Home Inspection Scams

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When I was a senior manager, one of my duties was to oversee risk control. I was good at it, since I paid attention to how it was accomplished after the fact, so I could spot signs of scams happening in the future. After having written about a real estate scam involving craigslist, I was asked about scams involving inspectors. I was stumped for a bit. I do not have the makings of a good criminal mind, and I have never been asked to investigate a scam, so I had to think hard for a moment about how a home inspector could be involved in a fraud. I came up with the following, but I have to state that I personally have never seen either of these done, but I am sure that one of them does happen on a regular basis.

The con job that I think occurs with some frequency would be the “I can repair that for you” scam. I would avoid any inspector who is advertising his repair service in conjunction with his inspection service. In Texas, we cannot work on the home for one year after inspecting it, so most Texans have nothing to fear. This would work much like what happens with mechanics who take advantage of people not knowing about their car. The inspector could point out an issue that needs to be repaired quickly for safety or efficiency, but it may not have to be fixed at all. How many people know the workings of their HVAC or what is acceptable in the breaker box? To prevent this scam, take a basic precaution when dealing with the inspector. Tell him that you will be asking for three bids on repair items. If he knows that another contractor will be looking into his statements, then he will not want to make a false one, in fear of being exposed.

This second idea may be far fetched, but it is the only other fraud that I could think may happen, and it may not involve the inspector at all. Currently, many buyers are becoming vocal on wanting homes repaired before they move in. What if to force the seller to make certain repairs, the inspector places them on his report with emphasis that this needs to be repaired. The idea being that the inspector and buyer work together to place the seller into a position that repairs have to be made. In this case though, the buyer does not really need the inspector involved. The buyer is not required to share the report, so they could state that the report demands the repair. The inspector would be compensated by an additional fee if it worked. To prevent this sellers would have to stand their ground. They could have a pre-inspection done on their own, or have a contractor come out to inform them of the significance of the inspectors findings. They need their own report to counter this scam.

I am not sure how else an inspector could develop a scam. Certainly, there could be other means for perpetrating a fraud on the buyer or seller, but I think that it would be a variation of the above. Maybe the inspector does not make the repair, but a firm that gives him a referral fee does (in Texas, the inspector has to inform his client, that this would be the case). I guess that I should contemplate a life in crime to determine how other schemes might occur, but I am not interested in that, so maybe you know of something that has happened along these lines?

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12 Responses to “Home Inspection Scams”

bobbie gooler Says:
January 23rd, 2010 at 4:52 pm
i bought a house a few years ago and the basement was given a clean bill of health which was obviously untrus alot was covered up is there anything i can do about thia now (legally) or otherwise?

frankschulteladbeck Says:
January 24th, 2010 at 6:39 am
Truly, you would be best served by seeking legal advice in your local area, since laws are different from place to place. If the homeowner knew, and did not disclose the problems on their seller’s disclosure, then there is the possibility of holding them liable. If you had a home inspection, and the inspector should have reasonably been able to detect the problems, then he could be held liable. When you say “alot was covered up”, could an inspector access the problem areas? If he spent time there, could he have detected the issue? Since your statement is not specific, it would be hard to determine. If you feel that the answer is yes to those questions, then you may have a legal case.

Tod Says:
January 24th, 2010 at 4:40 pm
Home inspectors are being offer positions as “Field Inspectors” for mortgage holder groups.
Like this: A “coordinator” creates a company to do inspections. He admits upfront there is no payment for 30 days. He turns in all the inspections and gets paid for 30 days work of 10-30 inspectors. Then he moves on to another state.

frankschulteladbeck Says:
January 25th, 2010 at 6:14 am
That sounds more like a problem for the home inspectors. I am careful to check out firms with whom I am doing business. For the owners of the property, this could be a problem of who is responsible if the report is inaccurate. The main responsibility would lie with the firm who hired the inspector, but if they are not to be found, the inspector may bear the brunt of the responsibility then.

EJN Says:
June 8th, 2010 at 10:04 am
The biggest scam in home inspections is the process itself. “Professional” home inspectors who are able to “Sponsor” other inspectors offer sponsorship for a fee. Usually around $5,000. This is to prevent others from entering the industry and limiting new inspectors to their friends and family. Trust me, 90% of home inspectors only have their license because they knew someone. Most of them know absolutely NOTHING about homes or how they are even built. The whole industry is a SCAM.

frankschulteladbeck Says:
June 8th, 2010 at 3:11 pm
Well, EJN, the designation “professional real estate inspector” refers to the license one obtains after completing the required education and meeting some other rules, such as passing a test. I did not get my license because I know someone (I did not know anyone, I studied). An inspector who is sponsored is going through a program where they work under a professional real estate inspector instead of going through the educational process, so that professional inspector takes on a responsibility for that. Due to the expenses the professional takes on, he decides upon a cost, which he may charge as a fee, or work out another through costs in the inspection price. I do not take on sponsored inspectors, most professional inspectors do not, so I cannot speak for what fee they may charge. If it bothers you, you can spend the $5000 going through the school and meeting the other requirements and become a professional inspector yourself.
The industry is not a scam. Most professional home inspectors take their job seriously, and we continue to study (in fact, it is a state requirement). Take the time to study the state laws, and you will see that must know a lot about homes, and that there are rules in place to protect the consumer.

Tom McInnis Says:
August 6th, 2010 at 4:42 pm
I am not an inspector but a victim of real estate fraud. Here is a scam that you have not heard before. If you want to know how bad it can get listen up. Our inspector was on the side of both buyer and seller agents. The seller was a friend of both agents and seller, unknown to us. Our inspector gave our report to our agent, she then passed it behind our backs to the sellers agent, making her an undisclosed dual agent in all fifty states which is illegal as hell. The inspection was compromised and we were given a false inspection. The inspector then sent us a hardcopy 22 days after close. All the big stuff like structural failure was missed, a cracked tub, a non functioning septic, a cement porch torn off the front of the house to cover up the structural problem and replaced with a wooden deck, etc. The inspector claimed into inspect septics in his ad but did not tell us the lid was above ground but hiddend under three or feet of sheetrock placed their by the owner and the location not disclosed and small things were added that did not exist on the property. He then tried to claim with both the Realtors that we paid him out of closing. I have the cancelled check to prove otherwise. We also received a $50.00 check over 22 days after close that was dated 1 day before the inspection supposedly took place. I guess it was guilt at the time. We are out over $60,000 in repairs. What most might not realize is: computer reports can and are altered in the hands of the dishonest. Oh buy the way our inspector right after that changed his company name and moved 30 miles away and calls himself something else now. He also hosts a website that prases one of the companies that helped rip my wife and I off. Of coarse his picture is plastered on the page as the only inspector, how nice. What was the reason for doing this for the seller and his agent? The sellers agent was also the owner of the property for 10.5 months before he sold it to the seller. This is conspiracy and fraud. This is what a criminal mind can do.

frankschulteladbeck Says:
August 7th, 2010 at 5:51 am
Thank you for sharing your story Mr. McInnis. Hopefully you are pursuing means for justice. Unfortunately, when those in business become complacent and forget the rules, problems can ensue. So others understand, the home inspection report belongs to the person paying for it, so it is their decision who is allowed to have a copy. If I work for the buyer, then the report belongs to them, and the seller cannot expect me to give them a copy. The buyer often wants me to send the report to their agent, which makes sense, since your agent should be working in your best interest, and they need to know the findings to help you proceed. Here is the grey area. For your agent to properly explain all issues to the seller’s agent, a copy of the report is sent to that agent. This should happen with your permission and knowledge; however, the practice is common to share the report, and your agent may forget to inform you. This is a bad business practice on their part. As the owner of the report, you should discuss your wishes of how you want it to be distributed (this is not something most buyers will be aware of).
Most states have disclosure rules. Sellers need to disclose known issues with the home. If they do not, they can be held accountable. You have to prove that they would have been aware of the problem. If the issue is visible to you (the buyer) when walking through the home, then the understanding is that you should have been aware, and cannot hold others responsible. If agents behave unethically, there are rules governing their behavior, which would be administered by the Realtor association, so you should seek how to file a complaint with the association. Home inspectors may be governed by an agency of the state government, so you can pursue a complaint through that agency. In any case, there would be laws governing how businesses conduct their affairs in your state, so a lawyer would be the best adviser.
Finally, you should always receive the report before closing. I try to have the report to my clients within twenty four hours of the completion of the inspection. A few inspectors have reports that are checklist type reports which will be given at the end of the inspection. Other inspectors take two to three days to produce the report. Ask your inspector when the report will be sent to you. It is good that Mr. McInnis shared his experience, so others can learn from it.

L. Poirier Says:
September 6th, 2010 at 8:47 am
A home inspection fraud can be as simple as. . . a home inspector writes a report that identifies signs of a major defect but does not raise any red flags (e.g. replace the windown in the basement there is moisture there) He notes that should a major problem develop AFTER the purchase of a house try to remediate it using “simple” solutions (e.g. put in window wells) as these issues can suddenly develop at any time. All along however, there are major issues (e.g. the basement is leaking).
So, what’s the scam. The real estate agent recommends the home inspector. The home inspector gets his fee and, by not raising any red flags, the real estate agent gets his commission. They continue to exist in this kind of a relationship which is win-win for them. The real estate agent also belongs to a business group where he recommends the mortgage broker who, in turn, recommends him. He also recommends the insurance broker. No money is officially changing hands but a lot of friends are getting a lot of benefits.
Unsuspecting buyers trust the professional opinion of the home inspector. Run around like crazy trying to follow the advice until the water in the basement is too much and the mold is causing extreme distress and the insurance adjuster tells the buyer that this is a pre-exisiting condition, the advice of the home inspector was bull**** and there is a serious problem.
THAT’s what fraud by a home inspector looks like.

frankschulteladbeck Says:
September 6th, 2010 at 2:44 pm
I would have an issue describing this as a scam. A home inspection can only determine current issues. Any one of my findings could lead to a major issue. Then again, they may not. I cannot predict the future. I do not know what the homeowner will do with the home. I do not know what other factors may change. There are times that a simple repair done after the purchase of the home may avert future problems. Here is an example from my reports: a cement cap should be in place over the post tension cable end. If the end rusts, the cable can snap. I have had homeowners argue with me over this repair, and I have found this left undone. Now, this is a common issue; it is easy to fix; and there is no major problem at the time of the inspection. It can become a major problem. Should I be red flagging every single item on my report? Because under the right circumstances each item can lead to something major.
In your scenario, the inspector has given you the report with the indicators. The responsibility falls onto the buyer to read the report, and determine how or when to make the fixes. If the inspector is seeing an issue that is of immediate concern, and does not mention that issue as immediate, I would be inclined to place responsibility on the inspector. On one job, I saw that there was a situation that could lead to a fire. No fire had occurred. There was no indicator that it was going to happen in the immediate future, yet I did tell my client that this should be repaired quickly. If I had not, I would not be responsible.
As for the networking problem, is that not how all businesses work? Yes, we may recommend certain professionals, because we trust or like them, but the buyer again has the responsibility to choose who they hire or work with. Actually, I think this is an important point, and I am glad that you brought it up. Any buyer reading this should know that who you hire is your choice. A lender cannot tell you which appraiser to use. A Realtor cannot tell you which inspector to use. You as the buyer are in control. Yes, it is easy to use the recommended professionals, but you have to be comfortable with them.

L. Poirier Says:
September 7th, 2010 at 12:22 pm
Thanks Frank. Unfortunately in my scenario, the issue wasn’t as simple as a few repairs. The issue was pre-existing my a long shot — documentation by workers in the house prior to it being listed revealed this-and the indicators were there at the time of the inspection. Should I have recognized the indicators? Well, that’s why I hired my inspector.
Even after I have had several highly trained professionals confirm that the issue wasn’t as ‘simple’ as the home inspector made it out to be, he did not accept responsibility.
His interests were to make the house go through so that he continues to get referrals from a real estate agent and the real estate agent continues to get commissions.
Is it foolishness to trust that professionals who claim to adhere to codes of ethics and standards of practice behave as agents of their clients? I don’t think so. Otherwise they shouldn’t be in business.
Unfortunately it seems as if home inspectors spend more time protecting their own interests than seeking the best interests of their clients.

frankschulteladbeck Says:
September 7th, 2010 at 2:00 pm
Well, I will agree that this is a problem in the home inspection industry. So other readers understand, most home inspectors rely on referrals from Realtors. If the Realtors are kept happy, then we should obtain more business. There have been well publicized incidents where inspectors failed to report on issues or did not properly clarify a problem in order to keep the Realtor happy. My own business model has focused more on this blog and through advertisements. I also sought becoming an Accredited Business with the BBB. This was a conscious choice on my part, because I felt that I would not be caught in a situation where a Realtor asked me to report matters in a certain way. I do obtain referrals from Realtors, but we have a clear understanding as to my independence.
Alright, so what do we do in your situation? Many states do have some type of oversight of the behavior of contractors or home inspectors directly. My “Info on Inspectors” page has many agencies listed. (I have had trouble going through and finding this on a few state web sites, so if you see that your state is not listed, please leave me a note, and I will update the page). Contact the agency, and find out how to file a complaint. Many of these services are being automated to be handled online. If you felt that a Realtor was involved, then there may be a state agency overseeing their behavior. If there is no state agency, then there may well be a Realtor Association, which would have the means to handle the dispute.
You are right. No business should be serving its own interests; this is a path which cannot only lead to failure. We are here to serve our clients. Home inspection is not a business that obtains a great many repeat clients; however, my business does obtain referrals from previous clients, so I see that as a repeat in a way. I like to remind myself that I am here to serve my clients. That icon by my name in the comments appears across this site and on my other business documents. It is a variation of my family crest. You will see most home inspectors have a home as the symbol for their business. The two leaves are Bochum leaves, and in German mythology, they are the symbol of protection. The crest meant that my family protected people on either side of the river Ladbeck. I use this version of the crest to remind me that it is my responsibility to protect my clients.
Thank you for sharing.