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Kaplan ITA's Monthly Inspection Tips - Free Electronic Newsletter

June, 2003
How to Price your Home Inspection Services
Issue #14

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
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