Dear
Inspector,
The
first thing the home inspection business person must understand
before learning how to price is what is a fair price. Persons
venturing into a new business, particularly if they are
self-employed for the first time, often make the mistake
of trying to break into the business by being the cheapest
inspector in town. This can end up being costly to or even
the demise of their business. If you are the cheapest inspector
in town that is the only reason people are calling you.
When you realize its time to raise fees because you are
not making a reasonable profit there will be significant
resistance from your customers.
Running
a business costs money. Most sole proprietor inspectors
without employees report the cost (before taxes) of performing
an inspection to be around $100. This includes costs of
insurance, reporting system, vehicle, training, equipment,
etc. and is based upon the average of 300 inspections per
year. If you add health insurance, two week vacation and
other typical benefits the cost will rise. Remember your
time involved with one inspection is not just the site time.
There is scheduling time, preparation time, drive time,
post inspection filing and bookkeeping, tool maintenance
and other items to consider. The typical home inspection
(up to 2500 sq. ft. house less than 50 years old) will usually
take four hours time when considering travel and other time
items mentioned above.
Some
new inspectors have the attitude that "this is only
part time, I can be the low price leader" or "I'm
retired and this is just to keep me busy so I don't need
the money." These are absurd business models and will
end up creating an inspector subsidized business, not to
mention the complete unfairness to other inspectors who
need to make a living at this profession.
We
recommend a professional fee that is competitive, but fair
to you and the client. Don't fall for the temptation to
be the lowest price to get quick business. Inspection services
are personal services and not a commodity. There are other
marketing efforts and business strategies that work much
better. We recommend you interview other local inspectors
to determine the median fee and make your decision based
upon that information.
Now
that we have discussed considerations for what to charge,
we can discuss how to charge. Of course we will not mention
specific amounts in this article. The home inspection fee
includes the primary residence and parking structure per
the ASHI Standards of Practice. Any additional buildings
or structures (like a pool) or services (such as radon)
could be inspected for an additional fee based upon mutual
agreement between the inspector and client.
There
are three basic methods of establishing the professional
service fee. The first is by the hour. This can include
travel time or not. There is a small minority of inspectors
who charge by the hour and give the client an idea what
the end fee will be by estimating time for the client during
booking the inspection. This is the least popular method
since most clients will want a fixed fee established prior
to the inspection.
The
next method in popularity is the percentage of contract
sales price method. The inspector asks the client or real
estate agent the price of the home and computes the fee
based upon a percentage that is in the range of the local
established industry standard. The problem with this method
is the wide range of prices for the same size house depending
upon location. Also, the most run-down and time consuming
houses tend to be the least expensive, thus lower fee. Additionally,
with many transactions the price is high due to the amount
of land, not the size or age of the house. This ends up
being unfair to the client. Most inspectors using this method
are now asking more questions such as size and age of the
house and lot size to price more consistently.
The
most popular method of home inspection pricing is by the
size, age and features of the home. Inspectors have an established
minimum fixed fee for a typical home, such as up to 2000
sq. ft. plus standard garage. Beyond the 2000 sq. ft. size
the price increases by so much per square foot or there
is a standard add-on amount for every additional 500 or
so square feet. Most inspectors also charge an additional
fee for houses older than 50 years and then again if older
than 100 years. Additional fees also typically apply for
a guest suite or house, second garage, more than one kitchen
and other specific items. Many inspectors will inspect items
beyond the Standards of Practice (when they are properly
trained and qualified) for an additional fee such as pools
and spas, radon levels, water quality and more.
We
recommend the use of a standard home inspection booking
form. This form should include spaces for you to record
the address, client, phone, etc. It is also important that
the form prompt you to ask the correct questions to fairly
price your inspection and to record the fee quoted to the
client based upon those questions. It is also a good idea
to verify that the house utilities are all turned on for
the inspection. Most inspectors charge a fee, such as half
the usual inspection cost, to return to the property to
complete inspections of items not available the scheduled
date.
Remember
the professional inspection fee is not just about time at
the site. It is about value for services rendered. You are
entitled to a reasonable daily rate and profit, just like
any other professional. There are risks and rewards involved
with running any business. You should be fairly compensated.
Mike
Casey
Kaplan Professional Schools
Now You're Ready For Business!