Active Rain March 8, 2009

Playing our Position

I still recall the instructor from my original 1996 license course admonishing our class that agents never give legal, accounting, or any other advice that is beyond the scope of our duty. We were even coached to repeat the phrase “I cannot give you legal advice.” Wise words.

In New York, the real estate transaction involves many professionals: agents, lawyers, title company, appraiser, home inspector, lender, loan officer, and so forth. While we do not operate in individual vacuums and there is some cross pollination of duties (I might provide an appraiser with comparable sale information, for example), by and large everyone plays their position. When one professional tries to wear that hat of another, it is an invitation for problems.

On a recent home inspection, my agent reported to me that the inspector advised the buyer that the presence of electrical fuses instead of a circuit breaker panel could cause problems with the mortgage lender. I have sold real estate for 13 years and originated mortgages for another 7; I have never heard of this. I asked Tom Ginis, one of the managers at Residential Home Funding if he had ever heard such a thing or if he was aware of any underwriting guideline to this effect. He had no idea where the claim could come from. He also wondered aloud why a home inspector would make such a foray into underwriting.

The problems that can arise from this sort of thing are numerous. First, in our marketplace inspections are done before contracts are signed. After a spirited negotiation on price and terms, this can muddy up the waters. Now our buyer, who is putting down a substantial amount on a conventional loan, has a new worry. If the reason were legitimate, fine. But no professional I have asked (myself included) agrees with this guy. We now have to devote time and energy to reassuring the buyer and researching mortgage underwriting to prove that she won’t have a problem getting approved. This is to say nothing of the fact that I have closed two recent FHA transactions on homes with fuses.

I have since heard that he sells insurance and moonlights as a home inspector. Now he’s underwriting loans in in basements. How silly! We should all play our position. Otherwise, the domino effect adversely affects both clients and colleagues. Buyers: Don’t work with part time professionals one of the biggest transactions in your life.