From the February 1998 issue of Startups

If you have experience in home construction or remodeling, or even if you're just handy around your own house, a home-inspection service could be the perfect new business for you. Lawsuits over undisclosed home defects have prompted home buyers, real estate agents and even home sellers to prefer that homes are inspected before the sales are finalized. In some states, it's even required by law.

Home inspectors review homes and provide written reports to the buyers and the buyers' and sellers' real estate agents. Rather than trying to discover every tiny defect, inspectors look for larger problems--such as improperly installed heating systems or damaged foundations--and educate buyers about the condition of the home. The cost of an inspection is usually $200 to $400, depending on the size and age of the home and what part of the country you live in.

Gary Anderson, owner of the Building Specs Inc. store in Owings, Maryland, says it can take as long as three or four years to build a reputation and a network of contacts to turn a profit in the home-inspection business, but the long-term rewards are worth the effort. A former home remodeler, Anderson opened his company in 1995, but it took three years to turn a profit: Last year, his store made $70,000.

John Ruiz started his one-man home-inspection company, Quality Inspections, two years ago in North Whittier, California, and he's already making a small profit.


Marcie Geffner is a Los Angeles freelance writer who frequently reports on residential real estate.

At What Cost?

The start-up costs for a home-inspection service typically amount to between $10,000 and $15,000. Ruiz spent $4,000 for training, another $5,000 to equip his home office and $1,500 for inspection tools and construction manuals. A starting inspector should have an industrial ladder, professional flashlights, an assortment of screwdrivers and other small tools, plus plumbing, electrical, building and other code books. Anderson's start-up costs were similar, but he also bought a new truck, which added to his initial outlay.

In addition to the start-up costs, you'll need savings or other income to cover your living expenses while you learn the business and build your referral base. "It can be a profitable business, but it's very competitive. You'd better have some other resources, because there are a lot of times when the phone doesn't ring," says Ruiz.

If you're not confident about starting your business completely on your own, a franchisor of home-inspection services can help you with signs, inspection forms, marketing brochures and the like. Expect to pay a franchise fee of $7,000 to $17,000 and royalty fees of 6 percent to 8 percent.

Background Check

Training is a must to become a home inspector, even if you have construction experience. Many companies offer training courses, as do most of the national and state chapters of the home-inspection associations

Ruiz began his training with an intensive two-week program to find out whether he was really interested in the business. Then he offered his services to home inspectors--free of charge--in exchange for on-the-job experience.

Licensing for home-inspection services is controversial, and the regulations vary widely among the states. Some states have tough licensing or certification requirements; in other states, anyone with a ladder and a few business cards can set up shop as a home inspector. Find out from realtors and other home inspectors about the regulations that govern licensing in your state and any neighboring states where you might want to do business.

The Real World

To make your company successful, you'll need to be an aggressive marketer as well as a good home inspector. Most of your marketing will be targeted toward real estate agents. "Eighty percent of the volume of home inspections is generated by real estate agents," says Don Crawford, last year's president of the National Association of Home Inspectors Inc. in Minneapolis and owner of Crawford Inspection Services in Hillsboro, Oregon. "You have to let realtors know what you do and how you do it."

You may also want to advertise your service to mortgage lenders, real estate attorneys and home builders.

Insuring Success

Home inspectors should carry errors-and-omissions (E&O) insurance to protect themselves from lawsuits. Every time a home inspector writes a report, he or she is exposed to liability for an error or omission. That's why home inspectors use pre-inspection agreements and forms that tell buyers exactly what the home inspection does and doesn't include.

Also be aware of two potential ethical dilemmas: repairs and rebates. Some home inspectors offer to repair defects they've uncovered during their own inspections, and others give rebates or coupons to real estate agents as incentives for referrals. Anderson, Crawford and Ruiz all believe that such practices are unethical, although they are legal in some states. Check with local and state regulators to find out whether these practices are legal in your state.

Resources

For more information about starting a home-inspection service, check out these sources:

  • National Association of Home Inspectors Inc.
    4248 Park Glen Rd.
    Minneapolis, MN 55416
    (800) 448-3942
    http://www.nahi.org
  • American Society of Home Inspectors Inc.
    85 W. Algonquin Rd., #360
    Arlington Heights, IL 60005
    (800) 743-2744
    http://www.ashi.com
  • California Real Estate Inspection Association
    4452 Park Blvd., #204
    San Diego, CA 92116
    (800) 848-7342
    http://www.creia.com
  • Entrepreneur Magazine's Home Inspection Service Business Start-Up Guide #1334
    Entrepreneur Media Inc., $69, 800-421-2300
    Order at http://www.smallbizbooks.com

Franchises

Ambic Building Inspection Consultants
(800) 882-6242

Amerispec Home Inspection Service
(800) 537-8000

The BrickKicker Home Inspection
(800) 821-1820

Building Systems Analysis Inc.
(770) 454-9333

The HomeTeam Inspection Service
(800) 598-5297

HouseMaster
(800) 526-3939

National Property Inspections
(800) 333-9807

Pillar to Post
(800) 294-5591

World Inspection Network
(800) 967-8127

Contact Sources

Building Specs Inc., 7260 Briscoes Turn Rd., Owings, MD 20736, (301) 855-3337

Crawford Inspection Services, P.O. Box 730, Hillsboro, OR 97123, (503) 628-1003

Quality Inspections, 1563 Channelwood Dr., North Whittier, CA 90601