How can a buyer that cannot afford an inspection afford a house? 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 ends up in more houses allowed to further deteriorate or end 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?” We used to call these buyers, “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 would argue that if a buyer can’t afford the inspection they sure as hell can’t afford the house. Charles Buell
It is my understanding, that in some areas of the country, it is common, or becoming common, for the home inspector to not bet 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?
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You are right about that. Reminds me of the old days when we tried to convince buyers that they did not need any money to buy a home.
As a realtor, if a buyer does not want to do an inspection prior to purchase, I make them sign a written statement that they choose not to do an inspection against the advice and counsel of their realtor (ME). I won't be going down with that ship.
As far as inspectors not getting paid until closing...who would agree to that?
Inspectors should be paid at the time of the inspection, period. If the buyer doesn't have the ability to pay for an inspection at the time of the inspection they have no business buying a house. You're completely correct - there is a difference between buyers and renters.
Jenna, yes, but the ones that "don't want" an inspection is a little different from the ones that want one but just don't want to pay for it until later. And your last question is my question as well---but in some areas inspectors are being asked to do that and the ones that do not want to do it that way are having to compete against the inspectors that are willing to do it.
Michael, we are in agreement----I hope to hear from some agents that can explain why this practice is happening in some areas.
And if the deal doesn't close? Is the inspector then left to figure out how to get paid?
Debi
Debi, that is what I hear----
Mr Charles,
Some of us, frankly, have to pay at closing when we are given the funds by the bank. That will be the way my contract reads with you, if I ever find a home that suits me. By the way, is the one above reasonably priced?
Nutsy
Charlie,
I have done that a handful of times. I agree that it is really questionable if they can afford a house. I know a PE firm, that does manufactured home inspections. The owner was surprised that we inspectors ARE NOT paid at closing. He said that is how they are always paid. My contract states the money is due, regardless of closing. I make it clear that if a major inspection issue comes up, then funds are due at that time, not at closing. I also make it clear that, if the loan falls through, I am paid. I have done this maybe four times and, two of the four times, the realtor's family was involved and I got a pledge from the realtor, whom I knew well, that I would be paid. And, so far, I have not EVER been stiffed by a client. But this is something I will do, but only on the most rare occasions. There are inspectors who do this on a regular basis.
Preposterous. I once sold treated lumber as a sideline to my construction business and a would be buyer told me that he was building his home from a kit and the kit company and their financing arm told him to tell me that I would be paid when the home was completed. He was being his own general and most of the labor. I declined the opportunity.
The inspectors I know are paid on the spot. But your point was about not being able to pay, and hence not ordering the inspection to begin with. Not a good idea to buy a property without an inspection!!
Nutsy, you don't have to worry as I am not likely going to be signing ANY contracts with you.
Steve, I still want to hear from some agents that are supporting this approach to get some answers as to WHY it is being done.
Glenn, I agree. I was a general contractor for more than 33 years and I NEVER got paid after the job was done. Sure I might get paid the "balance due" but that amount would be considered "profits" on the job typically and I would be paid in advance as each phase progressed. I never bought into the idea that I should use my money to finance someone else's dream house. If I had to borrow money to buy materials for a project I would have to pass on that "extra cost" to the consumer. With paying cash at the time of purchase I could also get discounts that I could pass on to the consumer as well. Just sayin:)
Carla, no, my point was not avoiding the inspection all together but about why agents would encourage waiting until closing to pay the inspector for the inspection.
I am to the point where I think home inspections should be mandatory.
Have a great weekend my friend,
Paul
Paul, do you have any stats on what percentage of sales do not involve an inspection?
Another quality picture from the annals of the home inspector. The end quote could be correct.
Robert, are you saying you would not want this to be your listing? :)
You make a good point Charles. Owning a home is expensive. There are always going to be enexpected expenses and if a buyer can't afford the home inspection, you're pobably right, they may not be able to afford the house in the long run.
Very kindly,
Croakster
Nathan, that is what I am thinking for sure
Croakster, can you afford the inspection? If not----just hop on out of here :)
My cousin Nutsy says that you have a special deal for rodents, those who are superstars, and that you will inspect and expect payment after closing. Waiting to here more.
Wheatloaf, superstar
Wheatloaf, you missed one little detail----that was AFTER closing the lid on the Barbeque. OK?
Had a buyer last week use his "brother" to do his inspection to buy a $340,000. house. Go figure.
Charles-
If they cant afford the inspection, but and still can afford the home, surely they will be hurting when the constant repair bills sink them.
This is what I call the Boo Radley house.
Rich
Hi Charles,
In San Diego, Most inspectors are paid at the time of inspection. If a Buyer wants to be billed through escrow, they charge from 15 to 20 percent premium. But I do share your view that a service should be paid when it is rendered.
Tammy, was he qualified?:)
Rich, seems like it to me.
William, I had not heard about a surcharge----perhaps that would encourage them to pay up :) Seems so odd though to not have any money now but will have even more at the time of closing.
Charles - Could not agree more. I know that it is not my job, but I do ask when we are out looking at houses how much they have saved for homeownership. They will no longer be able to call the landlord when something goes wrong. They will need to fix it and pay for it....right then and there....just like the home inspection.
Morning Charles, I'm seeing a slight trend for the condo docs and budgets to be paid upfront in case the deal falls apart.
Diane, I am glad to hear you do this----they do need to be prepared. Can be a very nasty awakening when they realize that they are now the landlord :)
Bill, that makes sense.
I had a customer once pay me at closing because he said it was written into the loan or some such thing. I was reluctant to wait for payment, but everything seemed and felt legitimate. I was paid, but would not do it again unless there were very, very special circumstances.
Home inspections should be paid for at the time of service, period! I completely agree if you can't pay for the inspection, how will you afford to keep the house.
James I wonder if in your case the expense was being built into the mortgage? Scary.
Charlie,
I can answer your question to James. Yes, that is why they ask for this. They honest to goodness do not have the money and the bucks (check to inspector) comes from the title company as part of escrow, built into loan. Banks, routinely, put the cost of the appraiser in at closing, they see us in much the same way (and I guess we are in that both can kill a deal) so it makes sense to them. I do not know any realtors who push this but, since they only get paid at closing, they might ask the inspector to accept this deal if it is the only way they see for the deal to close. Of course anyone on that tight of a budget will have problems affording the house but they are able to jump through all the hoops to get the loan so I guess our government thinks they qualify. I do not think we learned squat after the mortgage debacle of a few years back.
I think it still all comes down to people trying to make a living. If they cannot get the deal to close----they don't make any money. Honestly I don't know why agents don't expect to be paid "something" ahead of time----gas money----advertising money. Why should they use their own money to build someone else's dream?
Charles - If the money is that scarce, the buyers needs to remain a renter. We're still funding and creating opportunities for future foreclosures.
I think it still all comes down to people trying to make a living. If they cannot get the deal to close----they don't make any money.
Yep, the crux of the matter. I managed salespeople who were paid only if something sold for 15 years. They have to eat and pay bills too.
John, it sure seems like it to me.
Steve, capitalism sure can be wacky at times :)
Charles, I agree with you, Inspectors should be paid up front. (It would even be nice if Realtors could have a retainer fee paid up front, but that's another subject) And a buyer should have a cushion of money, a few thousand at least, left after settlement for the unexpected things that can go wrong once they move in. Because once a buyer has settlement their Landlord is now sitting in their living room when the faucet springs a leak. ---Gloria
Gloria, how in the heck did it get established that agents don't get retainers? This is common practice in so many professions.
Early in my career, on a few occasions I have billed to closing. I knew that was how appraisers were getting paid, so I thought, what is the difference? What I was unaware of was that the bank ensures that the appraiser gets paid, even if the deal goes south. Inspectors are on their own for collecting unpaid amounts owed.
In most cases everything went well. But I did end up with a couple that did not close, and had to play "bill collector". I really don't like being a bill collector. On one occasion the client kept promising to pay up, and after mutliple lies, I decided it was time to simply send his case to collections. I got only about half of what was owed.
On another the closing occurred, and regardless of the fact that I sent an invoice in, escrow overlooked it and did not pay. Eventually the client sent me a check, but it took a while, and I had to be an obnoxious collector.
So now when people ask, if I will bill to closing, I respond "No, but I can accept credit cards" :)
If the client does not have money at the time of the inspection, what is to make me think it will be any different after they close on the home?
Charles, I don't know the history behind the commission only practice. I wish it were different. Here's a link to a post I wrote about it. ---Gloria
Harold, fortunately this whole business of getting paid at closing sounds like an isolated issue----but nonetheless painful for those that must deal with it.
Thanks Gloria----will check out the link
"I would argue that if a buyer can't afford the inspection they sure as hell can't afford the house."
Amen to that! If a home inspector gets paid at closing, it means they have a financial interest in making sure the sale goes through. That's not good.
Never have, never will.
"Never have, never will." Love it----I am right there with you----I think it is treading a very thin line close to being a violation of our code of ethics.
Heck, I call it an outright violation of our code of ethics. I don't think it could be any more clear.
1. Inspectors shall avoid conflicts of interest or activities that compromise, or appear to compromise, professional independence, objectivity, or inspection integrity.
Inspectors shall not inspect properties for compensation in which they have, or expect to have, a financial interest.
Reuben, do you know if this question has actually been asked of the ASHI Code of Ethics? I have been told that it has and that as long as there is a clause in our contracts that says we are to be paid regardless of whether the deal closes or not we would be deemed "ethical." Still seems like a slippery slope to me.
You're correct - this would be ethical as long as we get paid either way. The problem I see is that if the client is planning to pay us out of the closing costs, they probably don't have any back-up plan to pay us if the deal falls apart.
Reuben, perhaps our COE's are a "minimum" standard too? :)