Fighting To Win - Don't Roll Over for Legal Issues

Ever thought about the harsh reality of lawsuits in the home inspection industry? Let's explore that together in a heart-to-heart session with our guest, Philippe Heller, a seasoned veteran in home inspections based in San Diego. Philippe pulls back the curtain on his experiences in court, dispelling the fear and stress associated with legal battles and presenting a fresh perspective on the inevitability of lawsuits in this field. 

We journey through the maze of liability, demand letters, and more. Philippe's experiences in litigious areas offer a roadmap for navigating the impact of claims on insurance premiums and the dilemmas of high deductible benefits. Deep-diving into the economic strategies of the industry, we discuss the necessity of a reserve fund to cover potential legal fees and missed defects refunds. The conversation turns toward the industry's fight against frivolous lawsuits and the importance of adjusting pricing and saving tactics to safeguard your business.

In the final stretch, we underscore the criticality of liability protection. We talk about the need for a strong inspection agreement, the importance of nurturing relationships with attorneys and licensed tradespeople, and the benefits of having an LLC or corporation in place. Philippe leaves us with valuable insights on setting industry standards and the necessity of adapting to technological advancements. Don't forget to subscribe for more informative and engaging conversations like this one.

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*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.

Transcript

The information we mention in the podcast for the attorney that Philippe mentions:
Gregory C. Pyfrom, Sr., Esq.
Gregory C. Pyfrom & Associates, Inc.
1534 North Moorpark Road, #324
Thousand Oaks, California 91360
Office: (818) 433-3666
Cell : (805) 207-4888
Email: greg@pyfromlaw.com

PODCAST TRANSCRIPT:

Ian R
Welcome back everyone to another edition of Inspector Toolbelt Talk. Today we have on a guest that, I actually reached out to Philippe and asked him to be on the show after a post I saw that he made on Facebook. But we have Philippe Heller from the Real Estate Inspection Company down in San Diego. How are you, Philippe?

Philippe Heller
I’m doing great. Thank you.

Ian R
Thanks for helping me pronounce your name properly, it’s Philippe, it’s the French version, right?

Philippe Heller
Correct. And being in San Diego, a lot of people always call me Felipe or Phillip, I’ll answer almost to anything, but it is Philippe.

Ian R
Alright, cool. Well, I like already, you know, anybody who was kinda like, that’s fine. Whatever you call me is good. Just shows that you’re a humble down to earth guy. So nice to have you on. So you actually had a court case recently, that you were dismissed from. And I want to hear about that, because you know, one of the biggest fears any home inspector has, and sometimes it’s a fear that’s never even realized, for a lot of inspectors that are smaller companies, is getting served with papers, and your stomach gets sick, and then the days and weeks of stress. But before we get into that, can you tell me a little bit about you and your company there, Philippe?

Philippe Heller
Sure, I’d love to. So I started the company in 2004. And, um, you know, a lot of business depends on timing. And I think it started at a really good time, it was in the run up of the real estate market. And at the time, a lot of us, you know, who a lot of inspectors who have gotten in since then, the industry has elevated quite a bit in the in the reporting software and all this stuff. When I started, it was still three ring binders, or NCR reports handwritten. And so introducing technology was kind of novel still. So I got in at a good time, I was able to introduce a lot of new stuff. We were one of the first companies in the country to include thermal imaging, with every inspection, which allowed us to really bump up our prices, and just include it, and I saw it as a great liability reduction. For me, it wasn’t just hey, client, if you want me to use it, you got to pay me, I thought I want to use it at every inspection, because it helps me find stuff. And it just worked out really well. So we ramped up and grew very quickly till, ’08/’09 when the market crashed, but we pivoted and started working with a lot of investors back then, and kept going. And so we’re going to celebrate our 20th anniversary, next in March of next year. And so we you know, we’re a mature company, we’ve got a lot of inspectors, a really mature CSR team and product offerings. So it’s been good, a good run, it’s been a difficult couple of years. But getting back to, you know, the podcast topic, which is lawsuits, the longer you’ve been in business, you may not have been sued yet, it’s going to happen. And it’s not a reflection necessarily, on how good you are or your inspectors, if you’re a multi inspector firm, it has to do with somebody lawyering up, because they know how the game is played. And once they get a lawyer, insurance companies just want to settle. So a lot of people, you as a home inspector have a target on your back sometimes. And if there’s any opening that somebody can see where they can make an argument, it doesn’t even have to be that great of an argument. But they get a lawyer, send you a nasty sounding letter, and they wait for the insurance company to write them a check. And that’s the way the game works. So don’t, don’t lose sleep when you get served that first time. I know it’s very upsetting.

Ian R
Yeah, you know, I remember the first time I got a ticket when I was like, 17, I thought I was going to die. And it was just a failure to not even stop, a failure to fully stop at a stop sign. And it’s like I stopped but he’s like, yeah, I didn’t anyways, at 17 years old, I’m like losing sleep. I’m like going to court. It’s scary. The next time I got a ticket. I’m like, oh, okay, well, you know, I was going three miles an hour above the speed limit, not the end of the world. Not even a point on my license. Let’s just, they reduced it to parking on pavement. Not that I’ve gotten a lot of tickets, but it’s just an illustration say, the first time it happens. We’re scared to death. Do you remember the first time you were ever threatened or served or anything like that?

Philippe Heller
Oh yeah, I mean, it one time I got served on New Year’s Eve day. Like it was late at night, nine o’clock on.. No, it was New Year’s Eve. And someone knocked on my door, I live in a bit of a rural part of San Diego. And so it’s very odd that somebody would come by my door and so you know, that just ruins the whole holiday like you know, it’s late at night you get this paper and you’re immediately digging through like, who was it? What are they accusing us of? Which inspector did it? On and on and on. And I don’t even remember the first time we got sued. But you know, it’s just you immediately go like my mind immediately now goes into instead of being upset I immediately go into defensive mode. Okay, let’s get the pictures from the report. Let’s contact the inspector and get their side of the story. See if they have any extra photos that were not in the report but may exonerate us. Let’s look at the wording, let’s compare it to the standards of practice, and, and on and on. And so we immediately go into defensive mode. But for years, the mindset is, hey, you better tell your insurance company right away and hand it over to them. And that’s it. And that’s your only option. And sometimes it is, and a lot of it, which I want to touch on is it depends on your deductible. Okay, that is kind of the limiting factor, which I was very upset, we had a couple of claims. And so my, you know, rates kind of skyrocketed, and they were high anyway, because we’re in California, a litigious state. And so they’re high anyway. And the only way for me to get a handle on it was to have a higher deductible. Now we’re lucky, we can put money aside to absorb a big hit, like, you know, a 10,000, $15,000 deductible if we have to pay it. And so that was one way to offset the high premium. But it turns out that I, I liked it now, because it gives me room to fight before I have to turn it over to the insurance company. And I can go into that a little bit more if you want.

Ian R
Yeah, you know, just to kind of touch on that, we talked with Nick Gromicko one time and his, his angle is always to fight. And I do want to caveat all of this with the fact that you own a pretty large inspection company, you’ve been around a long time, I don’t know how many inspections you do in a year, but probably more than a lot of home inspectors do in their entire career, your company, how many you do. So I’ve always done the math of one out of 1000 clients are going to be upset at me, or and then one out of every so many of those are going to send an angry letter from their attorney. And 99 of those letters aren’t going to turn into anything because the attorney is like, okay, let’s throw some spaghetti against the wall and see what sticks.

Philippe Heller
Correct.

Ian R
And then every once in a while one of them turns into, alright, we’re actually going to go to court or deposition is usually where it ends up, and almost never goes to court.

Philippe Heller
Right. So a couple things. First of all, very often, the first call you get is from the agent, not the client. Because you know, the client calls, the agent says, Oh my gosh, I had a plumber out here, an electrician. And they said that the inspector screwed up and missed this item. And you know, I’m really mad and so the agent wants to look like the hero. So they call the home inspector on behalf of the client. And you know what, as good of a relationship as you think you have with an agent, they will turn on you, do not, they’re not your friend, many times, like very few of them are truly you know, an advocate for you, and they trust you and they’ll push back on the on the client say, Hey, I know my guys good, let’s talk about it. No, they come at you really strong. My one bit of advice is try and cut the agent out of the conversation as early as possible, deal with the client directly. Because the agent is going to leverage their relationship with you. And they’re going to say, you know, Ian, you know, I’ve used you for years, and I sent all my business, I’ll never use you again, unless you pay for this thing, even if it’s outside the scope of an inspection or six months later. So try and cut the agent out as fast as possible. So you’re going to keep him in the loop. But you need to, you know, settle this matter with the client who you have a contractual agreement with. And because the client can’t leverage this relationship with you, because agents will and it’s, it’s sad, and it’s frustrating. And I think that hurts more than actually receiving the letters. Yeah, when an agent you’ve worked with for five or 10 years, great relationship, you’ll move heaven and earth trying to fit them into your schedule, or pick up a weekend or something like that you think, man, you know, we’ve got a really good connection and the first time they call and they’re screaming at you, and they’ll never use you again. That’s terrible, you know. So that’s my one bit of advice. And then, you know, do take as many photos as you can, even if they don’t go in the report, there’s some, there’s some theory out there that you don’t want to do that because if you miss something, and now it’s in the picture, it’s a gotcha. And you know what, it should be, you shouldn’t be missing stuff. If you can take a picture of it, you should be able to see it. So make sure you or your team is really aware and observant and try not to miss anything in the first place. I think that’s that’s one takeaway, but where are we going with that, get me back on track.

Ian R
I’m actually writing stuff down as you’re saying it. I love that point about cutting the agent out of the issue because that’s I mean that’s a deep thought man because I thought I was the only one who kind of felt like that that the worst part of it was maybe even sometimes even a whole small office like oh my goodness never use this guy again, this and that and clients like yelling about a you know a corrode, some corrosion on a pipe above a water heater. And it’s like, what in the world, he’s yelling about court over that. I’m like, This is not leaking or anything. So anyways, I’m writing this stuff down, but where I where I think we were headed was you see a lot more volume of this than the average home inspector. So your take on this is very important. And I brought up Nick Gromicko and his fight mentality, because he’s been through this a lot, he owned a very large inspection company, and he works with inspectors all over the country. And I tend to agree with that. I don’t roll over. But most of us tend to as an industry, and I think that’s why we get so many demand letters. I’ve never sent a demand letter to my HVAC guy, but they don’t roll over, you know, but we roll over. And I think that sets a terrible precedent.

Philippe Heller
So, California has a unique liability situation too, in the business and professional code, by law, we cannot limit our liability. I know, inspectors in some states say, well, we just in the contract, we say we limit it to the cost of the inspection, we can’t do that here. So it’s, it’s wide open to whatever, you know, claim that they want to make. And so that’s very frustrating. So we have to be super careful here. And as a result, our E&O insurance is quite high. So getting back to your point, the thought process out there is you better tell your insurance company early, because if you don’t and you make it worse, they could say, we’re not covering you on this because you tried to handle it on your own. Okay, so we all have to, and I am not advocating that you don’t tell your insurance company, you need to get them in the loop. But you also need to try and fight it because the problem is once you hand it over to the insurance company, their mindset is, let’s get out of this as cheap as possible. Even if we start to fight it, we have to pay an attorney and an adjuster and maybe send somebody out there and do all this stuff and the dollars start going up. So their first call is what’s it going to take to get my client out of this mess, you know, 5000, 10,000, 50,000, whatever it is, and they look at that as cheaper than going to court. So they’re just looking at the cheaper option. The problem is a long term consequence is that they are validating the behavior. And so attorneys know that they, all they have to do is push the insurance company a little bit and they’re gonna get weak in the knees and write a check to settle. So that’s all they do. And they you know, they come at you with a high number and they hope to, they hope to get a check in here and it never sees the inside of a courtroom.

Ian R
Yeah. And I’ve been threatened many times, I got to the point where it’s not like many times like every other inspection, but you know, you do enough volume, I started about a year after you did, you do enough volume, and eventually it’s like, I’m gonna send you a demand letter for $10,000 of this or that, I started looking at him and saying, okay, they want 10 grand, it’s gonna cost him 30 grand to get that. I’m like, I started telling attorneys, okay, have at it. And it never went anywhere, because you know, that they just expect you to roll over. So it’s part of doing business. Interestingly enough, three of the most litigious areas in the country are Southern California, where you are, Maryland, and well, more specifically Washington DC, not Maryland, rather, but Washington DC, and New York City. I’m just a few hours north of one of the most litigious areas in the country. So you kind of get used to the what we call in my area, the city folk coming up and buying a property and then trying to sue you and I had one lady tell me, it’s just the cost of doing business, just send this to your insurance company, we need to, we just want to be able to add a patio or something..to her it was just like normal day to day. And I’m like, no, this isn’t normal day to day to me.

Philippe Heller
And they don’t realize the consequences of what a claim does to your premium. They just think, oh, you just turn it in, probably pay 250 bucks. And it’s just the insurance company, who cares? It’s, it is a big deal. And the reason why is the three cities you mentioned, the courts are very unfavorable to businesses, and they will tend to side with the consumer over the business all day long. And the attorneys know that, they say, I’ve got leverage over you because if I threaten to sue you and you want to bring it to court, you’re taking your chances, right? Because it’s 60/40 that it’s going to go there, the clients way instead of yours, just at face value, like you’re starting with a handicap, right? They’re like, you know, you are, you have a target on your back, like I said before, so what’s happened now is as I said at the beginning is our deductible is quite high, and because we do, we do hundreds of inspections a week, okay, so you can imagine, I know some inspectors there have two or three inspectors under them say well, I review all the reports and I’m so good, like nothing’s gonna get by me. When you start getting 10, 15, 19 inspectors like we do, you’re not checking every report. It’s just impossible. You couldn’t do it all day long every day, check every report, so you really have to train well, rely on your team to be awesome. Do spot check the reports, but it really is impractical to check each and every one. But because of our size volume, and we’ve had had some claims and we are in California, so our premiums were ridiculous, so we chose to have a pretty high deductible of 25 grand. What this allows me to do, however, I still tell my insurance company, most callbacks we deal with, just with the client, you know, the small stuff, like, oh, you missed a rusted faucet, okay, you want 250 bucks, you want the inspection fee back, great, tell your friends, we stand behind our work, here’s your check, have a nice day. And that, you know, makes most people happy. But when it starts getting into, you know, 10, 20, 50, $100,000, you need to tell your insurance company, but you have the right to say, I want to fight this with my own attorney up until we hit the deductible limit. Okay, and you keep them in the loop. So they’re, you know, they kind of manage this process. But that’s what we’ve done. So I have a great attorney here local to Southern California. He was president of the CREIA, which is the California Association of Inspectors. And anyway, he’s super knowledgeable about our industry. And he’s a fighter like me, he’s just like, take no prisoners. He’s actually turned around a countersued people who have sued us on ridiculous grounds. When I say us, home inspectors, and he’s recovered a lot of money from plaintiffs who had unfounded claims. So I had a 25. Let’s talk about this one lawsuit that we got dismissed from.

Ian R
If I could, that’s the next point I was gonna ask you. But do you mind mentioning who that attorney is in case the listeners want to know?

Philippe Heller
Sure, it’s Greg Pyfrom, and I can send you his contact information if anybody wants to reach out to him? Maybe you could put it in the show notes.

Ian R
Yep. How do you spell his name?

Philippe Heller
Greg Pyfrom.

Ian R
Okay, great.

Philippe Heller
And anyway, so this one recent case that we had, we didn’t even get a demand, phone call, nothing. We just got served from the buyer of this property. And he wanted $50,000 from us, he wanted money from the agents and from the sellers. So I’ll paint the picture of what happened real quick, the sellers. It was an older couple who lived there for many years. And they were getting older, and they had to go to an assisted living. So the son said, don’t worry about it, I’m going to fix up your house, sell it. And that’s going to cover the cost of the assisted living as you, as you age. And so he did some stuff very similar to a flip, right, he came in and he painted and he, you know, did some stuff. One of the things he did in the backyard is he hired a landscaper to kind of fill in, it was a top of a little hill that was a cut lot and it kind of sloped down. So he had some dirt put in there and pour extended the rear patio out and then tiled over the whole thing. So when we did the inspection, it looked great. There’s all this fresh tile on this big patio and took pictures and there were no visible problems with it. Now we had really big rains this this winter, earlier this spring. And for whatever reason, the land, the dirt underneath this patio settled a bit along the cold joint, a cracked, it came through the tile. And you know, he’s furious that we weren’t able to predict that. And he was, you know, holding pretty strong, his attorney wanted us to pay that 50 grand to fix this patio and we just held to it that it was a concealed defect, there was no way, you want to go after the seller for concealing this and hiring an unlicensed landscaper to do this work, fine. But we’re out, like, our inspector did his job. And we got the blessings of the insurance company to fight it. And we did. It cost us, it cost us some money. It cost us about 13 grand. But we eventually got because we told him we were going to come after him and come after him for our attorney fees. And so we were able to get out of it with a waiver of cost, which means, hey, release us from this lawsuit, and we won’t countersue you for any money, we’re just going to, let’s just walk away. And so we ate that, which I would have had to do anyway if I gave it to my insurance company, but they didn’t get a penny from us or the insurance company. So it basically went to my lawyer to fight it. So anyway, we got the release from this one lawsuit, it was very expensive. But that’s what I said. Now, you might be thinking, well, that’s dumb, why don’t you let the insurance company pay for it? They will recoup that money. So your premiums are going to go up. And so they say short term, let the insurance company pay for it, long term, it sucks because they may come back at you with much, much higher premiums.

Ian R
Yeah. And it’s those are some very good points that we need to do the math on. So your deductible you said is $25,000 I believe. So it cost you $13,000 to defend it. If they had paid out. Let’s say 25 grand, it would have cost you more.

Philippe Heller
Yep.

Ian R
Because your deductible would have. So you actually saved 12 grand, and you saved your money in your premiums.

Philippe Heller
Yeah.

Ian R
So I’m not even going to begin to guess what your premiums are. So let’s say the average home inspectors premiums are $500 a month, a single guy, $500 a month. So now you pay, they pay out, they’re gonna grab that and say, okay, next time you have your renewal come up. It’s gonna be $1,000 a month or more.

Philippe Heller
Yep. And you’re deductibles going up to, you know, 2500, 5,000, $10,000, it escalates very, very quickly, or, I mean, there’s some cases where some inspectors have not been renewed, how do you function in this business without an annual policy? Do you want to self insure? It’s pretty scary. Yeah, no. So now we have another lawsuit pending. And it’s an attorney who bought the house, and she’s very aggressive. And they wanted $200,000 on the premise that the house makes settling noises in the afternoon. Like, you know, popping noises, didn’t happen during the inspection. We have statements saying it didn’t happen from all the parties that were there, there’s no way my guy could, there was nothing structural that you could point to to say, well, if he had seen where this beam was connected, or something that he should have seen it and call it out, that didn’t occur, the house structurally is sound and so and so they’re playing the game, though. And you can see once you understand it, you can see it. So their attorney, we have a court date, and he defers, deflects, delays. The husband’s, the plaintiff’s husband had surgery and is having trouble recovering, the lawyer got in a car accident, somebody died, I mean, on and on and on, we keep hearing all these excuses, what they’re trying to do is push us closer and closer to that court date, because they know that the insurance company is going to write them a check, they loath to go to court. So they’re, that’s what their game is, is to back you up against the wall. And then the insurance companies like what do you want, you know, 200,000, we’ll give you 50, okay, then they’re happy and they walk away. But again, they’re gonna come back and get that out of me one way or the other. So what the client did not count on is that I do have a high deductible. And I hired a lawyer and I am not settling and we are going to countersue them. And so this is culminating, it’s coming to a head. And we’ve since found that they that they did hear the noise prior to closing. And they went ahead and closed anyway. And so we feel like we have pretty good grounds, like, I’m of the mindset, like take us to court, we have a solid case, we’re going to fight it. And when we win, we’re going to turn around and we’re going to sue you and I’m going to recapture the money that I’ve spent.

Ian R
You know, there’s that old war expression, I’m going to make them pay for every inch of ground with a gallon of blood. If the battle is hard enough, and they see that they’re gonna have to pay with blood, it makes it not worth it. So again, much smaller scale than you, but I’ve had times where people wanted to fight hard. And just out of principle, I just like, I’m just like, Okay, let’s fight back. And they’re like, it’s 15 grand, or it’s 10 grand it’s just like, okay, it’s the principle of it. And I’m like, it’s gonna cost you 30 to get that 10. Let’s do this.

Philippe Heller
Yeah. Well, and so in most smaller inspection companies, you know, you may have a $2,500 deductible or 1500, or whatever. And you think, I’ll just eat that, that’s better than paying 10 grand, right? But the insurance company settles, and again, next year, you’re going to be paying more anyway. So, you know, build up a reserve, like we have what’s called a callback fund. And, you know, each week, we put quite a bit of money in that account, and just build it up. And so that it’s there for writing checks or paying for something or, you know, we’re really up front, if one of my guys misses something legit, you know, my company will pay to make things right, if in fact, we miss something. So build up a reserve, be prepared to fight, find a good local attorney who can at least respond with a very strongly worded response to a demand letter, do get your insurance company in the loop if you think you can’t make it go away with the return of the inspection fee. But you know, we need as a, as an industry. And I think you mentioned Nick Gromicko. And he’s known for this. He is a fighter, like if the insurance companies don’t stand up, and start to fight and get the word out among these lawyers who think we’re easy marks easy target, if they don’t start standing up and fighting and costing the plaintiffs money for doing this. And like you said, you know, they’re going to risk something. If we don’t start doing that, as an industry, this is going to continue.

Ian R
Yeah, that is a very true statement. And the reason it does continue is because we continue to roll over. But guys like you standing up, especially for bigger numbers like that. So let’s be honest, the houses you inspect in Southern California, probably a lot nicer than most of them in my area. So the defects, and more expensive, I guess, is the term I should use. Yeah. So if you’re inspecting a $3 million home and they have a $80,000 jetted tub, and they try to sue you over the 80,000 jetted tub, I’ll be honest with you, there’s houses in my area, the whole house cost 80 grand. So it’s also area dependent. So if we’re a single inspection, we’re hearing these numbers. We’re like, oh man, or if we’re a small inspection company, maybe four or five guys. Were like, Oh, no. Okay, it’s probably not going to always be 50 grand or 100 grand, most I find and I don’t know about you most are going to be in the range of five to $15,000. Just because that’s the easiest money to get. I think the attorneys think, right? Yeah. So it’s like, okay, I can get 10 grand out of this guy. Let’s see if we can do it, it’s not going to be worth it to him. And those I think you need to fight.

Philippe Heller
Yeah, and the agent and the seller. So if everybody ponies up 10 grand, you know, it’s a nice payday.

Ian R
Yeah. But now I liked your idea about putting away a fund. So I like to work things out on a graph. And you know, math, if you have, let’s say, we’re an inspector, we did 1000 inspections last year with a couple of guys. And we had one complaint. So that means or maybe we had 10 complaints. That means one, if we have ten complaints, what’s that 1% of our inspections, become complaints, take 1% from every inspection, and start auto depositing it in like a high yield bank account. Like there’s tons of them now where you can get, you know, four to 6% online of interest rate, and keep putting that in there. Or even better, just more even more of a cushion double or triple that number.

Philippe Heller
We did two percent. So we’re thinking the exact same way.

Ian R
Perfect.

Philippe Heller
We want to keep our callbacks, it’s going to happen, you’re going to refund some money, like in this business, at any business, you’re going to refund some money for customer service just for good, you know, PR, we eyeballed 2%, saying we want to keep callbacks under 2%. But let’s make sure that’s what’s in a savings account.

Ian R
That’s awesome.

Philippe Heller
Some people you know, 50 bucks per inspection or 20 bucks or whatever your, that works for a one person shop. Right. But I would say as you get bigger, just go for a percentage of your revenue, and put that away.

Ian R
Yeah, that’s awesome that we were on the same page with that number. But yeah, 2% is kind of what I like to have in any kind of reserve. And then if you don’t use it, cool, roll it over to next year and still put 2% away.

Philippe Heller
Yeah, take some for bonuses, because your team did well. But you know, save it. So there’s, never hurts to have money in savings, right? So you know, and it’s very comforting to sleep at night, when you have that there. And you know that you can write that check. So because it’s going to happen.

Ian R
You know, I’ve always thought it was funny that sometimes single inspectors would be like, oh, man, I don’t want to put any money away. I’m like, you don’t want to put $20 away from your inspection. I’m like $20 is lunch.

Philippe Heller
Raise your price a bit. And getting back to your point about, you know, houses in different areas being more expensive. We do, we add, almost our median price is a million bucks here, right? So you can buy a dog of a two bedroom, one bath house built in the 60s that’s never been upgraded. And it’s a million bucks, you know, so it’s kind of crazy. But we do adjust pricing in certain zip codes that are super high end. You know, because the same condo or house that’s in Encinitas, right on the beach, and then you go inland 40 minutes, you know, there could be a $600,000 difference in that price, the house being exactly equal, but the liability, the risk, etc. Maybe the upgrades on the house by the beach, it’s going to be more expensive. So there’s, you’re perfectly justified in charging more based on the value of the home. Just like realtors get paid. They hate this idea when you present it to them. Why is this more expensive? Well, you know, it’s a $1.8 million, two bedroom house. And so we are charging more because the liabilitie’ss higher. You can’t get paid based on the value of the house. Well, agent, you do. You know you’re selling, you’re selling the same house and you get paid more, and there’s higher risk. So we do charge more based on zip code and price.

Ian R
You know, that’s a great point, too. I really like the way you think. But we’ve had a couple of different guests talk about that, Mike Ortiz and Kevin Maxwell do the same thing. And I remember one time, one of the vice presidents of Coldwell Banker, there’s a place near me called Saratoga. It’s actually one of the third most populated area of millionaires in the country. But the houses there are unusually expensive, you know, million, $2 million. But when I inspected his house, the agent asked me, why did you charge so much more per square foot on this? And I walked over, just as one example, what we were looking at right there. I’m like, do you see that water heater right there. There’s two of them. Look up the price of not just installing, but just the actual price of buying that water heater, it was specially ordered. And I forget, it was like three grand, I’m like there’s two of them. Those are just the water heaters for the house. And there’s another water heater on the second floor for the, for the radiant floor heating and then there’s three heating units and not just a number of them, but the value. I’m like the heating is probably worth more than my truck outside.

Philippe Heller
We have houses where the stove is worth more than your car. You know?

Ian R
I know it’s crazy, right?

Philippe Heller
Yeah, these giant gorgeous stoves that are 20, 30 grand, you know, so yeah, there’s more risk. I’m sorry, there is, it’s not just square footage thing anymore.

Ian R
Yeah it’s not square footage. And I do like that thinking but when talking about liability too, some very basic stuff that a lot of home inspectors don’t know, like a businessman at your level, like making sure we have an LLC. And even if we’re a single member LLC, having our annual meeting so that they can’t pierce the corporate veil, because that’s the first thing they’re gonna do on a single member LLC is pierce the corporate veil, which means they come after you personally. So you lose that protection.

Philippe Heller
Yeah, and definitely have an LLC or corporation, whatever suits, you know, talk to your attorney or your CPA, whoever you trust to do that. And definitely set up your business and have those meetings and document them.

Ian R
Yeah, and having operating costs because if you don’t have operating costs, people are like, Oh, just take all the money out of the company, and then they can’t get anything. Now, they’ll just pierce the corporate veil, you can’t do that. Enron ruined that for everybody. You know, jokingly saying that, but um, yeah, making sure we have all that in place. Do you find with this particular case that you had, and a couple of others that you’ve had recently, is there some things that you’d go back and maybe do differently? Or there’s some things you’re like, man, I gotta do that every time. I really nailed it there.

Philippe Heller
You know, having a solid inspection agreement, and you must absolutely get it signed before you set foot and start doing that inspection. You know, don’t wait till the end, because it’s a nuisance. And you know, it’s kind of awkward to say, hey, I need this. No, you get that signed, or you don’t do the inspection. I don’t care about payment even, get your inspection agreement signed before you do the inspection or it is worthless in court, it will be thrown out under the auspice that it was signed under duress. And a court can just toss that agreement like it’s nothing. Put in a liquidated damages clause in there telling people that, hey, you can sue me. But if you lose, you’re paying all my attorney fees. So put a liquidated damages clause in that, again, I’m not an attorney, but there’s just from my experience that you want to have it in the contract. And it’s funny, because the one larger lawsuit that we’re still in, she’s an attorney. So she can’t use the excuse that well, I didn’t read the contract, because what kind of attorney would that be, because then I’ll just report her to the bar and you know, as a, anyway, so have a good solid IA, i don’t think that attorney realized that we were going to have such a high deductible and willing to fight, she thought it was going to be easy, because now they’re kind of backpedaling. And anyway, so she, you know, she kind of attacked the wrong company, she and I’m sure in hindsight she wishes she went with a, you know, one man operation that was just more, I don’t know, inexperienced than we are, because now she’s got her hands full. But um, so, you know, document, take a lot of pictures, and line up, make some relationships with a good attorney in your area that understands the business, be some, some contractors who you could reach out to and say, hey, I need your help, I need you to write a statement saying that whatever, the roof was installed properly, or you know, the water heater, and whatever. So reach out, build connections with licensed trades people in your area, who would be willing to vouch for you that your people did a good job. And at the end of the day, don’t miss anything, like do a good solid job, don’t be an inspector who is trying to do four inspections a day, that, I get it, you want to hustle and make the money, raise your prices, you know, stick to two and do a super thorough job, go back through the house, train your people. When you think you’re done, put down everything but your flashlight and you go through that house again, lighting has changed, your mindset has changed, you know more holistically about the house, you know, you may see a stain, you may see something that you didn’t see the first time and you know, you do these things, write your reports well, don’t nail yourself down by saying one failed window was observed in the master bedroom. And it turns out there’s three because weather conditions changed. And now, so well you missed the other two, so you got to pay for them all. Leave yourself wiggle room, you know, a window was observed. Others may have failed as well. We recommend getting them all checked by a you know, qualified window contractor.

Ian R
Man, that’s poetry, man. I like the way you think, Philippe, that’s, those are extremely important points. I’ve always said the same thing about a single item defect when there’s multiple versions of it. Not saying there’s one loose tile, why limit yourself. A loose tile was noted, others could exist, have it examined by a professional, it doesn’t take much longer, doesn’t take any longer. And now you’re covered and people think you’re amazing. They’re like he told me to check the other tiles and I found eight more that were loose, yay.

Philippe Heller
He was smart, and now my inspector was knowledgeable enough to know that just because he saw one window that failed, it could mean that others have failed too, like it just shows that, and you don’t have to be an expert, right? It’s like being your general practitioner, your doctor, your family doctor, and you go in there and you go, hey, doctor, I’ve got a lump on my neck and he goes, yeah, you do have a lump on your neck. I think you should go see an oncologist to check everything. You know, he’s not, he may not know cancer, right? But he tells you to go to the right doctor and look all over, not just here, you know, check the whole thing. So um, We, we really, as an industry, you know, go as always keep learning as well, because technology’s changed, you know, when I started tankless water heaters were never, unheard of, you know, and then those came out. And then, you know, all sorts of technologies we could talk about, you know, HVAC systems that have become more and more efficient. And how do you, how do you understand those, keep learning, you don’t know everything, be humble, and do your, do your homework and document your reports really well, if you’re just racing through doing the minimum standard of practice, because you think that’s safer. And I know, some people will argue, stick to the minimum standard of practice. I disagree. Because when you, if you do get to court, they’re going to use what’s called the standard of care. And they’re going to say, well, Ian, we know you did a basic home inspection, but in your area, all of the other inspectors would have checked this item, like they all would have done this, you know, you didn’t, you didn’t check appliances, because according to the standards of practice, appliances aren’t a part of a home inspection. But all the other inspectors in your area would, so you didn’t live up to the standard of care to the consumer that other inspectors would have done. So if you’re surrounded by a lot of high level home inspection companies in your area, and you’re doing a basic standard of practice inspection, you’re gonna get hammered. You can’t hide behind the standards of practice.

Ian R
We should totally just take that one clip out and have a whole separate podcast. Exactly. That’s well said. You know, what I like about you, Philippe, is, you know, a lot of times we had this image of somebody who’s a fighter, like, oh, you have to be that kind of guy. You have to be a bulldog. I mean, you remind me of that expression. I think Theodore Roosevelt said it, I could be wrong. Speak softly, but carry a big stick.

Philippe Heller
Yeah. Be humble. Be, you know, stand behind your work, don’t hide if you screwed up, you missed something, pay for it, you know, stand up and learn from it. You know it, what’s the saying, you’re not, you’re not losing, you’re learning, right? So it cost you 100, a few 100 bucks, but that really makes you remember it. Stand behind your work and do the best job you can at every single inspection because we don’t have a second bite at that apple, we get one shot at that inspection. So you got to be right, provide great customer service. But when you’re wronged, stand up and fight, you know, hold your ground, 100%.

Ian R
Awesome. Well, we’re running out of time, but I gotta say, I could talk all day, this, this podcast is full of gold. Thank you for that. You know, you’ve built up 20 years of experience. And just by my guesstimate, in my head, hundreds of 1000s of inspections over the years. That’s experience that you can’t get anywhere else, and you just freely gave it to us. So thank you, Philippe. That’s, that’s awesome. Appreciate it.

Philippe Heller
My pleasure. Yeah, there’s lots of topics we can go into. So just let me know.

Ian R
Yeah, we’d love to have you back on the show, and great job getting dismissed from that case, I count that as a win. And thank you for setting a good standard in the industry for the rest of us. We appreciate it.

Philippe Heller
Great. 100%. Thanks, Ian.

Ian R
Thank you.

Philippe Heller
Take care.

Beon DeNood
On behalf of myself, Ian, the entire ITB team, thank you for listening to this episode. Don’t forget to hit that subscribe button so you can catch our future episodes as well. And if you have any feedback, please send us an email at info@inspectortoolbelt.com. Also, don’t forget to check out our brand new app for home inspectors, scheduling and report writing all in one easy to use app. Check it out now at Inspectortoolbelt.com.

Ian R
The views and opinions of this podcast and its guests do not necessarily reflect the opinions of Inspector Toolbelt and its associates.

Outro: On behalf of myself, Ian, and the entire ITB team, thank you for listening to this episode of Inspector Toolbelt Talk. We also love hearing your feedback, so please drop us a line at info@inspectortoolbelt.com.

If you’re enjoying the conversation, don’t forget to hit the subscribe button. Our podcast is available on all major podcast platforms. For more information on our services and our brand-new inspection app, please visit our website at Inspectortoolbelt.com.

*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.