Reader Question: Why do so many states not regulate home inspectors?
Monty’s Answer: To answer this question accurately requires academic research that is beyond the scope of this column. I will reach out to the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business (https://bit.ly/3vPhr9V) to propose their students take on the research. In the meantime, I can offer an opinion based on my experience with home inspections that can provide a thumbnail of anecdotal information that may help. Here is a link to a map, https://bit.ly/3nZKZ1M, that reveals each state’s position on home inspections.
Each state individually decides whether or not to license home inspectors. The decision to be licensed, or not to be, lies with the legislature. Some states have no requirements. Some states require a license with considerable input on how the inspector operates with penalties, fines and the ability to revoke privileges. One might wonder how something as valuable as a home inspection could work with such extremes at the state level. Some may even argue that there should be a “universal” code that all states embrace. The word “universal” implies the involvement of the federal government. “Universal” is not likely because our constitution guarantees “states rights.”
It is philosophical
While there may be additional considerations, my opinion is:
- Some states with zero regulation leave the home inspectors to regulate themselves because existing law overlaps the conduct of state businesses. So they rely on the civil courts to take up and settle disputes.
- Others embrace such licensing without continuing oversight because they see licensing requirements establish a bar high enough to protect its citizens. So the citizens are protected from harm without the added expense of administration, investigation and enforcement.
- Certain states may desire to regulate inspections, but higher legislative priorities push against the added cost.
- Several states hand off the regulation decision to municipalities.
- Highly regulated states require a license and a program that includes oversight, investigation and enforcement. I suspect the cost of operation for a home inspector is higher in those states. Those costs are likely passed on to consumers.
Dear Monty column:The problems with home inspections
The variety of methods deployed by these states suggests a study could determine if any of these scenarios is superior to the others. There are likely methodologies in place to determine the answer. Questions could include the number of consumer inspection complaints per 50,000 home buyers, the number of lawsuits involving inspections, the cost to the state for whatever their involvement may be and more. This information could be instrumental in helping states eliminate inspection programs that are not helping and installing programs proven to be effective.
Some new ideas are floating around in private companies about improving the inspection service. Here is an example of one such idea in a recent Dear Monty column at https://bit.ly/2Q3kX13.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com.