The Home Inspection Business. A White Paper for Change. By Lorne Steiner.

[Nick Gromicko]

http://www.nachi.org/whitepaper2006.htm

[Joseph Burkeson, CMI]

Bravo Mr. Steiner.

[ddinwoodie]

So True!

[rwand1]

Inspectors historically have under valued their service. Its high risk low cost is not realistic given the increase in house prices over the last decade.

Its unfortunate that weekly inspectors hear about competitors who low ball their prices. In my area there are inspectors who are charging $199. Yes thats right $199!

Unfortunately pricing reflects ones experience and sends a subliminal message out that the inspector is most likely inexperienced, providing less than adequate reports if at all, and most certainly doing it part time.

I am proud to say I am charging more for my services. Remember you don't have to increase your fees in increments of $10, $20, $30, you can increase your fee in five dollar increments over the year, so by the end of the year you are charging $60 more. At the start of the new year you start your price increase over again. When you factor in your overheads, such as car, vehicle insurance, gas, wear and tear, office overhead such as phone, computer, electricity, stationary, and other sundries how much money are you really making?

Want to make more and work less? Raise your prices. Start making more money and dealing with better clientele and better referals by raising your price. You look professional and are seen to be professional by your pricing. Experience, knowledge should not be undersold. However you will always have clients who want something far cheaper than the going rate. Low ballers do the industry a diservice and membership in associations doesn't change your bottom line only you can.

[Mario A. Kyriacou, CHI]

He makes a lot of sense! I have allways maintained with my construction business that my truck does not leave my driveway for less than $500.00 min./day ,It does not matter if the job will take 2hrs.They are paying for my knowledge,tools,truck,insurance etc. the list just keeps going.

[gkoehl]

The white paper makes good sense; it is actually along the lines of what I have been thinking after watching a program which showed that in LA a 2500 sq ft house in the proper location can list and sell for around $900,000. The same program showed what types of properties would be listed at $900,000 in other parts of the country. I didn't have my notebook handy, so will recall as much as I can (roughly) estimating the sq ft area of the other homes.

$900,000 in LA (depending on location) 2500sqft with pool
$900,000 in Miami 3000-4000 sqft with pool and guest house
$900,000 in Tenn. A huge landscaped lot and 4500 sqft (pool? not sure)

Basing our fees on sqft actually works against us.

I do not know that the HI industry can go from its current pricing structure to the 1% pricing structure over night (the market shock would be too much) and all the low-ballers would be happy for the extra work.

But, what about a 1/2% of the listing price?

lets say a 3600 sqft is listed for $225,000 home
based on a sqft price a HI would get roughly $360.00 for the inspection.
based on a .5% price the HI would get roughly $1125.00 for the same inspection.

if you think that would cause a too much market shock, the same inspection at .25% would net $562.50

even with a 2500 sqft house listed at $125,000 the inspection based on a .25% of list price would be $312.50

$312.50 for a inspection is not out of line if someone is planning to shell out $125,000.

What if you get called in on a 2500 sqft listing for $75,000?
you lose money? -no, not really.

The only way to "lose" money is to have it first.

A 2500 sqft listing for $75,000 is a pretty good indicator of the economy in the area. Your price (based on the .25%) would end up being $187.50. That is $62.5 less than a sqft price which normally would net $250.00 right? But it is also $187.50 more than you would have if you turned the job down (if you didn't have anything else lined up).

Pricing based on a percentage of the listing price may actually net you more work because it responds to the economy of the area. And no one said you have to lock in at .25%

You could use .3% for houses under $100,000
So that, a property at $75,000 would net $225.00 for the inspection; but you are still in line with the area economy.

Just some of my thoughts on the issue of pricing.

[James H. Bushart]

Can you imagine the marketing value of having no inspections below $350 by a NACHI inspector...with a slogan on the NACHI inspector indexes that says "If you want a cheap inspector, call ASHI".

[Mark H. Roe]

George,
This is a very interesting concept that just might work. It will take some rewording of the marketing plan, but it just might work. Thanks for the input.

[Mario A. Kyriacou, CHI]

Originally Posted by gkoehl

The white paper makes good sense; it is actually along the lines of what I have been thinking after watching a program which showed that in LA a 2500 sq ft house in the proper location can list and sell for around $900,000. The same program showed what types of properties would be listed at $900,000 in other parts of the country. I didn't have my notebook handy, so will recall as much as I can (roughly) estimating the sq ft area of the other homes.

$900,000 in LA (depending on location) 2500sqft with pool
$900,000 in Miami 3000-4000 sqft with pool and guest house
$900,000 in Tenn. A huge landscaped lot and 4500 sqft (pool? not sure)

Basing our fees on sqft actually works against us.

I do not know that the HI industry can go from its current pricing structure to the 1% pricing structure over night (the market shock would be too much) and all the low-ballers would be happy for the extra work.

But, what about a 1/2% of the listing price?

lets say a 3600 sqft is listed for $225,000 home
based on a sqft price a HI would get roughly $360.00 for the inspection.
based on a .5% price the HI would get roughly $1125.00 for the same inspection.

if you think that would cause a too much market shock, the same inspection at .25% would net $562.50

even with a 2500 sqft house listed at $125,000 the inspection based on a .25% of list price would be $312.50

$312.50 for a inspection is not out of line if someone is planning to shell out $125,000.

What if you get called in on a 2500 sqft listing for $75,000?
you lose money? -no, not really.

The only way to "lose" money is to have it first.

A 2500 sqft listing for $75,000 is a pretty good indicator of the economy in the area. Your price (based on the .25%) would end up being $187.50. That is $62.5 less than a sqft price which normally would net $250.00 right? But it is also $187.50 more than you would have if you turned the job down (if you didn't have anything else lined up).

Pricing based on a percentage of the listing price may actually net you more work because it responds to the economy of the area. And no one said you have to lock in at .25%

You could use .3% for houses under $100,000
So that, a property at $75,000 would net $225.00 for the inspection; but you are still in line with the area economy.

Just some of my thoughts on the issue of pricing.

Good thoughts! Keep on thinking and posting.

[William J. Decker]

Great paper, Lorne.

I do a complete home inspection:

1. I exceed state and NACHI standards.
2. I don't just check for polarity and grounding, I check for voltage drops (Yes, I know, this is contrivercial, but I find a lot of 2nd floor receptacles with 15 to 25% at 12 amp voltage drops. That just ain't right.) I check every receptacle that is accessable.
3. I use thermal imaging on every inspection. Today I found, in an upscale townhouse, water intrusion from curled (badly flashed) metal siding at the outside base of a gabled dormer. Never would have found it without thermal imaging. Images were backed up with TRAMEX moisture meter and with further examination on the outside. Turns out the sheathing under the metal siding was saturated (63% moisture with a pin moisture meter).
4. The Realtor, today, (buyer's agent) kept trying to tell the buyer that the bathroom exhaust fans (you know the rest, vented directly into the attic!) could not be fixed because the "Homeowner's Association" would not allow changes to the exterior roof or sides. Who the heck's side is she on!
5. I do 'free' (actually, included in the higher than average inspection fee. $350.00 for a dulex townhouse) pre-closing walk through.
6. I still get calls from clients from 1 year ago when they want to know something. I like to keep my clients for life.
7. Last year, we had an early cold snap. The HVAC guys were so caught up in fixing bad furnaces, they had no time to do the scheduled maintenance. I offered free furnace and water heater inspections (sow season and marketing is marketing). I did 53 such inspections, all over the CHicago area, and found 7 CO hazards. 3 turned out (after the HVAC guy or the local gas company showed check on them) to be bad, not properly maintained furnaces. 3 truned out to be failed conventional lurnaces (gas, heat exchanger failure) and one was a CAT 3 furnace with the conventional draft water heaters to the same flue! WHat were these guys thinking. This proves that HOME INSPECTORS SAVE LIVES!. Can't stress this enough.

Sure, I charge more. I am fully insured, take 2 to 4 hours to write the report, cross check serial numbers on all appliances (including furnace, boiler, water heater and compressor). I actually walk (where safe) roofs and crawl crawlspaces and crawl the perimeter of the attic and crawlspace.

I take my time and do it right.

Of course I charge more.

When someone calls for an inspection and say that I charge too much and want to 'negotiate', I say "How cheap and substandard and incompetant an inspection do you want? I can give you the phone number of a guy who will do the inspection for $125 where I charge $400 (SFH, <2,500 SF).".

Some ask for the number (a 'candidate' in another association), but most hire me.

And, I have never had a complaint about my services.

Just my opinion, but hope this helps.

[Mark A. Timpani, CMI]

This is what is on my website...


Let's keep things in perspective. Most Realtors commission is 6 %. Home Inspection prices are not 2 % but generally in the .2 % range. Keep in mind there is no industry standard like the Realtors, so every inspector can charge whatever they want. Most are represented in the following example.

example: REALTORS INSPECTORS
On a 1800 square foot $140,000 house 6% = $8,400 $230
On a 2200 square foot $220,000 house 6% = $13,200 $280

The cost of a Home Inspection is a bargain. Even if you paid $1500 for the inspection, on average it is still less than 1% ! How much are you willing to pay for peace of mind and to know exactly what you are buying?Let's discuss how Inspections pay for themselves. First of all, say you and I agree on $220 to inspect your house. I arrive at the house you are interested in, perform the inspection that takes about 4 hours, after we go over the report you pay me $220. Now, two things can happen.


A. The house is in great shape so you want to make an offer. You tell your Realtor, "If they knock off $1000 we'll take it." The Realtor says we can try but they may only deduct $500. You say " We'll take it !"

B. The house is in good shape, but I found out that the roof has two shingles that are broken, the garbage disposal does not work, and although the light works on the bedroom ceiling fan, the fan does not turn. You tell your Realtor, "We love the house, but we need to get those items repaired, and we will buy the house." Your Realtor gets back to you with the good news and states, "The owners accepted your offer. They said that they will fix all the items, or they said they'll lower the price $800 and not repair anything."


In situation "A" you saved $500 on the price of the house. The price you paid me was $220. $500 - $220 = $280
Because of me and your sharp negotiating skills, you came out ahead $280. You made $280 !!

In situation "B" you have two choices.
1. If they do the repairs that means that you will not have do the repairs after you move in. (Thank goodness you had an inspection.) Repairs cost them $800. You paid me $220. For $220 you saved yourself an $800 repair bill. $800 - $220 = $580 Because of me and your sharp negotiating skills, you came out ahead $580. You made $580 !!

2. Now say you don't want them to fix anything and you want the $800 off the asking price. You paid me $220. $800 - $220 = $580 Good job, you just made $580 !


So you can see, not only am I there to help you find potential problems in your house, but nine times out of ten you make money! It's really a win win for the smart consumer, you!!

[wforsyth]

That's a great idea Mark. Wish I'd thought of it.

[gkoehl]

Some further development on pricing structures based on percentage of price vs sqft.

The bottom example has some suprising numbers that expose the results of pricing based on square footage.

The document is basically just some rough notes I compiled to further examine the differences in pricing structures.

For those of you who are intereseted, you might find this data helpful.

I tried to double check my math- and hope my figures are correct.

Every HI should look at the income gain difference between the realtor and the inspector from the bottom example- it will probably be upsetting.

[Steven E. Wiegner]

Our Basic Cost Is About 225.00 Per Inspection

So We Need To Go Way Above This For Each Inspection