Home Inspector and Appraisal

(DeAnthony M. Norwood) #1

Is it unethical for a home inspector to be an appraiser also? For example, is it unethical to inspect one home and do the appraisal also? Or inspect a home and do the appraisal for a different home in a different real estate transaction?

(Chuck Evans, CMI TREC 7657) #2

Does doing so create a conflict of interest? Neither service is dependent on the completion of the real-estate transaction nor would either be dependent on the other.

I see no conflict of interest.

(William B. Ogletree, TREC License #22530) #3

First question - absolutely not. I happen to be a Realtor also. Actually sold someone’s home in 2018 and no conflict arose there.

Second question - I see no conflict as such, but do see the possibility for one discipline to influence the other - both for good and bad. One would have to take care to keep appraisal concerns out of the inspection report and vice versa.

(DeAnthony M. Norwood) #4

Thank you for your response!

(JJ Pallay) #5

I disagree with it being a conflict of interest.
If a home buyer hires a person to do an inspection and they do there job correctly they could potentially find many faults an appraiser would not see with a basic home evaluation for a mortgage.

Ethically, the appraiser would have to fault the home in value for the items they uncovered while doing an inspection, if not there would be a liability issue in regard to their appraisal not being properly done as required for mortgage related home appraisals.

If they did the appraisal first then did the inspection after and found issues, they would have to do a re-evaluation appraisal based on their findings.

An appraisal is done for evaluation for mortgage companies for the most part value/loan equation. The inspection is done for the buyers benefit to find fault in a proposed purchased home.

Should there be an issue down the road, there is a definite conflict of interest. Even if there is no problem down the road you can’t ethically work for both sides buyer doing an inspection and seller/mortgage company with an appraisal/evaluation in regard to sale price and mortgage loan to value ratio.

A real estate agent or broker who is doing their clients inspections on a potential sale is totally unethical. They want the sale to go through so why would they find fault in a home. If an unethical person is to list a home, sell the home and do an inspection that is a even; with no problems with home or deal it is a major conflict of interest.

Realtors, doing appraisals or home inspections for clients outside your coverage area for sales shouldn’t constitute an issue, however even doing inspections or appraisals in your general work area in a court of law would be considered a conflict. It would be obvious to any court that you have to have working relationships with others in your business area.

Do yourselves a favor, don’t be dollar wise and penny foolish. You may make a buck or two extra taking care of inspections, appraisals and sales in any combination, but one lawsuit will put you back far more than you could ever make trying to be a one stop shop.

Additionally, if you have a relative or friend who is a inspector for a building department in any given area, try to stay away from those jobs also, since many states require CO prior to a sales transaction that could be misconstrued as a conflict to especially if county inspectors are required to come into a home to make sure no work was done without permits. The buyer would be liable moving forward and another lawsuit could potentially evolve with charges of duplicity etc.

Inspections and appraisals are dependant on another if the same person has knowledge of detail inspection prior to or after an appraisal, same with a real estate transaction. They are not dependant of each other if they are done by separate entities with no knowledge of others findings.

A party doing more than one part of a transaction where value ratio, condition etc is an issue is a conflict of interest.

You might do it on the up and up but the court would see it as a conflict. Just be careful.

Depending on what state you live in there is a statute of limitations, however most states statutes say you have so many years after you find out about a problem to file a suit. Even if original statute has expired.

I wouldn’t want an axe hanging over my head indefinitely, especially for a few bucks. People are sue happy these days…my family and livelihood is more important than one job.