HISTORY OF THE HOME INSPECTION INDUSTRY THE “PAST, PRESENT, AND THE FUTURE” by John Bowman

1. HISTORY OF THE HOME INSPECTION INDUSTRYTHE“PAST, PRESENT, AND THE FUTURE”by John Bowman

2. John Bowman’s Qualifications • Executive Director, National Association of Certified Home Inspectors (NACHI) • Founder, NACHI, NY Finger Lakes Region Chapter • Founder, NACHI, National “On-Line” Chapter • Author, Bowman’s Guide • Consultant, Gerson-Lehrman Group Real Estate Council • Retired – General Contractor • Retired – Certified Master Inspector • Past Expert Examiner & Consultant NYS, DOS • Vice President, Foundation for Safer Housing • Founder, Home Inspector Reference Manual • Founder, National Home Inspection Technical Institute • Past Chairman and Founder of the NACHI Awards Committee • Past member of the NACHI Steering Committee • Past member of the NACHI Education Committee • Past member of the NACHI Convention Committee

3. The PastA Brief Description of our History • How often have we heard that the Home Inspection Profession/Industry is new to the real estate world? • To this day, the home inspection profession is still considered a relatively young profession, but in reality, people have been seeking the services and advice of others about home purchases since - - well, since forever.

4. However, prior to the late 1960’s, early 70’s, that expert was usually a grandfather, father, cousin, uncle, or some other friend or relative who had some background or experience in real estate or construction. True that experience was limited. Normally these consultants or advisors had either already gone through the process of buying a home or remember helping their “Cousin Charlie” build a barn or an addition to the house. In addition people trusted or were dependant on the word of the realtors and their assessment of the home.

5. But those were simpler times. Beginning in the late 40’s, shortly after World War II, a huge nationwide demographic shift began and the “baby boomer” generation began. People began trading the farm life for the suburbs, which was closer to their factory jobs that offered stability and benefits. These “Blue Collar” workers began sending their children to college and from that came the next generation of upwardly mobile professionals. Professionals that were raised on the principle that “Knowledge is Power” and, if you get an education you can go beyond this factory life, etc. Which leads us to today’s generation, who are privileged to vast amounts of media and research by the creation of the internet.

6. In the early 70’s homebuyers began utilizing the services of general building contractors to perform pre-purchase inspections. The phrase “Contractors Inspection” was coined and many contractors began offering there opinions on the structural soundness of the home. But that was not enough for the buying public. Rising costs of construction and materials mandated that they also know about other systems of the house before they purchased it. It soon became apparent that a general knowledge of all the systems of the home was necessary to fulfill the demands of the consuming public. Gradually, the term, “Contractors Inspection” evolved into the term, “Home Inspection”, a term that adequately described the evaluation of the entire home and all of its systems by an expert. The term “Home Inspector” aptly describes an industry expert/professional with the ability to examine all the systems of a house.

7. SOME HISTORY CHANGING EVENTS • 1975 – A small group of concerned home inspectors formed a study group to troubleshoot inspection techniques and enhance their knowledge and professionalism. Up to this point, inspections had been performed on a very casual basis by a very limited number of individuals. This group morphed into the California Real Estate Inspection Association (CREIA).

8. 1977 (Some say 1976) - The American Society of Home Inspectors (ASHI) was developed. In addition in cooperation with CREIA the first Code of Ethics and Standards of Practice for Home Inspectors was developed.

9. 1984 – In California the famous “Easton vs. Strassberger” court decision held that the duties of a real estate broker include “the affirmative duty to conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective purchasers all facts materially effecting the value of the property that such investigation would reveal.”

10. This decision seemed unreasonable to ask, therefore, brokers pushed, California Senate Bill 1406, which legislated to mandate disclosure in California. The disclosure laws required seller to tell homebuyers everything that they “know” about the property being sold. This ranged from listing all items in the home that are defective, to identifying items not functioning, or additions built without permits. The law also required that real estate agents perform their own “diligent visual inspection” and disclose any defect that they might find.

11. To circumvent this new law, and shield them from litigation, The California Association of Realtors altered their contract forms to include a provision for the homebuyer to hire their own professional inspector. Hence the home inspection business emerged on the west coast as an industry. Since then, one state after another adopted California’s disclosure laws leading to the emergence and expansion of the Home Inspection Industry.

12. 1985 – Texas enacted the first Professional Practice Act regulating the home inspection profession. • 1987 – The National Association of Home Inspectors (NAHI) is formed.

13. The Ontario Association of Home Inspectors (OAHI) is formed. OAHI operated as a Chapter of the American Society of Home Inspectors (ASHI), until 1994 when they became a self-regulating professional body under the Ontario Association of Home Inspectors Act. • 1987 – Texas required home inspectors to be registered with the state.

14. 1990 – The National Association of Certified Home Inspectors (NACHI) was formed. • 1991 – Texas was first to enact a full licensing law for home inspectors.

15. 2002 – More than 14,000 home inspectors had entered the profession nationwide. The Home Inspection Industry continued to grow and a professional, independent home inspection had now become widely recommended by real estate authors and columnists. • 2007 – Recent estimates indicate that there are approximately 50,000 home inspectors in North America. (Some estimates have even gone as far as 75,000).

16. The PresentWhere are we now? • To begin we must take a look at some statistics: • One sixth of all Americans, an estimated 43 million people, move each year. (U.S. Census Bureau) • Approximately 17 percent of the total U.S. population moves each year, which is more than any other country. Australia ranks second in annual citizen moves with 10.4 percent followed closely by Canada. (U.S. Census Bureau) • The average American moves 12 times in a lifetime. (U.S. Census Bureau)

17. The PresentWhere are we now? • Almost half of all moves, an estimated 21.5 million people, occur between the beginning of May and Labor Day. (American Moving and Storage Association) • Moving is the third most stressful event in life following death and divorce. (Employee Relocation Council) • The typical moving customer is a married couple between the ages of 25 and 44, with one or two children between the ages of 2 and 11. (Mayflower)

18. These staggering statistics show that the need for professional home inspections is needed and warranted. We (meaning the home inspection profession) must take a stance to ensure the safety and well being of our fellow citizens, neighbors, children, elderly, etc. Educating the public should become our creed. • Public awareness begins with us. We must teach them that “What you don’t know can harm you”. Take the following and use it to your advantage to inform your customers.

19. Houses degrade from the moment they are completed. And with human nature the way that it is, many people won’t fix their home unless they are forced to. Until the home inspection service evolved, houses were typically purchased in “as is” condition. This process continues from buyer to buyer or until eventually the house falls apart or a disaster occurs.

20. Occasionally, houses are fixed up before they are sold, but these are the exceptions and not the rule. Owners who decide to market a house rarely want to invest extreme amounts of time and money in it because they usually feel that they won’t get their money back from the sale. When they do decide that the problem must be addressed or fixed, they often times do it themselves (even though they may not quite understand the problem or how to fix it) or hire a not quite qualified unprofessional to do the repairs, which may create additional problems. This process is not new. The old Roman Latin saying caveat emptor or “let the buyer beware” is just as appropriate now as it was then.

21. Prior to the introduction of the home inspection professional, rather than fix problems and be out thousands of dollars, typical home sellers kept quiet and assumed the attitude of “let the new homeowners take care of it”. But with the advent of the professional home inspection trade, many houses now get repaired before they are placed on the market, because homeowners know that the house will be inspected and don’t want any problems holding up the sale. Overall the home inspection industry has increased the quality of housing and has made for safer housing with longer expected life expectancy.

22. Our job as home inspectors is to provide a general, overall inspection of the home. It’s that simple. The properly trained inspector is someone who has a working knowledge of many trades and gives an overview of the condition of the home. An overview means that the inspector will list areas of concern. If these areas are significant, the owner or buyer will be advised to contact a specialist in that area of expert evaluation.

23. Home Inspectors are generalist. We do not compete with the specialists – we work with them. Anyone who wants a home inspected has really two choices. Spend a lot of money and bring in experts in all the trades, or spend significantly less money and bring in one person who has a general knowledge of all the trades. Most can ill afford to bring in all those individual professional specialists and choose us – the generalists. Hiring a certified structural engineer, master electrician, plumber, and so on to inspect a house would cost well over $1,000.00 whereas a typical home inspector charges $300.00 to $500.00. Think of the headaches of trying to get that many people to a house in such a short period of time.

24. TODAY’S INSPECTOR • The home inspection profession as you can well imagine has evolved into one of compliance and regulation. Many if not most states now regulate or license the home inspector and require adherence to a state mandated code of ethics and standards of practice. Additionally, states are beginning to require Continual Education.

25. TODAY’S INSPECTOR • In those states that do not regulate the home inspection profession, industry standards have developed to the point that a non-conformist (if you will) does not stand much of a chance in the industry. • This leads us to my procrastinations, musings and predictions for the future of the home inspection industry.

26. THE FUTUREMy Predictions, Procrastinations, and Musings • This is where I separate the meek from the strong. Many disagree with my future analysis and probably rightfully so.

27. In the beginning of our discussion we learned of the evolvement of the profession. We learned that the profession began with a small concept (contractors doing a cursory review of the structure as “Contractor Inspections”) that evolved into a generalist in all trades known as the “Home Inspector”.

28. The consuming public in my opinion will dictate the future of the profession. In fact, it has already begun. Soon Home Inspectors will find themselves needing to be specialist rather than generalists in many facets of the inspection process.

29. What are now considered ancillary services will become demanded services, (i.e. – radon, mold, water testing, etc.). Other structures, such as, swimming pools, hot tubs, barns, sheds, etc. will also become a mandatory part of the inspection process and will be expected.

30. In short the home inspection industry will further evolve from a generalist to a specialist because of consumer demand on the industry. This consumer demand will be sparked by:

31. Rising costs of construction/remodeling labor; • Increasing Material Costs; • Increased knowledge and education of the consumer; • Marketing trends of the home. (Future homes will probably all have a swimming pool or other amenities, as part of the new home package); • And yes, even possibly future government regulations that may place undo hardships on the sale of a home. (i.e. – mandated septic inspections or requiring certain systems to be up to code or at minimum standards). You see this code updating in the commercial industry already.

32. The Home Inspector of the future will be continuously tasked to improve his/her skills to meet these demands through specialist training and certification. • To that extent, Associations, Societies, etc. will need to expand their capabilities to service the future inspector. Trade schools, colleges, and others will need to expand, develop, and lead the way in education and certification programs. To answer my critics who say, “Certification of a generalist is not possible” I rebut with, “Yes, you are right. But, certification in specialist fields is”. The future home inspector will need to be just that, a specialist in the electrical, plumbing, HVAC, Swimming Pools, etc., fields.

33. Thank-you for your time and allow me to bring you this presentation. I only wish all of you the best in the future. • Let’s all make 2007 “The Year of Recognition” for everyone in the industry. The public needs to be educated on the industry and how it best serves them. • THE END • John Bowman- Author • This presentation will be followed by a Q and A session-