Q: We are under contract on a house and our agent recommended an inspector who she says she “uses all the time.” The inspection turned up a few issues, but nothing major, and the inspector seemed almost rushed to tell us everything was fine. A friend mentioned that inspectors sometimes soften reports because agents control their referrals. Should I be worried, or am I being paranoid?
A: You are not being paranoid. You have identified one of the most quietly uncomfortable dynamics in residential real estate, and it deserves a straight answer.
Here is the structural problem. Most inspectors build their business almost entirely on agent referrals. An agent who likes an inspector sends them client after client. An agent who feels burned – because an inspector’s report killed a deal, or made negotiations difficult, or simply took too long – quietly stops calling.
That creates a real incentive problem, even for honest inspectors. Recent industry research backs up what your friend was hinting at: a national survey of real estate agents found that home inspection or repair issues are cited as the cause in roughly 70 percent of canceled purchase agreements. Redfin reported nearly 60,000 home purchase agreements were called off in a single recent month, the highest cancellation rate the company has tracked. Inspectors are, structurally, in the business of sometimes blowing up the very transactions that feed their referral pipeline.nobody consciously decides to cut corners. Pressure does not have to be explicit to shape behavior.
So what should you actually do?
- First, choose your own inspector next time, independent of your agent’s recommendation. Ask friends, search professional association directories such as the American Society of Home Inspectors and look for inspectors who are not primarily dependent on referrals from a small handful of agents.
- Attend the inspection yourself and ask questions directly, rather than relying solely on the written report. An inspector explaining a finding out loud, in person, often reveals nuance that gets softened on paper.
- Read the full report carefully, including anything described as “minor” or “cosmetic.” Patterns matter more than individual line items. Several “minor” electrical notes together may indicate a larger issue than any single item suggests.
- Know that you have the right to bring in a specialist, for anything that concerns you. A few hundred dollars spent confirming a structural or electrical concern is inexpensive insurance against a six-figure mistake.
An unwritten practice exists in some corners of the industry, where an agent and an inspector are not truly arm’s length. It rarely shows up as anything as obvious as a direct cash payment. It can be a week at a lake cottage, a fine dining gift card, or some other untraceable favor between an agent and an inspector. Most agents and inspectors keep real distance between themselves, in part because many states have statutes that penalize such undisclosed arrangement if discovered.
To check on your own inspector relationship, ask your agent a direct question: How many inspectors do you typically recommend, and how did you choose them?” An agent who names one go-to inspector exclusively is a different situation than one who offers a short list and lets you pick. The answer alone often tells you whether you are dealing with a referral relationship or a referral monopoly.
But the incentive exists, and a home buyer or seller is wise to remain alert to it.
