Tips for Home Inspectors to Avoid Competing on Price

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The Harvard Business Review has posted an article titled, “How to Fight a Price War,” and I’d like to share some of the tips from the article that are applicable to home inspections.

Some competitors in your market will try to capture more clients by lowering their prices. So, what should a home inspector do?

A Cheap Inspection

Price slashing and offering discounted inspection fees have decreased profit margins for home inspection companies for decades. A competitive move based upon price is not a good, long-term business strategy. Competing on price only diminishes consumers’ perceptions of quality and value. A “cheap” inspection company may develop a bad reputation for being low-priced and may cast doubt on the quality of all home inspections. You do not want to get into a price war where everyone loses. The smart move for a home inspection company is to work on keeping their inspection fees up by competing on value.

Options

There are several options other than lowering inspection fees that inspection business owners may want to consider in order to compete and win in their market.

When an inspection company lowers their fees, they are essentially saying that they’re willing to buy a market share at the expense of their current profit margin. Your competitor may think that offering cheap inspections is easy, quick, and reversible. We teach about how to increase profit margins in a competitive market in a training video inside the free, online Master Class for Home Inspectors.

Contact the Competition

One option for a business owner is to actually contact their competitor and explain that it’s very difficult (nearly impossible) to reverse offering cheap fees once real estate agents and customers get used to the discounted rates. Your competitor may come to agree that there’s ultimately no profit for anyone when everyone is competing on price. We teach you how to spy on your competition and to get to know your competitors on neutral ground in the Master Class for Home Inspectors.

Contact Agents

Another option is to contact the real estate agents in the same market and point out that it’s not a good idea to have only one inspection company to refer their clients to, and it’s better to recognize other companies that are very attentive to their specific needs, including price sensitivity. We teach about a real estate agent’s duty, how to communicate and promote to real estate agents, and how to build a network of professionals who value your service in the Master Class for Home Inspectors.

Build Value

Another option is to build a marketing strategy that communicates a perceived value that’s overwhelming to potential clients. We teach several ways to overwhelm your clients with incredible value in the Master Class for Home Inspectors. Picasso knew this business concept of charging higher fees based upon value. We tell the story of Picasso in the context of providing incredible value to your inspection clients in one of the training videos of the free, online InterNACHI® Master Class for Home Inspectors.

Communicate the Risks

Another option is to alert potential clients to the risk of hiring a cheap or unqualified inspector. Your marketing may communicate that there is a risk of hiring a home inspector who is:

We teach how to calculate profitable inspection fees, get trained and certified, offer ancillary inspection services, and the benefits of offering the Buy-Back Guarantee in the Master Class for Home Inspectors.

Bundle Services

Another option is to use pricing options related to bundling services. For example, let’s say your home inspection fee is $400, the radon test is $125, and WDO is $75. That’s $600 when you add them all up. But you may want to offer a bundled package of those three services for $500. We teach about pricing your inspection fees and bundling inspection services in the Master Class for Home Inspectors.

Act Like a Leader

Another option is to act like a leader in your market and the home inspection industry. Leaders tend to develop reputations for running quality companies that are profitable and successful over time and through fluctuations in the economy. Leaders don’t engage in competing over the price but instead distinguish themselves by fulfilling the needs of their clients and providing incredible value. Leaders understand that if the perceived value is greater than the cost, it’s a good decision. We teach these concepts related to providing value to clients in the Master Class for Home Inspectors.

Reference: Harvard Business Review, “How to Fight a Price War,” https://hbr.org/2000/03/how-to-fight-a-price-war

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Thanks Ben; I will take the time to analyze this because I almost always get this question, and I am not the best in this area. Look forward to seeing what the think tank at Harvard has to say about it.

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It reminds me of what one of my bosses once said to a client, “I’d rather you stay in business because you’re good instead of because you’re cheap”

Great, Samuel. Enjoy the article. I think I’m filming a video on it next week.

Exactly, Chris. Thanks for commenting.

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Turned down 17 cheap jobs made triple the income this week. Thanks Ben!

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There is another gold nugget to pick up!..Thanks, Jonathan!

You’re welcome, Jonathan. Good job. Stay safe and healthy out there. Need anything from me, it’s ben@internachi.org.

Hope you all don’t mind I’m going off track here a bit with a somewhat related question.
How do you price age and still remain competitive?
I looked many times at the NACHI calculator, and find the default age factor works well for homes up to about 14 years old. Beyond that, I just don’t feel it’s compensating the extra work involved for much older homes - the report writing alone is a lot of extra time/work.
Any insights on the pricing for age would be greatly appreciated. I personally believe there should be some linear increase as the home gets older. I just can’t see default pricing of $1.80 per year covering the extra work once we get into > 30-year-old homes.
I have spoken to some other inspectors about this, some get crazy with the age pricing, and one other very prominent inspection company doesn’t charge anything extra for age or crawlspace. But, keep in mind they are large, well established, and likely can get away with much higher fees across the board.

I also found this posted somewhere, and again, I have to say I believe this is ridiculously cheap for age and does not account for size.

Home built on or before 2008, Over 10 years $10.00
Home built on or before 1998, Over 20 years $20.00
Home built on or before 1983, Over 35 years $35.00
Home Built on or before 1968, Over 50 years $50.00
Home built on or before 1943, Over 75 years $60.00

Just thinking about that 75 year old home, what am I going to find in the attic (knob & tube perhaps) I have to document. How much closer do I need to look at the plumbing to determine if that galvanized or cast iron is about to bust, how bad have the termites feasted on the structure, etc. - just a small sample, but you get the point.

I have built a spreadsheet, which does a per sq ft price of .00125 for <=5 years and adds an additional .00125 per sq ft for each additional 5 years. The problem I have encountered doing this, it’s gets ridiculously expensive on 40,50, etc. homes. The NACHI calculator at $1.80/yr on a 2k sq ft home comes in about .0036 per sq ft.

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Basically anything older than the 60s I custom price based off listing pictures and info I can gather from the client. If I am driving and/or at an inspection and they want the quote immediately, I basically just use the info from the client only and shoot from the hip. But I try and aim a bit high just in case.

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In my opinion, your competition and market are going to have a greater effect on your price points than a formula.

I would probably simplify the formula with larger age groups and larger sq. Foot.

Homes under 20 years xx per square
Homes 20-40 years xx per square
++ Crawlspace or basement

500 sq. Foot increments

Anything over 50 years or 3,000 sq. Feet custom pricing.

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I always look at pics and the listing before I quote. I’ve been burned a few times not knowing their was a detached in-law suite that was included in the sale. Sure I could go back a say “wait a minute…” but I would rather eat the extra and keep a client.

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Communicate a perceived value that’s overwhelming to potential clients on your website. We’ll be talking about that during an upcoming free live, online InterNACHI® Webinar, “Inspector Websites That Make Money.”

Chapter 11 of the free, online Home Inspection Business Course covers the most important factor in any business: figuring out how much to charge for services.

Many inspectors have no idea how to go about calculating it, and they don’t know what price is both competitive and profitable. That’s why we need strategies for pricing inspection services. Check out Chapter 11 and the free webinar.

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Thanks all for the great answers. We totally work by perceived value and loved the conversation about competing on price. We too have said no many times, but rarely have actually lost once the value is conveyed. I did run several scenarios through the NACHI fee calculator, and it’s actually slicker than I thought. It’s typically 0.072 per 100 sq ft per year and doubles by every 5 years and again by each 500 sq ft. Once I actually started plotting what it does it really made sense. Thanks, Ben and team for another great tool. I plotted out what the tool is actually doing for those interested. Ignore the FALSE in the first section - it’s just a scratch pad and I don’t have time to troubleshoot.
Scratch Pad.xlsx (11.8 KB)

Thomas, that’s a must regardless - we have made that standard practice after getting burned a few times.

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Thanks, Brian. Check out the sheet I posted later in the thread. Works similar to what your doing.

I am not sure if I understand how to use it.

Please provide me with the inspection fee for the highlighted home
image

Careful you don’t shoot yourself in the hip Ryan :slight_smile:

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Based on NACHI’s calculator, the $43.20 would be the cost.

Sorry, Brian, I may have misunderstood your question. The $43.20 is just the age fee you add on to your standard inspection cost for that home - hope that clarifies.

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