If we stop to think about it, our industry, the home inspection industry, really hasn’t been around for a long time. Yes, as long as people have been buying houses, they were always getting a more knowledgeable party, usually a friend or older relative, to take a look around before they bought that new house. But having an industry, a group of similarly trained (and often government certified) professionals that are paid to perform the specific task of “taking a look around” before someone buys a house is a relatively new construct.
Our History
The home inspection industry started to pick up speed in the 1980s when two significant events occurred. First, the average sales price of a new home in the United States crossed $100,000 for the first time ever, This meant that buyers were sinking even more of their hard-earned money into the purchase of a home and wanted to make sure they were making a sound investment. Secondly, a landmark legal case (Easton v. Strassburger) was litigated. The trial court in this case ruled that a real estate agent has a duty to their clients to have an inspection conducted and disclose all facts that may affect the value or desirability of the property. After this ruling, the real estate industry quickly realized the benefit of having a home professionally inspected. This not only helped their home-buying clients purchase better quality houses, but (arguably) more importantly to the real estate industry, helped to shield the real estate agent and their company from liability.
So, for the longest time in this fledgling home industry, there were more homes to be inspected than there were inspectors. Professional home inspectors were a highly sought-after commodity, and they held the power in the vendor/client relationship. Real estate agents (and their clients) needed a qualified professional to inspect the homes that were being sold and were willing to pay a premium to hire a quality inspector.
Time went on, and an all too familiar transformation occurred. As so often happens in industry, a race to the bottom ensued. As more and more people were being sold on the idea of working as a home inspector, the number of vendors went up as the demand for their product stayed relatively consistent. The laws of supply and demand took over, and an increased supply of home inspectors overpowered the baseline demand for their services.
The Struggle is Real
As happens in every industry, new vendors (in this case, home inspectors) arrive on the scene and struggle to find work. Because these vendors are new, it’s typically difficult for them to compete with already established companies. They can’t tout their years of experience, their number of satisfied customers or their hundreds of 5-star reviews. They typically won’t have an encyclopedic website offering their clients all the information they’ll ever need, they don’t have a marketing department working behind the scenes to disperse their message, and they haven’t yet created an awe-inspiring product that clients can’t wait to get their hands on. The fact is they’re outnumbered, out manned and outgunned.
So, like any newcomer to an industry, they compete using the only weapon at their disposal: pricing. They simply charge less for their services than their competitors, hoping that by going lower than everyone else is willing to go, they’ll be able to scrape out a living in their newly chosen profession.
The Low-Price Leader
And as evidenced in every other industry out there, this strategy can have its benefits, if you’re the low-price leader. The view of our clients (home buyers and the real estate agents that represent them) have effectively shifted. Seemingly, the clients no longer care about the quality of the product. It looks like the experience of the vendor (home inspector) no longer carries as much weight. It seems that the quality of the work performed doesn’t matter as much as it used to. It appears to be that the time spent actually doing the job you’re paid for (inspecting the property) doesn’t really make any difference anymore.
We think that the clients really don’t even care anymore; they’re just picking the cheap ones.
Scourge of the Industry?
I’ll admit, it’s very easy to get caught up in this negative thought pattern. It doesn’t take much thought to rationalize to yourself that all these cheapo inspectors are going to ruin the industry. We’ve all had these thoughts, at one point or another. Even if you’re currently the region’s low-price leader, there’s always someone willing to go lower than you. Then you’ll sound just like all those other crabby old inspectors, ruing the day that these new guys destroyed the industry you love.
If you stop to think about it rationally, there’s always an inherent problem with this business model. While undercutting the competition may seem like a fool-proof way to grow your business, it’s not without its down-side. In a race to be the lowest, someone always gets there. If everyone is racing to be the cheapest, to give away the most, to do everyone else’s job so they don’t have to, eventually, someone reaches the end point.
Sooner or later, we’re there; we’re at the bottom. As low as anyone can go. It can’t get any cheaper. We can’t offer any more. We’re doing all the work that everyone else used to be doing. There’s nothing else we can give away. This is it. We’re doing it all and getting almost nothing for it in return.
Then what?
Where do we go from here?
Ultimately, this happens in every industry. Think about today’s real estate market and its proliferation of low-commission agents. Now you can hire someone to list your house for a 1% commission! What’s next? Will there be a new company called 0.5% Listing? Free listing? The new “I’ll pay you to list your house real estate company”?
Anywhere Else to Go
The race to the bottom hurts every industry. It has a detrimental affect on the overall value of an industry. It hurts the perceived value of the vendors and hinders the long-term viability of the companies that have worked so hard to cut all those corners to get to the bottom. It effectively lowers the value of everyone’s product.
But it doesn’t have to be this way. We’ll never be able to stop a competitor from going the low-cost route; that’s always going to happen. But that doesn’t mean we have to take part in the race. We can refuse to sign up for that particular event.
Sorry, we’re not going to participate in your 5K Fun Run.
We’re moving on; we’re gonna compete in the marathon instead.
We can do it. We can take a stand. We can insist on first-class instead of cheaper. We can work at the upper levels instead of groveling in the streets. We can strive to be at the top, rather than racing to the bottom.
While there’s always cars in the parking lot at your neighborhood dollar store, not every shopper’s buying their wife’s anniversary gift from there. There will always be clients at every level of the spectrum: low end, middle and high.
It’s up to you to decide where you’re going to hang out. Me, I like the quality of the air up here. It smells just a little bit better.
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Thanks, Joe
