Is your Home Inspector properly notifying you if they are receiving referral fees or kickbacks when they refer other service providers to you?

Texas licensed Inspectors are required to notify you if they are receiving kickbacks or referral fees when they are making money from your inspection by providing your information or referring other companies to you.  Is your Home Inspector properly telling you they are doing this?[tab: Introduction]

The Texas Administrative Code (TAC) prohibits licensed Home Inspectors from collecting fees or other valuable considerations from other parties (not you) as a part of their services to you without first obtaining your consent.  This is the wording from the TAC.

(4) An inspector shall not receive a fee or other valuable consideration, directly or indirectly, for referring services that are not settlement services or other products to the inspector’s client without the client’s consent.

Texas Real Estate Commision TREC Fee Disclosure form for Home Inspectors

This is the old TREC REI 7B-0 Fee Disclosure form Home Inspectors were required to have you sign. Click for a larger view.

This is a very simple concept that is intended to protect the consumer from Home Inspectors that might be selling your private information (by referring other companies to you) for additional money that you might not be aware of.  A lot of this behind the scenes kickbacks and referrals comes from these 90 Day Wonder products such as the 90 Day Warranties Home Inspectors have been handing out.  There are other newer products or services that Home Inspectors now use along with these 90 Day Wonder warranties.  These products are typically nothing more than lead generation tools for alarm system sales companies.  Some of those have been reported to pay the Home Inspector as much as $200 or more for a good lead.

Not long ago licensed Home Inspectors were required to have their clients read and sign the Texas Real Estate Commission’s (TREC) REI 7B-0 Disclosure form that you see here.  This form was intended to make sure that the client was aware the Home Inspector is making a kickback, referral fee, commission, or other “valuable consideration” from a third party as a result of them using your information, referring the third party to you, or taking other actions to make additional money as a result of your home inspection relationship with the Inspector.  There are several important points to note regarding this form and its wording.

1)  Note the first box under the “Instructions” heading where the Home Inspector was required to tell you that part of your inspection fee was being paid to a third party and the Home Inspector was suppose to specifically name this third party.  This was a very important part of this form as it helped ensure that the Home Inspector was not advertising some type of “Free” product or service when in fact they were paying for it out of the fee you paid them!  This actual practice happens frequently now with some of those 90 Day Wonder products, as well as other products and services, the Home Inspectors are advertising to you as “Free”.

2)  Note the second box where the Inspector is suppose to tell you that they were receiving a kickback, commission, referral fee, or other valuable consideration from a third party as a result of their home inspection relationship with you.  The rules never required the Home Inspector to state how much they were receiving but just that they were receiving one and specifically who it was being paid by and not some generic “Third Party” statement.  This was to help ensure you knew who was being given your private information or what the “Behind the scenes” deal was that the Home Inspector was going to profit from in addition to the fee they charged you.

3)  Note your signature block as you the consumer had to print, date, sign, and indicate the property address that this kickback, referral fee, commission, valuable consideration was relating to.  By forcing the Home Inspector to have you sign this there was no way they could hide this back door transaction from you and still follow the laws and rules part of which is to protect your privacy!

4)  Note the use of the words “other valuable consideration” where the Inspector was being paid by the specifically named third party.  It was well understood that Home Inspectors might not be specifically paid in cash for some of these referrals and their kickback, referral fee, or commission might instead be a product or service they could use either for their business or personal use.  This was to help prevent dishonest third party vendors from trying to skirt the system by using other valuable items/services to pay the Inspector instead of cash.  At the time the “valuable consideration” was typically considered to be more than a one time gift to the Inspector of some worthless trinket having values less than around $20.  Today these “valuable considerations” under some of these programs can be in the thousands of dollars depending on how many leads the Home Inspector can generate for the third party vendor.

So where do we stand today and what happened to this TREC REI 7B-0 form?  Well just like everything else in this industry the consumer has been hung out to dry!  This form and the actual laws requiring its use have been scuttled by those who would rather you not know what happens behind the scenes.  All that is left is a short blurp in the Texas Administrative Code (TAC Subsection 535.220) that basically states:

(4) An inspector shall not receive a fee or other valuable consideration, directly or indirectly, for referring services that are not settlement services or other products to the inspector’s client without the client’s consent.

This is a complete bastardization of the original consumer protection scheme that once was!  Now Home Inspectors can easily hide specifically what information they are selling, specifically who they are providing your information to, how many third parties they provide it to, and what they are providing it for.  The old laws required them to at least tell you specifically who your information was being sold to and now Home Inspectors are being allowed to use extremely generic phrases to hide all of the details from you.  Before the Home Inspector could be in a tremendous amount of trouble if they did not have you sign this form.  Now it is the honor system whether they tell you or not.  When they do it is typically placed in your Inspection Contract with generic wording and TREC refuses to regulate even any part of the Inspectors contracts, including where it involves consumer protection problems!  I recently asked TREC for an interpretation of the consumer privacy laws and they stated that your approval to sell your private information could be obtained verbally if the Home Inspector wanted to.  That is totally incredulous!

As if you don’t already have enough problems today what with all of the recent hacking and massive theft of private data that has occurred, or has been reported, this past year alone!  Now you have yet another potential way to have your private information being sold off by the very Home Inspector you thought you could trust!  So if you do run into the “Free” this and that, or you do see generic wording in an Inspectors contract about passing your information to some unnamed third party for one of these Wonder Products you need to start asking some questions.  It sure seems that the words Caveat Emptor (Let The Buyer Beware) has struck again!

Be safe and protect your private information!

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PS Inspection & Property Services LLC is a full service home inspection and light commercial inspection company servicing the entire Dallas and Fort Worth, Texas metroplex as well as all areas around them.  If you are located outside of these areas we can still help service your needs so call us to see how we can help.  We strive to for the satisfaction of our customers in everything we do.  Our services offerings include:

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If you have an inspection need we can customize an inspection for it.  Please visit our main site at PS Inspection & Property Service LLC.

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