What Can You Do When a Client Won’t Pay for the Home Inspection?
We have been in the home inspection industry for many years, and this is something that unfortunately does come up. There are various reasons why this happens. For instance, maybe you do onsite reporting and the client “forgot” their checkbook/credit card/cash. Maybe you committed the “ultimate sin” and sent the client their report before you collected payment and now that they have what they want and they don’t feel the need to pay you – especially if the deal fell through. Maybe their check bounced, maybe they later canceled the credit card payment before it was processed. Whatever it happens to be, not getting paid stinks. So what can you do about it?
We have been through this before, and we would love to share what we learned from those experiences that may help you collect your money and move on with life/business. Before we start, we want to emphasize that we are not attorneys, laws vary from area to area, and what worked for us and may work for others may not work for you. So be sure to thoroughly research things before you take a step in any direction.
So let’s look at the first thing you could do, and why I regret it to this day…
Option 1: Cut Your Losses and Move On
This is probably the most popular option that home inspectors take. And there are many reasons why they do this.
Fo many inspectors, it’s just the easiest option. We may reason that we don’t want the stress, we don’t want to deal with that person, and that we just want to move on.
For other inspectors, it’s all about the math. If we are out $500 for an inspection fee, but we are booked out for weeks, we may just view it as “the cost of doing business” and not want to take time away from paying inspections to chase down money.
For others, we may worry about our reputation – especially with the agents. We may think that the agent would be upset if they found out we went after their client for the money they owed us.
Whatever your reason, in my opinion, this option is almost never good business. This is a terrible premise to build your business on. A couple of things to consider, if we let the money go then when this happens again in the future, we may let it go again. It’s a mentality that we build up in our minds.
Also, we may get a reputation for not chasing the money we are owed – and this is not a good reputation to have. Real estate agents and others talk. If people know you are soft about collecting, you will likely tend to not get paid more often.
I actually let a payment go one time – and I still regret doing it. A seller had a radon test done by the buyer’s inspector and it came back high. The seller disagreed and hired me to do another test for the fee of $150. Well, my test came back at almost the exact same level as the buyer’s inspector – which my client was not happy about.
We had an agreement, but he said that since he has to pay for a mitigation system that he didn’t feel that he should pay me. He was a very unpleasant person, it was only $150, and the agent was in a tough spot because her client was such a difficult person. So, I let it go. That was about 10 years ago now – and I still think about it.
That agent really didn’t use me again (she didn’t sell many houses), the client got away with a free test, and I was left with an unpaid bill and wasted time. That is ba business, and I vowed to never do it again.
I told myself that was the last time I would let someone take my time from my family and money from them because they feel they have a right to. It was like I let someone steal my wallet because it wasn’t worth the effort to stop them. I still regret that. So what other option do we have?
Option 2 is something that I have done in the past, and may help you as well.
Option 2: Pursue Your Hard Earned Money (Nicely)
This one is probably the most unpopular option. It takes time and effort. Also, no matter how hard most of us try to hide it, it can also be stressful doing this.
It takes time away from other things to pursue your money, and it is never fun or pleasant. But people who don’t pay often count on you not pursuing your payment and giving up. To be honest, some people make it a practice to not pay people and see who continues to come after them to determine who they will pay.
It is hard to believe, but that is how some people run their lives. So if you do not pursue your payment, then they just won – they got exactly what they wanted.
I had a client like that about 8 years ago. We did an inspection for them for about $600. They “forgot” their checkbook on site, and I foolishly sent the report before payment… Never did that again…
A few days later I called and asked for payment. It was the usual “it’s in the mail” kind of stuff. After about a week I knew something was going on. So, I started to call and blow up their inbox with emails. I was very kind, and courteous, and pleasant as pie – but they heard from me every day.
Turns out they spent the money they were going to pay me with on something fun instead. Then they were worried about all the closing costs and wanted to see if I was going to try to get the money I was owed. Eventually, they paid me. Just like we don’t like the stress of having to call them, they don’t like the stress of being called all the time.
Also, we always worry about “losing an agent” in those circumstances. Because I was persistent but very kind, the agent actually appreciated how I handled it and he referred us for many years.
So as uncomfortable as it may be, can you take a minute each day and call the client very calmly and nicely? Then follow up with an email saying: “I hope you are doing well. I called again today at 3:27 pm and left you another message, etc”. When they see you are following up (and documenting everything) often times people don’t want the hassle and will pay.
But what if they don’t? What are some other steps you can take?
Option 3: Take it to the Next Level (Still Nicely Though)
So what is “the next level” exactly? Well, it isn’t small claims court (yet). It is a well-written letter, by either you or your attorney. Also, this letter should be sent via certified mail so that you can verify they received it. But what is in this letter?
Well, I will tell you my experience sending one of these letters. A client of mine paid me on site with a check, and I sent his report later that evening. I cashed the check and everything seemed fine. Well, about a week later, my bank sent me a letter and said it bounced. I pursued option 2 as best I could for quite some time, but he just didn’t want to pay.
So, I sent him a letter. I wrote it, videotaped the content and me putting it in the envelope for certified mail at the PO, and mailed it off to him. Within a couple of days, we had out payment. So what was in the letter?
We didn’t have a lawyer write this one, but we very kindly stated 1: when and how often we contacted them about payment and that we have records of those times, 2: That their inspection agreement states that payment is due at the end of the inspection before the report, 3: that their agreement states that late payments are subject to daily compounded interest and time pursuing the payment at a rate of $175 per hour, 4: that they were in breach of contract, and 5: we expect immediate payment and compensation for bank fees within 5 business days or we will have to, unfortunately, take things to the next legal level… We had payment in 3 days.
We said it all pleasantly and nicely as always, but we made our point. Even the worst of people who don’t pay will have to recognize that they are really in no position to negotiate at that point. What if this step doesn’t work?
Option 4: Small Claims Court
I have never had a situation get this far before. We have had two situations get to option 3, but never to court. So I really can’t speak from experience on this one. I
would highly recommend doing all the other options first and using this as a last resort though. Court is not fun, and usually doesn’t end in what we would call “justice” My insurance guy once told me to avoid court if at all possible. The court is there to protect justice, but the way he explained it, they are also there to protect consumers.
For instance, he told me about a court case that he was involved in where he worked for a marina and sold someone a boat. He didn’t pay for the entire boat and said he didn’t understand their agreement – and the court ordered in the favor of the person who didn’t pay because (as he told the story) it is the obligation of the professional to educate the consumer.
Now, that is an experience of one person. I have been an expert witness in a case where the consumer “lost” even after the contractor pretty blatantly ripped him off. When I say lost, it was too hard to make the case happen so he went to mediation because the court couldn’t seem to decide.
So those two experiences show that it is kind of in the air as to where the court will rule. My whole thing is that it almost never gets to that point. One time I filed a small claims case and the court sent the person a letter. Before the date arrived I had my money. No one wants to go to court – and it almost never ends up there.
Protect Yourself BEFORE it Happens
The best thing I have done is to try and put in place items and processes to fix this issue before it happens. Here are some things that I have found useful:
- ALWAYS have an inspection agreement (and have it checked by a qualified attorney like Joe Ferry or someone else)
- Use an industry standard agreement as your basis (like InterNACHI’s Inspection Agreement)
- Make sure your inspection agreement is in the hands of your client, reviewed, and signed well before your inspection
- Do NOT give the report to anyone before payment has been received and verified
- Consider processing credit cards if you don’t already
- Consider collecting payment before the inspection begins, or immediately after the on-site portion is done
- Have a plan in place ahead of time
Following these few simple processes and suggestions, we have saved ourselves a lot of stress and money over the years. Hopefully, it helps you as well, but remember to consult an attorney before doing anything.