Liability of providing MoveInCertified.com vs a regular inspection.

[Bruce A. King]

If the buyer walks away, the seller can claim a loss. Anyone can sue anyone for any reason. MIC is no different than anything else, liability is a given when dealing with people and their most valuable asset.


The biggest obstacle's to pre-listing inspections are:

1. The seller is done with the house, they don't want to spend any money on it. Many sellers don't think much is really wrong with their house. Others know of problems and hope the buyer has a lame inspector.


2. Sellers really hope to travel down the same path as the agents, straight to the closing table with few obstacles, once they know of problems, they must disclose them. The whole process has always been about placing buyers under time constraints (pressure) and hope they don't take the time to rethink things. Springing the buyer's inspection report on them while they are under this pressure sells more houses than any other technique. Sellers know this, and agents know this, its all part of the wonderful world of real estate. Some smart buyers kill the deal while under this pressure created for them. Would it be stupid to put money down on a car and spend days negotiating before starting the engine? Yes it would, the way real estate is marketed is stupid but it is necesary to create that pressure on the buyer due to the large numbers involved. Pre-listing inspections should be required by law and any patty cake inspector caught doing quick easy ones should have his license pulled. A buyers inspection would still be needed also for obvious reasons.

[James H. Bushart]

Originally Posted by jbraun

If the seller signs a seller disclosure, at least in Missouri, the disclosure is not worth the paper it is written on. I have seen several of my clients try to sue the seller over obvious lying on the disclosure. Lawyers just laugh it off. Remember the MAR had lawyers write these seller disclosures. Why would they want them to hold up in court?

Up until now, as you say, the disclosures are laughable and not taken seriously by anyone.

But in this case...we have a sign in the yard specifying that the property is "Move-In Certified" with a professional third party evaluation attached to the owner's claim.

[James E. Braun, CMI]

Originally Posted by jbushart

Up until now, as you say, the disclosures are laughable and not taken seriously by anyone.

But in this case...we have a sign in the yard specifying that the property is "Move-In Certified" with a professional third party evaluation attached to the owner's claim.

Would it not help the seller then, because the inspector did not know of this defect either?

[Bruce A. King]

I guess I should clarify the case where the buyers inspector finds more wrong than the MIC inspector, if the 2nd inspector uses an IR camera or other tool such as a gas detector not used by the first one it would be another subject.

[Nick Gromicko]

James Braun writes:

What is Nick trying to say that your client (the seller) cannot sue more than what he has lost. If worst comes to worse, you will just need to pay the inspection fee back.
The main advantage to a MIC is the advertising ability. I have gotten as many as three additional inspections from buyers looking at a house and decided they want another on instead. I would get more but if the seller has the house priced correctly, mine MIC houses have been selling one to five days of putting the sign in the yard. You can not beat getting paid to advertise your own business.
MIC works, just convincing a Realtor to try it is hard. But once they try it, they like it.

Which demonstrates the added profit in an MIC inspection.

Remember, lowering liability is NOT what really what we are trying to achieve. Lowering liability per dollar of profit is.

For fun, let's say that each inspection we do comes with $25 worth of risk. Do 100 inspections and you probably have to write a check for $2500. It may be to a client or it may be to an E&O insurance company (depending on how you manage risk), but part of the cost of every inspection is $25 in risk costs.

You can change (up or down) the $25 amount if you like, I'm just using it as an example. Now MIC's risk cost is less (I say it is about $1), but let's just assume that I'm wrong... that working for the seller instead of the buyer doesn't reduce risk, that time between the inspection and the buyer moving in doesn't reduce risk, that having no duty to the buyer because he isn't your client doesn't reduce risk, and so on. I think it does, but just for fun we'll say it doesn't and the risk cost associated with an MIC inspection is no less than a regular inspection. OK so far?

Now then, it is pretty clear that the profit increased by all the target marketing that comes with an MIC inspection at least triples its profitability. Actually, if you were to pay me a million dollars and say "Nick, get a copy of my sample report in the hands of 25 prospective buyers in my area, each about to hire a home inspector."... I'd say that I need more money to succeed. MIC does just this. Now I'm not saying that an MIC inspection is worth a million dollars, but it is probably worth 4 or 5 times a regular inspection when you account for the added marketing value. Just landing the seller's other inspection on the house he/she is buying gets you 2 for 1 (cuts your marketing cost per inspection in half because you got 2 jobs out of it).

Anyway, let's be super conservative and say that the risk cost of an MIC inspection is the same for a regular inspection (it isn't, it's less) but the profit is double. That means that your true liability (risk cost per dollar of profit) is halved to $12.50.

At very worst, you've cut your risk per dollar of profit in half!

Actually, by my math, where you cut your liablity per inspection to 1/20th and you quadruple your profit, you've actully cut your risk cost per dollar of profit to 1/80th of that of a regular inspection.

[Nick Gromicko]

For those of you who are saying "huh?"...

Every inspection you do has costs associated with it. You can calculate the average cost per inspection of let's say... Marketing, by taking all your marketing costs for the past year and dividing it by the number of inspections you performed (usually about $20 per inspection).

You can do the same for your fuel cost for each inspection.

You can do the same for your risk costs for each inspection. For those of you who carry E&O insurance, it's simple... divide the cost of your premium plus the cost of any deductibles you paid in the past year by the number of inspections you did last year. For those who don't carry insurance, you should probably look back 3 or 5 years to get a grip on your risk cost per inspection and divide refunds, settlements, and legal fees by the number of inspections you did in the same time frame.

[Nick Gromicko]

My point being that reducing risk isn't the idea, reducing risk per dollar of profit is.

Generally when you do anything in business that increases profit, you also increase risk.

The whole trick to making money in the inspection business is to take those actions that increase profit at a faster rate than your risk costs (and other costs) increase because of those actions. MIC clearly does this.

[Dale Duffy]

Originally Posted by gromicko

My point being that reducing risk isn't the idea, reducing risk per dollar of profit is.

Generally when you do anything in business that increases profit, you also increase risk.

The whole trick to making money in the inspection business is to take those actions that increase profit at a faster rate than your risk costs (and other costs) increase because of those actions. MIC clearly does this.

I don't see any problem with the program, it's the agents who don't want to hear about pre-listing inspections around here for some reason.

With all the REO's you would think they would want their listings to stand out, but I cannot persuade any agents I know to even have one inspection done at a reasonable cost to the owner or even the agent paying for the inspection, just cannot get it through their heads.

[Nick Gromicko]

Dale, it was the same in Denver until I plastered these two words in my talking points and hand outs... "FOOT TRAFFIC" MIC generates foot traffic by making the reports available to prospective buyers who then get interested in the property.

Also http://www.moveincertified.com/agents

[Dale Duffy]

Originally Posted by gromicko

Dale, it was the same in Denver until I plastered these two words in my talking points and hand outs... "FOOT TRAFFIC" MIC generates foot traffic by making the reports available to prospective buyers who then get interested in the property.

Also http://www.moveincertified.com/agents

Good point....like the agent doesn't know those two words, but I think many are forgetting them now because their listings ain't selling, the REO listings are....need to drill the definition of "Foot Traffic" into their heads again I guess.

[Nick Gromicko]

It's a buzz phrase that works. I was an agent for 10 years and most of us suffer from A.D.D. A pitch has to be 2 words or less.

[Joe Farsetta]

I can actually see some liability on the part of the inspector who misses something during the seller's inspection. MIC is a fancy word for seller's inspection or pre-listing inspection.

Should the buyer's inspector find a material defect which can be proven to have existed at the time the seller paid for the initial inspection, I can absolutely see some sort of lawsuit. The problem comes when assessing actual damage, not liability, IMO.

A buyer can state thet he/she will be out some money for a repair that they did not know about prior tp purchase. What will the Seller claim, though?

I believe that a lawsuit may still move forward for the value of the repair or defect. Whether a judge or jury will find in favor of the seller for the amount of the claim is another story. What will the argument be? "Had I known the repair was needed, I would have spent my own money, but now I want to spend his money instead."

The inspoector will still need to defend the claim.

Know your liability.

[Dale Duffy]

You definitely don't want to miss a damn thing, that is a given, but I don't want to miss anything for a buyer inspection either, so it all boils down to doing the best inspection possible regardless of who you're client is.

This might not be something a new inspector would want to offer, but I guess if you call yourself a Home Inspector, you better be a good at every aspect of the job someone is paying you to do.

[Nick Gromicko]

Dale gets it:

that is a given, but I don't want to miss anything for a buyer inspection either, so it all boils down to doing the best inspection possible regardless of who you're client is.

Who do you want your client to be?

The buyer who is about to move into the home you just inspected (traditional inspection)?

.... OR....

The seller who moved out of the home and who hired you 6 months before the buyer(who isn't your client anyway) moved in (MIC)?

From a liability standpoint... it's a no brainer.

[Bruce A. King]

I agree Nick, EXCEPT many of the prelisting inspections are done by inspectors that miss A LOT of stuff.

The mindset may be the problem, they give a discout to get the job and figure their job is to just look for certain problems. Agents have that mindset too, they think we should only be looking for strutural problems.

The misc elect, plumbing, HVAC and exterior stuff can cost around $2000 to $5000 on nearly EVERY house if someone has to hire high priced contractors.