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February 2008 Inspector eNews

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CREIA Inspector Journal

Welcome!

It has been said that change is inevitable and growth is optional. As your newly elected Chairman of the Board I'm pleased to announce that CREIA is in a position to do both. We live in exciting times where communication with the entire world is at our fingertips. The advent of the internet has changed our lives forever. In a move that is both responsive and responsible, the CREIA Inspector Journal will now be an online publication in a format that can be viewed by anyone. Friends, relatives, past clients, agents, brokers – anyone who has a computer and an internet connection will be able to read the CREIA Inspector Journal. This will be an opportunity to reach farther than we ever could with a printed magazine. Now you can read, learn, contribute articles and spread our message far and wide.

Duane McCutcheon, MCI, CNCS
Chairman of the Board


 

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Be the Great Communicator

A recent CREIA chapter meeting featured an open discussion of inspection issues with a panel comprised of a top Realtor®/Broker and State Leader from the California Association of Realtors, and the top leaders of C.R.E.I.A. and A.S.H.I. Much of our Association’s current and previous local and state leadership was in attendance as well. One of the key topics that came up was the importance of fulfilling our role as inspectors in communicating the true condition of a property to all parties involved in the transaction.

Ronald Reagan's ability to galvanize the American public with a direct style of address earned him the accolade of “The Great Communicator”. His ability to get to the heart of an issue using plain language that ordinary people could understand also endeared him to millions. Our role as inspectors puts us center-stage in a number of instances during the process of providing an evaluation of the property. While the written report is equally important (arguably more important from a legal standpoint afterward), this article will focus on the importance of developing and improving verbal communication skills which are critical to the survival and growth of our individual businesses.

Some are born with “the gift of gab”, but most are not. Fortunately, the art of conversation is really as much a science of human nature that can be learned with education, training, practice, and usage. But like any other challenge you attempt, it will not be easy at first and there will be some stumbling. In the beginning, it’s a good idea to develop an outline or script, and understand how you want the inspection event to proceed. Talking to other inspectors can give you insight, but you ultimately control the situation or the situation controls you.

It has been said that Reagan read from cue cards and many speakers use Teleprompters these days. We are obviously not afforded the same support arrangement. And while we may not be giving a formal speech at an inspection, we really cannot afford to just “wing-it”. Although there really is no substitute for experience(s), there are books to read, classes to attend, and groups like Toastmasters to get involved with that can increase your comfort level. (Note: Dale Carnegie, Og Mandino, and Harry Beckwith are renowned authors at the top of my favorites)

  • The goal is to be comfortable with:
  • Meeting and greeting people (introductions)
  • Explaining what you do and how you do it
  • Handling interruptions or distractions when inspecting
  • Presenting findings to your audience in an easy to understand manner
  • And mastering responses to objections and the occasional rude person

All this, is in addition to getting your agreement back signed, asking for payment, and generally “taking care of business”. Talking with fellow members can help with what to expect and or personal stories of reactions to specific encounters. The real challenge though, is for experienced inspectors who have been around the block a few times, to still see their need to continually sharpen their communication skills.

Reagan paid attention not only to his speeches, but also his audiences’ reactions to them. After one early speech in Washington when he was still Governor of California, an aide rushed up to him afterward and gushed, “Oh Governor, you were terrific”. Reagan replied to him, “Don’t give me that, I bombed”.

So Reagan may not have always known what was going on in his administration, or he may have forgotten the names of Cabinet members, but he knew when his speeches were effective and when they weren’t. And when they weren’t, he changed them to make them effective the next time. How those listening to us receive our words is so important in determining how effective we really are. It is important for all of us to reflect on and evaluate our presentations and make improvements as needed. Inviting a trusted inspector to tag along and observe silently for feedback later is another exercise I promote and practice from time to time.

While we have all probably had days when we wished our inspection was of a vacant home with nobody else there, hopefully those days are few and far between, because liability can go way up in that situation. Sure, no need to deal with any interruptions or pesky clients. But, there is also no opportunity to build any rapport, any confidence, or any solid referrals. Some inspectors will absolutely NOT do an inspection under those circumstances. It’s a business decision we all have to make. But if you do, I suggest that you follow up with your client verbally, if possible, to prevent any misunderstandings. Absentee clients are a big contributor to misunderstandings and hardship after an inspection. (Note: Although real estate agents are also divided on who should or shouldn’t be present at the inspection, the better agents will generally have all parties present, but out of the way of (distracting) the inspector as needed.)

It is important to always be professional and courteous to every person we encounter on the inspection, not just the ones paying our fee. And although many of us think of ourselves as the client’s (buyer’s) advocate, some go beyond that, creating an even adversarial position with every one else involved and miss opportunities to garner future referral business. Again, it has been said that we are really purveyors of knowledge and the true condition of the property. Our clear, concise objectivity and neutral impartiality are paramount to our position.

2008 GOAL: Read a book and take a class on effective speaking.

By Craig Funabashi, MCI who can be reached at craigfun@verizon.net


Try New Marketing Strategies to Survive and Thrive

Any successful businessperson can tell you the best way to succeed is to find a need and fill it. But almost anyone in the home inspection industry these days can tell you that there isn’t near as much need as there used to be!

While challenging times have visited this industry before, it sure was easy to get used to the phone ringing without as much effort as is required today! And while nobody really knows how long the slowdown will last, one thing is for sure… when it’s over, there will be fewer inspectors out there as competition! Now the only issue is how do you become a survivor?

The traditional ways of creating demand for your services were just that… traditional. Nowadays, if you want to do more than just survive, but also thrive, there are some ground rules to discuss before you start your plans to recreate your business.

Rule #1 The first rule is to recognize that nobody wants to waste money. This applies to you, and it most certainly applies to your customers and prospects. I don’t care how good the market is, how low mortgage rates go, or how much excess spendable income they have, if your product isn’t perceived as a value, they won’t buy.

Even those that regularly purchase luxury goods do so from a standpoint of value. In these buyers mind, paying an exorbitant sum for an item actually saves them money! Most will tell you that the reason they spend more is that it is actually cheaper to buy a quality item once than to buy many cheaper items during their lifetime. Whether this is true or not is irrelevant. The buyers perception is that it’s so, and that is what counts.

Perception of value is a simple concept, but one that is fundamental to a successful business plan. In fact most of the time value has more to do with quality than price. Just because you want more business doesn’t mean you have to cut your price. While you may eventually have to do that, first try another way.

Try to market your service to someone other than your traditional customer, one that may have very different perception of value from that of your traditional customer. We will get back to that in a moment, but keep this in mind while we discuss the next rule, if you treat your customer’s money like your own, you will build loyalty that returns to you in repeat business and/or referrals.

Rule #2 The second rule is that people respond to crisis, not fear or greed. I know, I know, you have heard to the contrary all your life. But ask yourself, what was your last reaction to fear? Like many, the most fearful event in recent memory was 9/11. But did you go out and buy duct tape, emergency rations, or a HazMat suit? Probably not. More than likely, the fear paralyzed you like it did me. When faced with that fear of the unknown, I felt more numb than energized with action.

The same goes for greed… really! When was the last time you actually bought that ‘sure thing’ stock touted by your brother in law? Suspicion usually counters greed in most people who have any worldly experience, and more often than not, it prevents them from acting on the primal urge to lunge ahead.

But a crisis is different. Let the washer overflow, or your baby get sick and you spring into action! Out comes the checkbook and cost is no object.

The same is true for your customers. If you can somehow be there when the crisis is happening, you have the best chance of not only selling your service, but of becoming a trusted commodity.

Rule #3 The third rule is every region is different. Try several strategies, or tweak some a bit to find what works now in your area. I live in Florida. You may have heard we get hurricanes down here. Did you worry about hurricane preparedness in Iowa this year? No, you have your own worries. Selling rollaway storm shutters or portable generators would probably not sell as well there as here in Florida. Different area, different crisis. While we are on the subject though, since Florida didn’t have any hurricanes threaten our shores this year, guess what didn’t sell? Bingo. Home Depot was stuck with thousands of unsold generators and the RollAway shutter people filed for bankruptcy. It isn’t enough to be in the right area with the right product… you also need the crisis.

Rule #4 The fourth rule is to give before you get, and probably the most important. This is very similar to the tried and true approach of offering a free trinket with every purchase, but different. I used to work as a Radio Shack manager many years ago. Part of the stores promotion was to offer a battery card that the customer could use to get one free battery every month. The idea was to get the customer into the store once a month and you were likely to sell him or her something that they needed. The problem with this logic was that the concept branded us. In the customer’s mind, Radio Shack didn’t become the place they went for all their electronics needs, we became the place they went for free batteries!

Now, of course I’d like to sell more of our inspection software, but even though we have the lowest price and the greatest product, I don’t want to get branded as cheap. Price is the easiest thing for my competition to meet. If I want to be a success, I need to offer more than the customer expects. I have to give them more than great software, I must also give them ideas and strategies that will help them succeed, and here is the key, I must really want them to succeed, not just say it. I have found that this concept returns more to both parties than beginning the relationship on just price.

So, here are the rules again:

  1. Nobody wants to waste money. Find a customer with a different perception of value
  2. People respond to crisis
  3. Try several strategies
  4. Give before you get

Now using what we discussed, how can you shape your business into a successful and thriving one?

Remember what I said about treating your customer’s money like your own and how that would build loyalty? Well, right now I’d wager there is a new customer in your area that just happens to also be in crisis and would really appreciate a sympathetic approach.

Banks and mortgage companies have been hit harder than you have in this downturn. As the sub-prime crisis expands to Alt-A mortgages, the foreclosures increase. Of course banks are not in the real estate business, nor do they want to be, but they are finding themselves in over their heads and in possession of a growing portfolio of homes while the wolves circle. Opportunistic investors hope to pick up distressed properties at fire sale prices from the banks, while the pressure to move the properties off their books grows with each passing month. The banks reaction in many areas is to try to ignore the problem. Some will even tell you they have no non-performing loans!

Strategy #1 Why not take your mortgage lender to lunch and propose that you would be a wonderful ally? You see, most foreclosure sales are as is. It would certainly be worth knowing beforehand which properties needed major repairs and which didn’t, when choosing which ones were put up for sale and which ones were retained to wait for higher prices or an eager buyer!

You see you have just found a different customer, with a different perception of value, going through a crisis. Do you see a need to cut your price? I don’t! Now don’t be discouraged if the first lender eats your lunch and declines your offer. Nobody bats a thousand, but be sure to tell him or her that you will be meeting with their competition as well. Remember, even if you’re turned down, you benefit just by telling the story again. When you meet with the next candidate, you will be more polished and better able to explain the invaluable service the partnership could provide to the bank.

Above all, stand firm on your price. If you waver, you become a commodity and invite the bank to shop your competition. Come across as genuine, and stress the benefits of the partnership. If you feel the need to throw something into the deal, guarantee that you will perform the inspection within a 24-hour period of their call, or that you will limit work with other banks if their volume of business is met.

Strategy #2 Here is another strategy that can remake the way you conduct business. This one may take some extra studying on your part, but can open doors you never thought to try.

Commercial property has not had the severe slowdown that residential property has, but it is getting harder to raise rents in a slowing economy. Owners of commercial property are being squeezed from different directions and have their own special challenges, but the rules still apply.

Securing commercial inspection work is hard, but extremely lucrative. Business has been so good for the typical inspector until recently that they never really looked at the market before. Now that the slowdown is here, you need a different approach to earn their business. You need a strategy that sets you apart from the other inspectors in town that suddenly show up at their door wanting business. To do this, lets apply Rule four up front and give before you get.

First some background will be helpful. Commercial property owners enjoy one special benefit that residential owners do not; they get to depreciate the cost of their investment in the building and improvements. Most owners write off these costs over the standard 39-year schedule. Every year they can take one thirty-ninth of the cost off their taxes as a depreciation expense.

If they could accelerate this depreciation somehow, they could recover their cost sooner, and that translates into real savings to them. The benefits of ‘time value of money’ are well known and apply here. Well, it turns out that the IRS lost a court battle and now must allow an owner to ‘segregate out’ those components of a building that would not actually last 39 years. The process is called ‘Cost Segregation’ and while the concept is still not widely known, it can move 25-40% of the cost of a typical building into shorter term schedules resulting in hundreds of thousands of dollars in savings for the building owner.

Where do you come in with this strategy? You just happen to be the one that tells the owner about it! You don’t need any special certification or even to be licensed to represent an engineering firm that could perform the study. Some firms have a finder’s fee for referrals to compensate you for your effort, but the real payoff is that you have given before you got. You have offered the unexpected benefit and become a trusted advisor with some pretty important people in your area, and you have come to be seen as a consultant of value, not a salesman.

This special status will translate to many more opportunities to work with influential people throughout your community and help you on your way to success. Incidentally, cost segregation is also a door opener for commercial real estate brokers in your area as well. There are many other aspects of the strategy that aid the sale and ownership of commercial and investment property*. Just remember it all starts by giving before you get!

Andy Crossfield is owner of Cicada Industries, creator of First Choice Home Inspection Software and can be reached at sales@homeinspectorsoftware.com. His company is committed to improving the professionalism and effectiveness of the home inspection industry and to providing innovative marketing strategies to the inspection community. *You can download a brochure on cost segregation here


Sacramento Scene

The Special Sessions of the Legislature called by Governor Schwarzenegger in September produced little of substance. Once again, they kicked the can down the road and will wait for the new year before resuming their activities.

Presently, legislators are focusing on the special election in February to modify term limits. Nothing is more important to a politician than getting re-elected or elected to a higher office. The proposal to change California’s term limits law to permit legislators to serve their entire 12 years in one house, rather than the present shorter terms in both houses, is receiving their greatest attention.

From the polls I’ve seen, the prospects do not appear good for passage of the term limits proposal. Most of us on the “inside” feel that term limits is a bad idea that “dumbs-down” the Legislature. Nevertheless, the general populace seems to like the concept of limiting legislators’ terms. Although the February proposal actually reduces the maximum term a person could serve in the Legislature from 14 years to 12, it still faces an uphill battle to gain widespread support. Recent revelations about political junkets and free-spending by Speaker Nuñez have not helped the Legislature’s image. Furthermore, with Congress’ image at an all-time low, some of that negative perception may be rubbing off at the state level.

The big events this fall were the devastating fires that ravaged southern California. It’s too soon to assess how that will impact your business, but keep in mind how another disaster a few years ago – hurricane Katrina – affected home inspections. As in the case of the mythical phoenix, opportunities will arise from the ashes.

The melt-down of the residential loan market and the general decline of new and used home sales continues to take its toll. There has been, and will continue to be, attrition in the home inspection industry for the next year to 18 months. As a CREIA member, you’re better prepared to survive than your non-member competitor. CREIA continues to work to make you successful. Thank you for your continuing support. You need CREIA now, more than ever.

Submitted by Carlyle R. “Carl” Brakensiek, CCHI Legislative Advocate


Technical Feature

2007 California Plumbing & Mechanical Code Changes - Effective January 1, 2008. Click here for details (sorry... Members Only).

Submitted and edited by; Jerry McCarthy CREIA MCI, CNCS



Congratulations
!

New CCIs

Bjorn Nichols, CCI
Ken Normington, CCI
Leo Michaud, CCI
Erik Bryant, CCI
Frank Pechar,CCI
Gary Hunter, CCI
Randy Keys, CCI
Michael Perko, CCI

New CNCSs

Ralph Bertke, CCI, CNCS
Coleen Brand, CCI, CNCS

New Candidates

Kenneth Terry
James Deering
Gary Weaver
John Shepherd
Dennis Candler
Robert Carter
William Gauthier
Mike Starr

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