Lowballers, Please go away!

[ADAM HANNAN]

Tuesday rant...I apologize in advance for this rather long rant.

Lowballers are going even LOWER these days. The following email was forwarded to me by a Realtor in my area. He said that his entire office received this email and mentioned that he is getting marketing like this all the time.

-----Original Message-----
From:I have removed the name. I'm too nice!
Sent: June-09-09 8:49 AM
To: undisclosed-recipients:
Subject: Home Inspections

"Beat the recession.
Home Inspections
Now only
$255.00*
and the Very Best
by a Professional Engineer
Does a thorough and a complete inspection from the basement to and including
the roof with
a 14 pages written report handed to you at the conclusion.
Total time is approximately 3 hours.
In full compliance with the Ontario Association of Home Inspectors
standards.
Fully insured.
References available.
*to August 2009"
_________________


Now, we've all seen crap like this before and most of us realize that lowballers are a part of the game in every business. As I've said hundreds of times to my clients and Realtors, "those who cannot compete on quality, value, service, or experience tend to compete on price".
However, with a steady flow of recent graduates, lowballers have become an increasingly big problem in my area. There is the guy who advertises $199 inspections, and another that markets $249 up to 3000 sq ft., and a bunch more that charge $275, and there is even one moron that charges $200 for Pre-listings...and gets paid only if and when the house sells!!!! Has anyone told this guy that more than half of homes go back off market!
I spend alot of time trying to educate Realtors and consumers about what a home inspection is and why most professionals should be charging at least $350 to $500 for a detached. (I start at $375 for semis and detached and $300 for small, new towns)
It has become increasingly frustrating to deal with but I refuse to join in on the price wars. Am I losing out? Am I missing something here?

True story - Wedneday of last week, a realtor calls to book a small 1200 sq ft, 2yr old town. I quote $300. She tries to haggle the price down to $250. After I ask her if she's new to the business (she was) and give her an education about prices, I told her that I'd do it for $290 because it's the first time she is referring me. We book. 10 minutes later she calls me again and tries to haggle down to $270!!! This is exactly what I said to her. "Lady, you'll need to book somewhere else. If I have to charge any less, I'll need to skip a room or two. Take me off of your referral list and do not ever contact me again! Ever!" She was shocked by my reaction and after a pause, she said that if I charge the client $270, she would refer me again. I refused. I reminded her to never to call me again and hung up.

Did I need or want that inspection? Of course. But not at the expense of being a hypocrite. So what is my point? The point is this. If we continue to charge less and we are open to negotiations, we will continue to water down the business. Consumers and realtors will assume that it is ok to negotiate our fees. Professional Inspectors need to stand their ground and charge a professional fee. Do not attempt to compete with the part-timers and fly-by-nighters. Stand your ground! How are we supposed to grow a business with no profit margins? How can you expand a multi-inspector firm? Are you forgetting to subtract: marketing and advertising, equipment, training and continuing education, office supplies, receptionist, answering service, report fees, phone, gas, in auto, internet, Insurance, etc, etc, etc.???

Please stand your ground. We are worth it!
Here's a link from a CMHC article that states home inspections should start at $500 and up. Finally some common sense!
http://www.cmhc-schl.gc.ca/en/co/buho/buho_001.cfm

Any thoughts are appreciated

BR, Adam

[relliott]

Good for you,though it is a shame you could not have reasoned with her rather than shocking her.
I like the old what percentage of your commission will you take off so i can match that.
How about she just deducts $50 OFF WHAT she makes by paying the extra from her pocket.

[Gerry Pallotta]

Adam

I am with you bud.
Turned down a few myself.A friend of mine asked me the other day why don't you bring your fees down to $300. I replied because once your in the basement you'll never crawl out.

[tneyedli1]

Adam:
The realtor asked how much Reply $450.
Another inspector quoted $250.
Please use him or I can inspect half the home, you choose.
Ended up getting my usual fee. Quote firmly and don't back down.
Quality is long remembered after price is soon forgot.

T.Neyedli CHI(P)
BPCPA 47827
www.alphahomeinspections.ca

[ADAM HANNAN]

Originally Posted by tneyedli1

Quality is long remembered after price is soon forgot.
T.Neyedli CHI(P)
BPCPA 47827
www.alphahomeinspections.ca

Agreed!

[ADAM HANNAN]

Originally Posted by gpallotta

Adam

I am with you bud.
Turned down a few myself.A friend of mine asked me the other day why don't you bring your fees down to $300. I replied because once your in the basement you'll never crawl out.

Thanks Gerry. Good on you Gerry. Very true. Tough to reverse once you lower prices.
What I don't understand is why even seasoned inspectors are charging $275 all incl. for homes of all sizes. Can't figure it out.

Here is one very tacky story that I heard one time...can't remember where...it's probably made up but it doesn't matter....

"There was a large manufacturer in the US that produced millions of dollars of products per day. One morning all the machinery abruptly shut-down. The entire plant was shut-down. Frantic, the plant manager, knowing that they were losing money every second, calls for emergency service. A short time later a service man walks in and surveys the situation. He walks to an area that houses electrical panels and what seemed like a mess of garbled wires everywhere. He opens one of the panels. looks around. Grabs a screwdriver and turns one screw. Within seconds the entire plant springs back to life. The plant manager was ecstatic. The service man then walks over and says "ok sir, that'll be $10,000 please." The plant manager says "What! are you crazy! All you did was turn an effin screw - I want a complete itemized invoice!"
The service man says ok, no problem and then calmy writes up the invoice and hands it over to the plant manager who then reads the bill. it says:
Turning of screw $1.00.
KNOWING WHICH EFFIN SCREW TO TURN $9999.00
...the service man got paid.


Alright, I know that was a lame story but it underscores the fact that home inspectors are paid for their knowledge. Inspectors must consider the wealth of knowledge that they have earned through training and experience. That knowledge is brought to each and every house. That knowledge is worth more than what most are charging.
I think I've said enough!

BR, Adam

[Mario A. Kyriacou, CHI]

Adam writes:
It has become increasingly frustrating to deal with but I refuse to join in on the price wars. Am I losing out? Am I missing something here?

Adam,

First allow me to tell you something that you will soon figure out on your own. It's not only the new guys that have the low fees, it's the seasoned veterans as well. The lowballers in our industry will allways be among us...allways. Ask anyone and they will tell you how passionate I am about receiving a fair inspection fee for a home inspection. I was tired of receiving call after call for the $250-$300 inspections. That's when I finally decided to post my basic fee of $425 on my website and it worked because the requests for low inspection fees have dropped drastically. When I receive calls for a home inspection now I know and they know that my min. fee is $425 and that's for a 1000 sq ft bungalow.
I just finished a home inspection on a 5000 sq ft house with a fellow NACHI member (he can identify himself if he wishes) that took almost 5 hours. I won’t get into details but the entire inspection fee was $6000.00 split 2 ways. This included infrared imaging of the entire house. Our client realized the value of having thermal imaging on a potential purchase and he also appreciated having 2 inspectors onsite.

I applaud you for standing up for yourself and sticking to your fees. Best of luck and continued success.

BTW In answer to your above questions, the answer is NO and NO

[ADAM HANNAN]

Originally Posted by mkyriacou

Adam,

First allow me to tell you something that you will soon figure out on your own. It's not only the new guys that have the low fees, it's the seasoned veterans as well. The lowballers in our industry will allways be among us...allways. Ask anyone and they will tell you how passionate I am about receiving a fair inspection fee for a home inspection. I was tired of receiving call after call for the $250-$300 inspections. That's when I finally decided to post my basic fee of $425 on my website and it worked because the requests for low inspection fees have dropped drastically. When I receive calls for a home inspection now I know and they know that my min. fee is $425 and that's for a 1000 sq ft bungalow.
I just finished a home inspection on a 5000 sq ft house with a fellow NACHI member (he can identify himself if he wishes) that took almost 5 hours. I won’t get into details but the entire inspection fee was $6000.00 split 2 ways. This included infrared imaging of the entire house. Our client realized the value of having thermal imaging on a potential purchase and he also appreciated having 2 inspectors onsite.

I applaud you for standing up for yourself and sticking to your fees. Best of luck and continued success.

BTW In answer to your above questions, the answer is NO and NO

Thanks Mario. Yes in the above post, I noted that I was surprised by the amount of seasoned guys undercharging. It's too bad.
I considered posting a price list on my website and advertising but decided against it. My concern was that it would not give me the opportunity to speak to the client so that I could educate them about prices, difference in services, etc.
$6000 for a home split 2 ways. good stuff. way to go!

Adam

[Rudolf Reusse]

Most proprietors who are trying to generate business by undercutting the competition are either broke already - or well on their way.

Charging these days less than $300.00 for a home inspection does simply not cover the overhead and profit margins required to sustain - unless the home inspector is willing to sell his/her expertise for less than $50.00 an hour.

Any tradesman working for a good company has more benefits risk free.

RUDOLF REUSSE - Home Inspector since 1976 - TORONTO

[hjanssen]

Any one who is a full time inspector and is a professional should be charging no less than 400 dollars
Remember,professional people use our services and they expect to pay a fair price for this service
You can always get some thing cheap,but is it of any value?
Lets work in raising our fees,not lowering them
Harry

[George A. H. Luck]

Bold, bald statements that "you should be charging $600. or $500. or $400." are being made in a vacuum. Each area has a different 'norm' as far as pricing goes. The reality is that you should never be in the bottom 2/3 of the pricing range. Persons from the larger urban areas of Ontario telling an inspector who lives in 'Buckpoo' Ontario that he is selling himself short and destroying the industry by charging less are at best hyperbole and at worst very bad advice. You can only charge what the market will bear and 'Buckpoo' will have a very different market than downtown 'Bigsmoke'.

That being said, I raised my prices on the 01 June and have been as busy this year as last. I guess it pays to be a 'well known old fart' in your market too !

[Stephen W. Stanczyk]

I have had this happen twice now. Both selling agents were calling and trying to get me to lower my price. I told them both that I normally only offer discounts for Active Military but in this instance I would offer a 10% discount, IF they matched it with a 10% discount in their commission.

Boy they sure got offended fast and the response was almost identical....... "How will me giving them a 10% discount on my commission help them purchase the house?" I just state that "fair is fair" and my discount will help them the same way. I think the next time I will add in, "If you give me the clients name, I will find them an agent that will handle the sale for 1/2 the commission". That will really help them out.

Jerks.

[Christopher Currins]

Originally Posted by sstanczyk

I think the next time I will add in, "If you give me the clients name, I will find them an agent that will handle the sale for 1/2 the commission". That will really help them out.

Jerks.

That's good Stephen, I'll remember that one.
I'll find them a low-balling agent and we both will help this distressed home buyer.

My favorite scenario with agents is when they ask if I can drop my fee $50 and their client is buying a $400.000 house.

[Gerry Pallotta]

'Buckpoo'

George
Spent a few nights there. Not very good for hunting or fishing.

[David A. Andersen]

From the other side of the fence...

Why is it so easy for some Real Estate Clients to ask for commission reductions?

In what other Professional industry do the clients feel so brazenly justified asking their "representatives" to provide superior levels of service at a reduced rate?

I think it's because they (often) can.

After all, you never know til you ask, right?

Truth is, a commission reduction doesn't make up much ground in the grand scheme of things, does it?

If a Seller is up-side down, the mistake happened when they purchased . . . in combination with whatever circumstances are causing them to need to sell in a less favorable market.

Ask me to reduce my commission, and I'll ask you where you work . . . and I'll show up one day as a customer of yours and ask you to return the favor by reducing YOUR pay commensurately . . .

and just as arbitrarily . . .

"NO"

That's a complete sentence!

I know some agents agree to work for less commission than others for a variety of reasons. I have no issue with that whatsoever. Commissions are not standardized, so I'm perfectly fine with any agent who wants to charge a low, flat rate or a minimal percentage - Just to "get the listing" . . . That's OK by me . . . I have my own fee structure for my clients.

My beef is when after having signed an agreement (Listing or Buyer Representation) agreeing to pay a stated commission for that particular transaction . . . The client sometimes "strokes out" and develops amnesia and requests permission to renege on that contractual promise (obligation).

If you allow this behavior during a negotiation, what good will be the deal you have reached with the Purchase agreement?

If the client will renege on his deal with YOU, what level of comfort can you possibly have that he will perform as promised on the purchase agreement?

For me, this is a matter of principle.

Don't be quick to agree to cut your pay . . . You'll regret it later because there will an embedded emotion of disappointment . . . and odds are great that you will lose some motivation to maintain your standards of service for that client.

If you are the client . . . think about your integrity . . . and negotiate commission rates UP FRONT . . . BEFORE signing a representation agreement . . . NOT afterwards in the heat of a negotiation. This is "fair play" ... and honors your REALTOR'S professionalism.

At the end of the day, you'll save a heck of a lot more money (and reputation) simply by holding up to your end of the initial bargain.

I'm just sayin'

Best,

b

The Owen Group – http://www.theowengroup.net

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Barry Owen
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Keller Williams Realty