point is, increase advertising, don’t decrease it. You won’t see as much return on investment as you did before the recession a lot of the time, but the seeds of success take time to grow, and it will keep you thriving through a recession. 2: Expand Your Services: This one comes down to numbers. If there are 100 people needing a home inspector in your market, but 20 of them need a septic inspection, five a well test and 10 a pest inspection, you will capture more of that business if you offer the additional services they need. Work at expanding your services now. We all have reasons for not adding services—added liability, we don’t want to dig holes and smell the septic tank, the pool training course is too long or whatever it happens to be. But adding services allows you to capture more leads, whether or not there is a recession. Whatever services you add on, be sure to be qualified and well trained before offering those services to clients. 3: Do More Seller Inspections: When the market is slow, sellers will do anything to make their homes seem more appealing to a buyer. Pre-listing inspections are a great way to do this. The best part is that every seller is an opportunity to do a buyer-side inspection for them as well. So get out there and market pre-listing inspections. 4: Work More than You Want To: I hate saying this because I am of the mind that you should control your business and not work yourself to death—as that negates all the benefits of owning your own business. But if you do eight inspections a week now, and the market drops by half, you will be left with four inspections a week hypothetically. So sit down and figure out how many inspections you need to do per week and then increase that by whatever is doable. Obviously, those are just rough numbers, but the point is if you are doing the bare minimum of inspections now, you will likely be under the bare minimum during a recession. So work a little bit more than you want to now, so you can keep afloat later on. 5: Have a Side Gig Ready: This one is simple; get a side gig. Have a contractor buddy? Talk to him about doing some side work. Have a particular skill? Get it ready to deploy. I say this because as we mentioned before, over 200 inspectors dropped out of my market area. But why give up a good business because it got slow? Instead, supplement that business until things pick up. Below are some side gigs that a lot of inspectors I know are doing now in preparation: • • • • •
Radon mitigation Pest control Handyman work Field inspections Cleaning services
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You don’t have to pick from that list, but do you see a common theme? Low startup costs, low overhead (for the most part) and something that won’t interfere with scheduling home inspections. You don’t want to take a side gig that will make you have to turn down inspections when they come in. (OREP offers E&O for many of these services. Please ask your OREP agent.) 6: Don’t Panic When Things Get Slow: So many people panic. Panicking doesn’t change the situation; it just changes how you address it. An inspector I know panicked once when things got slow for a few months, so he found a new job, shut everything down and told everyone he was out of business. But when things picked up, he regretted it. Recessions happen, so don’t panic. If you can hold it together, you will likely be able to make it through fine. 7: Be the Best: We talked about this above but it’s worth mentioning again. When a recession happens, it typically becomes a “buyer’s market.” With more houses than buyers, buyers become more cautious, take their time, and research inspectors more before they hire them. If you are highly skilled and qualified, you will be their top pick. Low-ballers and fast inspectors don’t do as well in a buyer’s market. 8: Don’t Give Up: Those who stick around are the ones who come out on top. Don’t get discouraged; adapt instead. If I did it, you can too. If you do make it through, your company will be better and busier than ever. So don’t give up. Conclusion Recessions come and go every so many years. But a recession does not mean that things are impossible to work through. View a recession a lot like a storm, and your business like a house that you built. If you get your home ready for the storm, it will likely make it through. Will there be some damage? Sure. But if your house is one of the last ones standing, guess who has some valuable real estate at that point. So come what may, work now to recession-proof your home inspection company. WRE
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Metal Fireplaces and Chimneys—The Science Behind Your Inspection By Tom Feiza, Mr. Fix-It, Inc. HowToOperateYourHome.com
Advancements in building technology have dramatically changed
fireplace and chimney construction. Masonry fireplaces date back to the first time humans heated their homes by burning wood. Since then, central heating systems have taken over the heating job, and fireplaces mainly provide ambiance. Most building scientists believe that a standard wood-burning fireplace venting up a chimney should not be installed in a modern, tightly sealed home. Standard fireplaces create great energy loss and undermine the integrity of the building envelope. Today we should be using sealed-combustion gas fireplaces. Since the 1970s, most masonry fireplaces and chimneys have been replaced with factory-fabricated metal fireplace and chimney assemblies. These metal systems are less expensive and when installed properly they perform well. Home inspectors see many of these metal systems, including some that were poorly installed and create big problems somewhere down the line.
Figure 1: Metal Chimney in Wood Frame
Inspect All Visible Parts of Flue and Chase Most home inspection standards require some level of fireplace, flue and chimney inspection. We can visually check a metal fireplace/fire box and chimney, but we can’t normally inspect the inside of a flue. We also can’t inspect inside the chase/chimney —the wood structural frame around the fireplace to above the roofline. We can see the exterior of the wood chimney chase, the metal cap, and the exposed tops of the flues. Considering the challenge of access, should you try to inspect the top of a metal chimney in a wood frame? Always. Frequently, the metal flue and metal chimney cap are improperly installed. Important parts can be missing. Leaks at a metal chimney cap can result in serious damage to the flue, damper and firebox. An improperly installed metal cap can result in damage to the wood chase. What to Look For: Important Details Let’s look at a well-constructed metal flue in a wood-framed chase/chimney (Figure 1). The factory-manufactured metal flue is installed within a wooden chimney chase that may be covered with any type of siding or faux stone. Normally you can identify a metal chimney flue by looking at the unique fireplace flue cap and the metal cap over the wood-framed chase. Look at the structure around the metal flue pipes. The metal cap over the chase should be sealed to the flue. This cap should 18 Working RE Inspector Summer 2020
Figure 2: Metal Chimney in Wood Frame - Problems
have two raised crimps from corner to corner to direct water drainage from the center to the edges. Also, the cap should have a drip edge that extends at least one inch outward from the side of the chimney and overhangs the chase by at least one
inch. The drip edge enables the structure to shed water properly without damage to the siding. A storm collar has been installed around the metal flue to deflect water outside the hole in the metal cap. At times, the metal cap will also have a raised metal ridge at the hole for the metal flue to help keep water out. Typical Signs of Defects Now let’s examine typical problems with a metal chimney in a wood-framed chase (Pg. 18, Figure 2). The metal cap fits tightly around the wood chase with no drip edge. The center of the cap is not raised for drainage. The flue pipe is not sealed to the cap. Storm collars are missing. These defects allow water to leak around the metal flue and into the appliance (fireplace) below.
Figure 3: Metal Cap with Rust and Drainage Problems
With no effective metal cap and drip, water will flow around the exterior of the wood chase and damage the finishes. Expect rot and leaks with a poorly designed metal cap. Obviously Bad Metal Cap Moving on, here’s a metal cap with obvious problems: no slope and no clearance to the chase (Figure 3). It appears the storm collar is set tight to the metal cap and caulked in place. The flue should be sealed to the metal cap with the storm collar above the metal cap to deflect water.
Figure 4: Metal Chimney Cap and Rubber Sealant
Water ponds on the flat sur face, causing rust to develop. Rust that has crept over the edge is visible from the ground. There is a drip edge but it’s too close to the wood frame. And where is the storm collar again? The storm collar is not visible from the ground because it is buried in caulk on the metal cap. Ineffective Repair Example During another inspection, I found a chimney with an ineffective repair (Figure 4). The cap is not pitched for drainage, and there is no drip edge. The storm collar is missing, and some kind of rubberized sealant was applied to secure the flue to the metal cap. Most likely, this assembly leaked before the sealant was applied. No slope, No Flashing, Rust Here’s an example of poor construction, with one view of the entire assembly (Figure 5) and a closer look at the chimney top (Figure 6). This chimney has a storm collar but lacks good sealant from the flue to the metal cap. Water ponding on the metal cap causes extensive rust. We can look even closer at the side of the chimney chase with no flashing to the roof (Pg. 22, Figure 7). The metal diverter was obviously intended to keep water away from the chimney chase, but that’s not enough. There’s no step flashing and no clearance from the chimney siding to the shingles. Someone has installed clear caulk (what I jokingly call “liquid flashing”) in a misguided attempt to keep water out of the chimney chase.
Figure 5: Poor Construction, No Slope, Rust
Figure 6: No Slope, Rust, No Sealant
Look Inside this Rusting Firebox During your indoor inspection, examine the inside of the firebox and look up at the damper and flue (Pg. 22, Figure 8). In this case, we see rust on the damper and the lower edge of the flue. This prefabricated fireplace is almost new. How could it be rusting already? There could be a leak around the top of flue where the metal cap meets the chimney chase. page 228 Working RE Inspector Summer 2020 19
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7page 19 Whenever there’s rust on a flue, damper or firebox, you should call out further inspection, including an extensive visual inspection of the top of the chimney chase.
top, look for rust on the sides of the chimney or damage to the siding. These are signs of a poor metal cap. At a distance away from the home, binoculars or a telephoto lens will help you see the flue and storm collar.
Sealed Fireboxes Need Your Attention Here’s a look through the glass of a sealed direct vent fireplace (Figure 9). The view is a little foggy because soot has settled on the glass separating the firebox from the room. Light from a flashlight clearly reveals rust and water stains at the opening to the metal flue. This structure/fireplace requires further evaluation.
Always check the metal firebox below for signs of water and r ust. Even if it’s a sealed combustion f ireb ox, you can peer through the glass and illuminate the area with a bright flashlight. Water and fireplaces aren’t a good combination; a ny lea k s w ill caus e st a ins a nd r ust t hat require further evaluation.
Final Overview: What Should You Look For? During an inspection, always try to see the top of the chimney so you can check the details. If you don’t have access to the
Up on top, a missing storm collar, missing sealant, rust, poor pitch or a poor seal show that the chimney needs further evaluation and repair. WRE Visit HowToOperateYourHome.com (or htoyh.com) for more information about building science, books, articles, marketing, and illustrations for home inspectors. E-mail Tom (Tom@htoyh.com) with questions and comments, or phone (262) 303-4884. Tom Feiza has been a professional home inspector since 1992 and has a degree in engineering. Through HowToOperateYourHome.com, he provides high-quality marketing materials, books for homeowners, and illustrations that help professional home inspectors educate their customers. Copyright © 2020 by Tom Feiza, Mr. Fix-It, Inc. Reproduced with permission.
Figure 7: No Visible Flashing
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Figure 8: Rust Above Gas Logs
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22 Working RE Inspector Summer 2020
Using Sewer Scoping to Grow Your Revenue By Mark Raumikaitis, InspectorCameras.com
In today’s real estate world, successful home inspectors provide more than just a standard home inspection. Inspectors are expected to provide or arrange auxiliary services for their clients. Value added services such as testing for radon, mold and water quality bring peace of mind to the client and provide a significant source of revenue to home inspectors. Indeed, many home inspection companies bring in as much or more total revenue from auxiliar y services than from the initial home inspection fee. Offering sewer scope inspections to your clients is a great way to provide additional services and added income to your home inspection business. Providing a sewer scope service also lowers liability risk for the home inspector, clients and for the real estate agent. Here are some details. Why Sewer Inspections Older homes used many obsolete materials for the underground sewer system. Clay pipes are susceptible to displacement, cracking and collapse. Cast-iron pipes are susceptible to displacement, corrosion, and cracking. Orangeburg, a type of resin impregnated wood fiber pipe is prone to disintegrating underground, for example. These older underground piping installations are now beyond their expected service life. These piping systems are also susceptible to root intrusion, requiring ongoing and expensive root clearing service on a regular basis. Many of these obsolete underground piping systems need significant expensive repair or replacement. Newer homes, including new construction, can also have sewer problems related to poor or faulty installation practices, damage caused by construction vehicles, construction debris inside the drains and sometimes intentional vandalism. It is recommended that even new homes have a sewer scope inspection. Mark Raumikaitis is a NH licensed Home Inspector and Septic System Evaluator who has been inspecting residential and commercial buildings since 2000. He has earned interNACHI CMI and ASHI ACI status and has been a speaker at ASHI Inspection World. Mark now sells Sewer Inspection Cameras perfect for Home Inspectors through his company INSPECTORCAMERAS.COM
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Liability Having a sewer scope performed as part of a home inspection protects everyone involved in the real estate transaction. Underground sewer and drain systems are not visible or readily accessible and are certainly beyond the scope of a standard home inspection. However, if there is an issue with the sewer drain system after transfer of title or close of escrow, you will likely get the phone call from your client. Your company, the real estate agents and likely the seller are now in the middle of a significant dispute. Underground sewer or drain problems potentially cost thousands of dollars to repair. Finger-pointing, anger, financial risk, and poor reviews on social media potentially affect everyone involved in the transaction. Many home inspectors now add a standard comment in the home inspection report recommending a sewer scope for every inspected home. Real estate agents are becoming more accepting of this additional recommendation. The sewer scope inspection helps protect the agent and client from the liability of unknown sewer issues. At a minimum, you might consider recommending a sewer scope to your client at every home inspection, as it lowers your liability in the event of a claim. Revenue Depending on your location, the price of a sewer scope service ranges from $150–$350. If you average $200 per sewer scope inspection, every 50 sewer scopes performed by your company will generate $10,000 in additional revenue. Why not take advantage of this income opportunity by providing the sewer scope service as part of your home inspection? Inspection companies that utilize a single inspector can perform the sewer scope inspection before or after the main page 26 8
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7page 24 home inspection. Those companies that use a multi-inspector team approach can consider combining the sewer scope inspection with other portions of the home inspection, such as interior plumbing. Multiple inspector companies operating in a single geographic location can choose to have a dedicated sewer scope inspector traveling from inspection to inspection as needed. The process of performing the sewer scope is straightforward. The drain system is accessed through a cleanout located in the basement, crawlspace, exterior yard or in some parts of the country, from the roof through the plumbing vent stack. A pushrod type camera system is used with the camera head attached to a flexible yet rigid cable and is manually pushed into the drainpipe system. Cameras The preferred camera system features should include a self-leveling camera head to always orient the camera view for easier interpretation. A self-leveling camera head is beneficial when a client is viewing the actual inspection screen or viewing a video as part of the sewer scope inspection report. Adjustable LED lighting at the camera head is recommended as well. It optimizes the view of the various internal drainpipe conditions. Another beneficial feature is a distance counter providing a reading in feet or meters, indicating how far
the camera head has traveled inside the drainpipe. This feature is helpful in reporting the location of issues or defects. Additional locating information can be provided by a small radio transmitter built into the camera head—this is called a Sonde. The Sonde broadcasts a continuous 512 Hz radio signal that with an additional optional radio receiver device can pinpoint the location of the camera head underground. This information is useful when deciding where excavation is necessary. The camera system should have the ability to record color video and take still photographs also. Video and photographs can be provided to the client as part of the inspection report as needed. The inspection company should always keep copies of any video or photographs on file for future reference after the inspection. Adding sewer scoping to your inspection services is a great way to set your company apart from your competition. Too often inspection companies compete on price alone; a better way is to compete by offering superior service and expertise. Your clients and real estate agents are looking for companies that provide a full range of services; a sewer scope inspection is one more valuable service that protects your client while providing a significant additional source of revenue for the inspector. WRE
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Working RE Inspector Summer 2020 27
Insurance IQ: Reading Your Policy by David Brauner, Senior Broker OREP
Why is reviewing your E&O insurance policy important? Isn’t that my job as your agent? Yes, it’s OREP’s job to review your policy and Declarations Page for accuracy as your insurance agent, and we do, but you can help yourself too. Let me give you a couple of real-life reasons why reviewing your policy is important, no matter who your agent is. Retro Date At the very least, make sure your retroactive date is correct. This concerns how many years back your coverage goes, which is important for an inspector because claims can happen a year or two after the date of the report. About three years after opening OREP I was renewing my own E&O policy, which I need to operate my business just like many of you. Without it, I can’t do business. At that time, I had three years of continuous coverage, meaning my Retroactive Date (retro date), also referred to as a Prior Acts date, should have gone back three years, meaning my coverage should have gone back three years for all the work I did over that time. When I reviewed my own Declarations Page that year after receiving my policy, I noticed the retro date was gone! Meaning that to the carrier, I had no back coverage. I remember verifying at the time that I had filled out my application correctly, including my Prior Acts date. The agent made the error. I had to resend (fax in those days) the previous Declarations Page to prove my case. If I had missed their error and a claim had arisen from those prior years, it would have been a mess for me to prove I had coverage without an accurate Declarations Page. This is one reason why it pays to check your retro date when you receive your policy. We have gotten questions from inspectors switching to us from other Agents that go something like this: They say, “I’ve been with (the other agency) for ten years; I have prior acts going back that far.” But when we review their Declarations Page it may go back only three or four years. What? Somewhere along the line, these inspectors let their policy lapse/didn’t renew in time and they lost their prior acts. When they “renewed”
Lock-down selfie (week four).
David Brauner is Senior Broker at OREP, a leading provider of E&O Insurance for home inspectors and other real estate professionals in 50 states (OREP.org). He has provided E&O insurance to home inspectors for over 25 years. Contact him at dbrauner@orep.org or (888) 347-5273. OREP–Organization of Real Estate Professionals Insurance, LLC. Calif. Lic. #0K99465.
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late (after letting their policy lapse) maybe the previous agent didn’t catch it or chose not to poke a hornet’s nest. At OREP, we take your prior acts coverage very seriously, issuing many reminders via email and phone as your insurance expiration date approaches, to the point of annoyance for some of our insureds, I’m afraid to say (sorry). We remind our insureds frequently to renew on time, if they intend to continue inspecting or risk losing their prior acts. This is job one at OREP. You can switch to another agent/program and keep your prior acts as long as 1) you bind your new policy before the policy expiration date and 2) the new policy includes prior acts for free, like at OREP. Overcommunicate With insurance, if not in life, it’s best to overcommunicate (right?). Many of us renew our E&O without ever speaking to our agent. Many times, there is no reason to. Here is another real-life scenario that happened with a real estate appraiser: the insured completed an application intending to get combination coverage for appraising and real estate sales. This is like two policies for the price of one—a money-saving option for OREP insureds. Inspectors can get combination coverage for inspecting and mortgage field service work, for example. Anyway, because this applicant indicated no previous or estimated future sales revenue, they got no coverage for sales. This particular application (created by the carrier) has a glitch in my view, because it had no checkbox to clearly indicate a desire for sales coverage along with the appraising coverage. One of our agents caught the mistake at renewal. When I called the insured to follow up, they indicated they had wanted coverage for both appraising and sales, just in case they did one or two sales transactions during the year. They thought they had coverage for sales but a year later we realized they did not. They filled the sales revenue column with zeros and had failed page 30 8
7page 28 to communicate their wishes to the agent. And, of course, the application was deficient because it lacked a clear “yes” or “no.” Luckily for our client, they had done no sales that year so there was nothing to worry about. We fixed the application. But this underlines why it’s a good idea to over communicate with any agent you transact with.
minimum. If you have a special coverage request, let it be known up front. Thanks for reading and don’t forget that OREP provides comprehensive E&O and General Liability/Off-Premises Coverage for home inspectors. Give us a look at OREP.org/inspectors. WRE
Though the OREP home inspector’s policy is broad, not all policies are. If you want a specific coverage, like for pest or rodent, don’t assume you have it. Ask your agent which coverages are included and which you won’t get unless you pay extra for them. Reading Your Policy Getting back to our example above of the appraiser/agent who wanted coverage for both: The Exclusion Portion of the policy he received—what is excluded or not covered, reads as follows (bold is mine): Services performed for others in the Insured’s capacity broker Leasing agent or Property manager; as a(n): Real estate agent or broker; Auctioneer of real property; Real estate consultant or counselor; Short term escrow agent, or referral agent. So there it is in black and white. If the insured had read the “Exclusions” portion of the policy (what’s not covered) he would have realized right away that it wasn’t the coverage they wanted. Agents can ask the right questions; we can anticipate your needs, but we can’t read your mind. This is not a complete list of everything to review in your policy of course. If your name/company name is wrong, or if your coverage amount (“Limit”) or deductible is not correct, that’s important too. Getting insurance at OREP can take as little as five or 10 minutes, so you have time! Review your policy when you get it, especially the Exclusions section, and verify your Retroactive Date at a
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Home Inspectors & Coronavirus: National Survey Results by Isaac Peck, Editor
We don’t know how long the pandemic will continue to affect our country and our industry. At the time of this writing, over two months in, over 1,000 home inspectors have responded to OREP/Working RE’s Coronavirus: National Home Inspector Survey. The survey remains open to all home inspectors nationwide.
added a place at the end of the survey for your comments. We’ll have updated survey results as we go in Working RE’s print and email editions. (To opt in for WRE’s twice monthly news edition, visit WorkingRE.com).
The results at this time indicate that home inspectors are struggling. Over 20% report a complete work stoppage, with an additional 45% experiencing a 50% or greater decline in business. As we write this, more states are opening up and we’ve
Interestingly, some home inspectors are encountering sellers who are unwilling to let them onto the property. Are you? You can complete the survey at WorkingRE.com/inspectorsurvey. Here are the results so far. WRE
Question 1: What precautions are you taking in light of the Coronavirus pandemic? (Select all that apply) Wearing gloves, mouth/face cover, and other protective gear while performing inspections.
71.91%
Calling ahead to homeowner/Realtor® and requesting that no one be in the house while I’m inspecting
57.93%
Call ahead to qualify that no one at the property has been sick recently
29.97%
Other: Please list: ______________
16.13%
8.33%
Stopped performing any interior inspections
2.82%
None, it’s business as usual
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Question 2: How do you expect the Coronavirus to affect the demand for inspection services over the next 6–12 months? Do you think the demand for inspection services will: Decline Slightly for a few months but will return to normal by Fall 2020
38.62%
Decline Drastically: we’re headed for a recession
23.17%
Decline Slightly but come back even stronger by Fall 2020
22.36%
Remain Steady
15.85%
0%
32 Working RE Inspector Summer 2020
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Question 3: How has your inspection business been affected by the Coronavirus?
8.20%
No change, business is going well!
10% decline in business
4.57%
20% decline in business
4.97%
6.72%
30% decline in business
9.41%
40% decline in business
45.03%
50% or more decline in business
21.10%
Complete Work Stoppage; I’ve stopped Inspecting
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Question 4: What percent of homeowners / borrowers are refusing to let you on the property? None, everyone is accommodating
72.31%
5%
5.38%
2.55%
10%
4.03%
10%–25%
25%–50%
2.96%
50%+
12.77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Working RE Inspector Summer 2020 33
Same House, Second Inspection: What Now? by Reuben Saltzman, Structure Tech
This question comes from a thousand other home inspectors, including just about everyone in my company. What happens when we get a request to inspect a house a second time? The most common scenario that triggers this situation is when someone from my company inspects a home and the deal falls apart; then we get a call from someone else to inspect the home again. This is a tough question to answer because it raises some ethical questions. Because we now have intimate knowledge about the home, do we have an obligation to report that information to the new client? Would disclosing information from a previous inspection violate our Code of Ethics? Is it right for us to tell the client that we had previously inspected the home? Are we obligated to tell our client that we had inspected the home previously? These are all great topics for discussion among home inspectors, and I don’t think the answers are black and white. I’d like to share my thoughts on these questions. Code of Ethics The American Society of Home Inspectors (ASHI) has a Code of Ethics for the home inspection profession, which is incorporated into the ASHI Standard of Practice. As an ASHI Certified Inspector (ACI), this is the Code of Ethics that I am obligated to follow; the same goes for everyone in my company and any other member of ASHI. Even though this Code of Ethics only applies to home inspections, I feel it’s proper to extrapolate these ethics to other similar services that my company provides, such as radon testing, stucco testing, and other similar inspection services. The Code of Ethics says the following about releasing information about the inspection to anyone other than our client: Inspectors shall not disclose inspection results or client information without client approval. That sentence explains why home inspectors are always diligent about asking clients if they would like their agent to receive a copy of the inspection report. It always seems curious to me when a client doesn’t want their agent to receive a copy of the report… but it does happen. The one exception to this relates to immediate safety hazards. The Code of Ethics also says the following: Inspectors, at their Reuben Saltzman is a second-generation home inspector with a passion for his work, and is the owner and president of Structure Tech. Visit his blog online at: http://www.startribune.com/variety/ homegarden/blogs/Reuben_Saltzman/
34 Working RE Inspector Summer 2020
discretion, may disclose observed immediate safety hazards to occupants exposed to such hazards, when feasible. I usually limit such disclosures to things like big gas leaks, carbon monoxide hazards, and things like that. There Are No Obligations The ASHI Code of Ethics doesn’t tell home inspectors that they must disclose to a client that an inspection was ever previously done on a property. Nevertheless, I think that any client would appreciate knowing this information, so I always share that with my client when performing an inspection on a house for the second time. I say that my company has already inspected the home, and that’s pretty much where I leave it. The one thing that I can’t do is share my previous inspection results. I do always make a point of reading any previous inspection reports that my company has done at a property. When it comes to finding potential defects at a home, I’ll take any advantage that I can get. I feel the same way for homebuyers. If I were buying a home and all things were equal, I’d prefer to hire the inspector who had already been there once. When inspecting a house for the second time, we inspect the house just as thoroughly as we did the first time. We do not offer a discount because it is no less work to inspect a house the second time. We’re still responsible to report on the condition of the house at the time of our inspection. We can’t simply copy-and-paste our old report. Keep Track If you’re a local competitor of mine here in the Twin Cities, you may stop reading here. There’s no more useful information after this, so you needn’t read any further. Here at Structure Tech, we keep track of duplicate inspections through an invaluable service called Inspection Support Network, or ISN. It’s the service we use to keep track of all of our inspections, to offer online scheduling for real estate agents and a thousand other things. It also sends us an alert anytime we’re scheduled to inspect a house that we’ve already inspected. What would we do without ISN? I don’t know. That’s like asking what we did before we had digital cameras. We got by, but things were very different! WRE
Working RE Inspector Summer 2020 35
Anatomy of a Demand Letter by David Brauner, Senior Broker OREP
From time to time I like to pull back the curtain on claims to help OREP insureds learn how to avoid problems and in this case, how to respond to them. It’s important to know how to respond to a compliant effectively. Below is a demand letter from a homeowner (not an attorney). Take a look at it then read the claim response (page 40) from a home inspector who does a good job formulating a rebuttal. This complaint was forwarded to the OREP pre-claims assistance team, who reviewed/critiqued the response for the inspector. A strong response is no guarantee it will resolve the complaint, but it helps increase your chances if your inspection is solid. The resolution of this issue is unknown at the time of this writing. WRE FORMAL DEMAND FOR FINAL SETTLEMENT PAYMENT ON NEGLIGENCE & MALPRACTICE To Whom It May Concern: Please accept this letter as a Formal Demand for a $150,000.00 payment due to negligence on behalf of the Inspector involved with the Home Inspection on our home. Please also provide the contact and policy information of your Liability Insurance Carrier and Policy. Due to the insufficient and negligent home inspection, our home suffered catastrophic water damage that required far more than $150,000 to repair beyond what was covered by home insurance and warranty. The entire loss could have been avoided had the Inspector performed a thorough inspection and revealed a significant leaking bathtub in the upstairs guest bathroom. Within seconds of running the tub for the first time, water poured down the wall and into the floor below. Had the Inspector, or any person, turned on the bathtub prior to our first use, this would have been revealed. Furthermore, within minutes of using water in our home for the first time as a family, it was revealed that not only did the bathtub leak, but the entire home was not draining properly. Two separate plumbers involved with the remediation asked a simple question, didn’t the Inspector fill the bathtub and run all the water faucets to make sure this wouldn’t happen? Because I was not present for the inspection, I cannot say that he did. These problems did not show up in his report. I assumed the hired Inspector would perform a routine check that included the common practice of filling the bathtub and running faucets for enough time to rule this out. Therefore, we purchased the home under false pretenses that the inspection revealed acceptable concerns. Had the inspection revealed these major water issues, we would have either offered far less money on the purchase, or not purchased the house at all. Instead, we were forced to remediate, repair, and remodel massive water damage during a time we could not afford. The remediation took more than six months to complete. The process put unnecessary emotional and physical stress on our family, an extreme financial burden on our budget, forcing us to borrow in ways we never would elect to do. We were forced to live in a hotel for SIX MONTHS, with two children under the age of four (with only room enough for one of them to sleep in a crib in the bathroom). We make this demand due to undue hardship, financial damages, and emotional/physical stress inflicted upon us due to Inspection Industries LLC’s negligence and professional malpractice. Our evidence includes, but is not limited to: 1) Numerous quotes and invoices, highlighting the cost of remediation from this loss. 2) Letters from contractors explaining the invoices and justification for the expense. 3) Photos of most of the work before and after. Therefore, we make this demand for $150,000 for all losses, undue hardship, and negligence. We have presented this evidence to an attorney who has agreed to take on our case, should we engage them. Should a lawsuit be required, you should expect an attorney to present evidence that this claim is awarded for more than what we are asking for. I trust you will be reasonable and settle this claim out of court, saving unnecessary legal fees and even higher claims. PLEASE RESPOND TO THIS LETTER IN LESS THAN 3O DAYS TO AVOID FURTHER LEGAL ACTION. Please mail a check WITHIN 30 DAYS to: Mr. and Mrs. Homeowner
Read the Claim Response page 40 8 36 Working RE Inspector Summer 2020
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California OREP Insureds—Group Medical $10,000 Life Included OREP insureds in California enjoy group access to several medical plans, including certain Kaiser Permanente and Blue Anthem plans. The group plans provide benefits not available to individuals and at no extra cost. Those who purchase their medical coverage through the OREP group plan, also enjoy a $10,000 life insurance policy included at no extra cost. The policy, written through Mutual of Omaha, is guaranteed-issued without any exclusion for medical conditions and pays double in the event of accidental death and dismemberment (AD&D). Also included is the New Dental Choice Special Discount Plan that gives you significant discounts of 15-60 percent for dental services. There is no cost above the medical plan itself for these services, including expert help navigating Covered California. If you are a California resident and an OREP insured please email info@orep.org for more information.
38 Working RE Inspector Summer 2020
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Working RE Inspector Summer 2020 39
7page 36
INSPECTOR RESPONSE: Dear Homeowner, I received your demand letter on Friday, 4/3/2020, and have since been thoroughly reviewing your concerns and pertinent documents involved regarding your home inspection at (1234 Main Street), which was performed on 5/23/2019 at 10:00 am. After consulting my professional liability (E&O) insurance company, I would like to address each of your claims in your demand letter. First, you claim that the inspection was insufficient, negligent, and not thorough. Your inspection report contained 55 items that were identified as needing repair, many of them essential safety-related items, as well as many other general recommendations and informational statements about the home you were purchasing. Second, you claim that the water was not turned on during the inspection, or a significant leak would have been found at the upstairs bathtub. In the Inspection Agreement form that you read and signed on 5/20/2019 at 1:39 pm before the inspection being conducted, Part II, Section 5—Plumbing, item C, number 1 states that the Inspector is not required to fill any fixture with water, however, Part III, Section B allows the Inspector to go above and beyond the Standards of Practice set within the agreement to provide a more thorough inspection. So, in the inspection report, Section 10, Item A, 3rd paragraph states:
The property is vacant and the plumbing system has not been used on a regular basis. As part of my inspection, I ran the water from the plumbing fixtures for an extended period. Also, the information provided to you in the header under Section 10 states the protocol that I follow: The home inspector shall observe: Interior water supply and distribution system, including: piping materials, supports, and insulation; fixtures and faucets; functional flow; leaks; and cross connections; Interior drain, waste, and vent system, including: traps; drain, waste, and vent piping; piping supports and pipe insulation; leaks; and functional drainage. Thirdly, you claim that your entire home was not draining properly. In your inspection report, I provided three pieces of information that were designed to assist you in knowing the condition of the home’s plumbing system in Section 10, Item A:
Because many of the waste and drain lines are hidden from view and access, a video camera inspection of the waste lines by a qualified licensed plumbing company is recommended. This type of inspection can reveal underground piping conditions. The original, remaining cast iron and/or galvanized steel drain/waste/vent piping is at or close to the end of its dependable life expectancy due to the age of the home. Repairs and/or replacement should be anticipated with little or no warning and performed by a qualified licensed plumber when necessary. The property is vacant, and the plumbing system has not been used on a regular basis. As part of my inspection, I ran the water from the plumbing fixtures for an extended period of time. Without regular use, some plumbing components can fail: seals and washers dry out and crack; valves seize. Also, the condition of the main drain from the house cannot be fully assessed without daily or regular use of the system. These conditions and others may not reveal themselves in a short time during the home inspection; they may not become apparent until after the system is used on a regular basis. Monitor the plumbing system and anticipate repairs as may be necessary. Fourthly, you claim that you were not present for the inspection; however, on page 3, the inspection report states that at least one of you was present along with your Realtor®. Finally, you state that you were forced to remediate, repair, and remodel this massive water damage. However, before receiving your demand letter by email on 4/3/2020, you did not contact me about any of your concerns. You agreed to contact me if you experienced any problems associated with the home inspection before conducting any repairs when you signed the Inspection Agreement—refer to page 1 in the second paragraph, titled “Client’s Duty.” In the same section, you also agree to have a specialist provide additional information to the reported conditions written in the inspection report. I provided eight other plumbing-related deficiencies in your inspection report that should have assisted you in knowing about the general plumbing systems within the home. In summary, a home inspection is designed to assist you, the buyer, in discovering readily accessible conditions in the home. It is not a guarantee or insurance policy that systems or components will not fail. A home inspection is not technically exhaustive and cannot predict future conditions, including the failure of a component. As a Home Inspector, I always have my client’s best interests in mind. The inspection agreement document that you read and signed prior to hiring my services and the written inspection report that was provided to you after the inspection was completed contained the necessary information for you to perform your due diligence prior to purchasing the home. If the specific leaking bathtub and lack of drainage existed at the time of inspection, as your demand letter states, it would have been identified and reported to you. Due to the extensive information I have provided and the breach of our contract, I will not be extending any payment to you at the advice of my professional liability insurance company. Sincerely, OREP Inspector
40 Working RE Inspector Summer 2020
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