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State of the Inspection Industry

State of the Inspection Industry
November 21, 2018 KERNadmin
In Uncategorized

State of the Inspection Industry

Blake Williams owner of Super Inspector, a Professional Inspection Company in the Dallas Fort Worth Metroplex and Greater Austin area, talks about the State of the Inspection Industry.

The “Home Inspection” Industry has traditionally been considered a cottage industry with mostly self employed inspectors with a few Multi Inspector firms scattered across the country.  Most self employed inspectors have been able to make a comfortable living.  In the past few years we are seeing new trends develop in the industry.

I expect to see larger regional and national firms develop as a natural step in the evolution of the industry.  This evolution is incomplete and we are seeing a variety of business models being tested.

Regional and multi inspector firms have gained success by providing high quality inspections coupled with excellent customer service and high quality work environment.  The success of these companies is largely dependent on developing relationships with Realtors, who provide referrals.

Real Estate Agents have historically been a major source of referrals for many vendors, such as: mortgage brokers, title agencies, home owner’s insurance agents, home warranty companies, professional inspectors, home repair, cleaning services, home security systems, etc.  These referrals are very valuable to these companies.

More recently we are seeing vendors look to Professional Inspectors for these referrals.  Reason being, a top producing individual Realtor will close about 15 transactions per year, while an average Inspector will inspect 300 to 400 homes per year.  The inspector is collecting data from clients who are in contract to purchase a residence and will be needing the services of many third-party vendors.  The volume of data collected by inspectors is more valuable than that of Realtors just by the shear numbers.  Additionally, data collected about the prospective property can prove to be valuable to many third-party vendors, such as: warranty companies, and home repair and remodeling companies.

The industry has captured the attention of many large corporations who are after that data.  These vendors typically offer the Inspector some type of fee in exchange for client referrals.  The fees are miniscule in comparison to the value of the client referral, in my opinion.

Today we are seeing venture capital come into the Inspection Industry in an attempt to bypass the Inspector, and the Realtor, as the referral source by creating Inspection Companies owned by big money interests in an effort to collect and exploit the client and building data.  Venture capital in the hundreds of millions of dollars has been established to do for the Inspection Industry what Zillow has done to Realtors and Uber has done to Taxi Cabs.  These companies seek to be Industry Disrupters and make the inspection nothing more than a tool to solicit other services.  The model appears to be low cost inspections using inspectors who are willing to work for very little with goal being data collection.  Inspectors who are inexperienced and/or incapable of creating a steady stream of business will be the pawns in the data collection game.

In my opinion, this business model will devalue services provided by the Professional Inspector and be a disservice to the client.  The Professional Inspector is already a severely undervalued professional.  In no other industry do we see a consultant who is asked to analyze and evaluate multiple systems in a complex structure with limited access, in a short period of time, provide an almost immediate report, and be liable for the repair of unreported deficiencies for so little in fees.  Consultants in other fields who provide the same level or less service earn many times the amount of fees in comparison and are rarely asked to stand behind their work to the same level as the Residential Property Inspector.

Some Realtors see inspectors as “deal killers”, some contractors and builders see inspectors as agitators and will quickly throw the inspector under the bus without good reason, and now, large companies see inspectors as data collectors for the purposes of solicitation.  Somewhere in all this, the client and their interests are lost.

Most inspectors provide a high level of service to their clients and the information provided is extremely valuable to the client.  This should be the primary focus of every related professional.  The inspector should be a highly valued professional within the real estate transaction.  Business models attempting to commoditize the inspection and exploit it for profit of third-party vendors are not in the best interest of the client.

Real estate professionals should be keenly aware of these trends and guard the interests of their clients with good advice about using an inspection company that provides Professional Inspections at a very high level.