Expected windfall from disclosure law turns out to be a drop in the bucket INSPECTORS FIND DEFECT: NO BOOM IN BUSINESS


It looked like high times ahead for the home inspection business.

The new state property disclosure law was about to go into effect -- on Jan. 1 -- requiring sellers of single-family homes to fill out a disclosure form describing the condition of their property, or sign a disclaimer. Home inspectors expected a big windfall, as sellers sought help from a professional in filling out the disclosure form.

But the good times never rolled.

Only a handful of sellers have opted for inspections. Many others are filling out the disclaimer -- instead of the disclosure form -- and have no need for a pre-listing inspection.

In addition, the number of inspectors has mushroomed -- partly in anticipation of greater business. Membership in the American Society of Home Inspectors, the nation's largest home inspection association, tripled over the past five years. And with only a modest increase in inspections, mostly from buyers as the market improved, some companies have found that business has even dropped.

Nervous sellers

Harvey "Sonny" Mosier, a home inspector with R. J. Moore and Associates in Annapolis, said no one realized how nervous sellers would be about disclosing potential defects in their home to buyers.

"A quirk in the law says you can do a disclaimer in lieu of a disclosure statement," Mr. Mosier said. And many sellers chose to do just that.

Mr. Mosier, who is 1994 president of the Baltimore Chapter of ASHI, said buyers still order most of the home inspections. At his company, buyer-ordered inspections are up about 15 percent over 1993 -- he believes because of the attention given to the disclosure law. "We are a nationally based firm, and we do tracking in other regional offices, and they are not experiencing the same increase," he said.

Eric Paris and his company, AmeriSpec Home Inspection Service in Rockville, have more business this year than last. But Mr. Paris doesn't attribute the increase to the disclosure law.

"Home inspections naturally follow the real estate cycle," Mr. Paris said. Home sales in the first half of 1994 were up 12 zTC percent from the same period last year.

"Last fall we anticipated when the new law went into effect lots of things would happen," like more inspections requested by sellers. Mr. Paris said his company heavily marketed a seller inspection program to real estate agents. Even so, "probably 99 percent are ordered by buyers on their own behalf or by Realtors for buyers."

Buyers may actually become suspicious of home inspections paid for by the seller, Mr. Paris said. "They might think it's not totally objective," even though inspectors wouldn't have much to gain from a favorable inspection.

Brian Schade, an agent with Champion Realty Inc. in Severna Park, said he hasn't noticed any more sellers arranging inspections than before the disclosure law went into effect. Buyers are still requesting them most often.

Other agents, like Ed Slacks with ERA-Imperial Real Estate Inc. in Baltimore, agree. Mr. Slacks said of 15 sales he's handled since the disclosure law went into effect, only one seller used the disclosure form. The other 14 signed the disclaimer and let the buyers take care of home inspections if they wanted them. "Sellers don't want to pay for anything," Mr. Slacks said. "I can hardly get them to buy a home warranty" for the buyer.

Dog-eat-dog world

Wayne Norris of the Baltimore inspection firm Dallmus Norris Associates said his business is about even this year, compared with last year. And business at Master Home Surveyors in Columbia has actually dropped off, according to company owner Stanley Serson. Mr. Serson thinks that's because more inspection firms are chasing the same number of customers.

Inspectors all seem to agree competition is heating up. "Every week I'm hearing somebody else is coming into the profession," Mr. Norris said.

"It's not impacted us because we're pretty well established."

Mr. Serson said: "A lot of people in construction are tired of scurrying around for what little bit is going on in home improvement and we're seeing more and more people getting into the home inspection market."

Mr. Mosier agreed. "We have a lot of contractors who are now promoting themselves as inspectors."

"We go out frequently to visit Realtors' offices and two years ago when we opened this franchise there were half a dozen brochure stands for home inspectors," Mr. Paris recalls. "Now you go in and there are 10 or 12. In the phone book, instead of 20 or 25 inspectors listed there are now 60 or 70 or more."

Maryland does not require home inspectors to be licensed, so the actual number of firms is hard to track. But home inspection associations around the country report their membership is on the rise. The largest of the trade groups, ASHI, says its ranks have tripled since 1989 when the organization was founded. Starting with 469 members its first year, ASHI now has more than 1,400 members.

ASHI spokeswoman Vera Hollander said the number of candidates -- people who have applied for ASHI membership -- has tripled, too. The group had 996 candidates in 1990. About 3,000 are waiting to become members today.

"Home inspection is perceived as an easy business to go into," Ms. Hollander said.

Professional inspectors make an inside-out check of the house, from foundation to roof. They look atstructural soundness of foundation, walls and roof; smooth operation of plumbing, heating and electrical systems and warning signs or symptoms of things gone wrong. Inspectors can only inspect what they can see or hear the day of the inspection. Invisible defects may go unnoticed.

After the inspection, a professional provides a written report outlining his findings. Sometimes he makes suggestions on how to maintain or repair house components. Inspections typically cost $125 to $250, depending on house size.

Homeowners can do their own inspections; professional inspections are not required to buy or sell residential real estate. But it's hard to stay objective when inspecting a house you plan to buy, Mr. Mosier said. "If you are involved in the transaction you have a lot of emotional ties that a professional inspector does not have," he said. "Other than the inspection fee, which is modest, [the inspector] is not going to get any more money out of it."

Stephen Showalter, an inspector with Building Specs Inc. of Annapolis, added: "Anytime you're paying $225,000 for a house, $200 for the cost of an inspection is a drop in the bucket."


The following groups set standards of practice and codes of ethics for members. All offer training and seminars for members.

American Society of Home Inspectors (ASHI), Chicago, 800-743-2744. Established 1976. 1,400 members, about 40 members in the Baltimore chapter. Members must pass three exams and perform at least 250 fee-paid inspections. Members must also complete 40 hours of continuing education every two years. Annual dues: $200.

National Association of Home Inspectors (NAHI), Minneapolis, 800-448-3942. Established 1987. 550 members, no regional chapters. Members must have completed a training course in home inspection or have prior experience with fee-paid inspections, and pay an application fee of $50. Annual dues: $150.

Society of Professional Real Estate Inspectors (SPREI), Lynnfield, Mass., 617-334-4500. Established 1989. 675 members, no regional chapters. Members must have background in construction or building trades and pay application fee of $150. Members may use SPREI logo after completing sanctioned 22-hour certification program. Annual dues: $75.

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