GTA Bidding Wars Hurting Home Inspectors

Real estate bidding wars are nothing more than self-serving sales gimmicks invented by the real estate fraternity to artificially increase the selling price to collect more and more sales commissions with little or no effort.

Since only unconditional offers are being considered during the conniving process - the request for a Home Inspections is always the first condition to be eliminated. That confirms once more that the majority of real estate agents are foremost protecting the interest of sellers who are paying their obscene commissions. They certainly do not care about the concerns a purchaser may have.

RUDOLF REUSSE - Home Inspector since 1976 - Retired

http://www.thestar.com/news/article/1153815–homebuyers-sue-over-an-unhappy-surprise-their-unsafe-garage
Back to Homebuyers sue over an unhappy surprise: their unsafe garage Homebuyers sue over an unhappy surprise: their unsafe garage

March 30, 2012 Patty Winsa

Stephanos Michelis stands in front of the north Toronto home he bought three years ago and is currently rebuilding. The garage previously attached to the original house wasn’t built to code.Michelis is suing the city, his real estate agent and the former owner.
RICK EGLINTON/TORONTO STAR

When Stefanos Michelis and his wife, Peggy Karagianis, first set eyes on the small north Toronto home they were about to purchase, they didn’t see a 1960s bungalow.
They saw their dream home.
After living with Karagianis’ mother and patiently saving, the couple was ready to buy the house and embark on a major renovation and second-storey addition.
But buyers beware: Their million-dollar dream has turned into a bit of a nightmare.
Three years later, and nearing the end of the home’s stunning transformation, the couple are caught in a legal Catch 22 because of the 1970s addition of a garage that engineering reports say is unsafe and should be torn down.
At issue is who is going to pay for it.
The couple says they can’t move in until problem is resolved and are suing the city, the former owner, the agent and the realty company for $50,000 to cover the costs of tearing down the garage and replacing it.
“It’s my first house with my husband. It’s my dream home. We saved. We worked hard,” says Karagianis. “I think it’s ridiculous.”
The problem is proving who’s at fault.
North York expunges old records, a practice that continues today. Aside from a permit number, there is little else to prove the garage — built by a contractor — was ever properly inspected.
“The permit (to build the garage) is almost 50 years old,” says Ted Tipping, director and deputy chief building official for the city. “And the former North York had a retention bylaw where they destroyed records. You can’t go and look at inspectors’ notes, because all of these documents have been destroyed a long time ago.”
Tipping says the issue is even more complex because the building predates Ontario’s building codes, which didn’t exist until 1975. “What happened in the early ’70s, prior to the building code, I can’t comment on,” said Tipping. “And what the standard or practice was back then, I truly don’t know.”
Currently, a permit for a garage is followed by mandatory inspections of the footings and framing, plus a final inspection.
The couple waived a home inspection when they purchased the property because of a bidding war.
“There are many issues going on here,” Tipping says. “If a garage became unsafe because of a lack of maintenance, then that is nobody’s fault. If you buy a property you need to do an inspection. That’s not a liability issue from our standpoint.”
But Michelis’ lawyer, Robert Moubarak, says an engineer’s report — which Tipping doesn’t have a copy of — found several structural problems with the garage that a home inspector would never have uncovered.
The garage is too close to the lot line, according to current zoning. The engineering report also found that the foundation was sunk 2 feet into the ground instead of 4 feet, and the rafters and framing were improperly built.
“An inspector would not have been able to find latent defects, what we call structural issues,” says Moubarak. “An inspector does not come to the home and dig under the garage to see if they’re underpinned properly.
“This was a bidding war. Everything was happening quick, quick, quick,” he says. “They relied on the representations of the broker and the vendor when the home was on the market.”
Everyone named in the lawsuit has filed a statement of defence, Moubarak says.
“The problem is my client now has to deal with it because he has knowledge, and now he owes a duty to any future purchaser that he sells the house to,” he says. “Any owner, just like the city, has an obligation to any potential future buyer of the home to make sure it’s built properly and safely and legally.”
Maybe the mayor will figure it all out. Michelis was on a local radio show Thursday morning when Councillor Doug Ford called in to say that the homeowner could expect to hear from his brother.

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You can tell from the picture that the garage would not pass an inspection who needs the Inspector to even come.
Thanks for the article Roy.

The Sun had a similar article, which I read this a.m. In the comment section, the usual idiots were there trashing HI’s and praising Holmes. Methinks the home-buying public needs a lot more education on what is expected of an HI, especially what they are allowed to do and not allowed to do.

http://www.ctv.ca/CTVNews/CanadaAM/20120329/five-ways-to-get-the-most-for-your-home-david-flemming-120329/

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Five ways to get the most for your home

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Real estate agent and blogger David Fleming

Updated: Thu. Mar. 29 2012 8:34 AM ET
Earlier in March, a three-bedroom bungalow in Toronto’s Willowdale neighbourhood made headlines when it sold for $421,800 above the asking price. The modest 1960’s home was listed at $759,000 but sold for near $1.2 million. Four offers were put in and each of them was over $1 million.
The home wasn’t worth that much, according to Toronto real estate agent and blogger David Fleming. But the real value was in the property, Fleming said on Thursday on CTV’s Canada AM. The house was located in an area that has seen considerable redevelopment in recent years.
Every home owner dreams of turning a profit such as this, but never sees it. But with these five tips Fleming believes every seller can get the best price for their home.
**Timing **
Every business is cyclical to some degree and real estate is no different. The condo market is pretty steady throughout the year, but you should always look to list if/when there is little to no competition. The housing market, on the other hand, is exceptionally cyclical.
We’re in the middle of March – a very slow period. March means “March Break,” and that means public and private school breaks of up to one or two weeks. Families are out of town – they’re not looking at real estate.
March Break moves into Easter and Passover. That puts up a red flag for most of March and early April.
The spring market is great in late January and February, then in late April into June. Once again, families go on vacation and think about other things during the summer. For that reason, July/August is not a good time to sell your family home in a residential neighbourhood. The market explodes right after Labour Day and lasts until mid-December.
Pricing
Everybody wants to talk about “bidding wars” these days, and that silly bungalow in Willowdale that made headlines is still being talked about. That house may have sold for $422,000 over asking, but it was priced at $759,000. In reality, it was a $1,000,000 house, so the pricing was silly. But under-pricing is a time-tested technique that always brings in more money.
For example, a $550,000 house is best priced at $499,000 with a set “offer date.” This brings in a sub-set of buyers with a $500,000 cap that would otherwise never see the house. If some buyers offer $499,000, $505,000, $510,000 and so on, this just means the astute, informed buyer who is looking at $550,000 will have to pay more.
People are competitive by nature – one buyer will get caught up in the bidding war and overpay. That’s all a seller needs. That buyer might come in at $560,000, but once the frenzy begins he could walk away with the house at $591,000.
Ultimately, that house would never sell for $591,000 if it were priced at $591,000. The only way to get that money is to price at $499,000.
**Staging **
I’ve never seen a house or condo that doesn’t need some element of staging. Sellers always feel that their house shows well, even if they’ve been there for 25 years with no renovations or new furniture. But a house needs to be as generic and inoffensive as possible. This means removing any and all elements of life – no family photos, no personal touches and a minimal number of books/DVDS on display. Otherwise, buyers will focus on the fact that the seller has all 10 seasons of “Friends” on the shelf instead of actually looking at the house.
I’ve had clients spend $15,000 on staging. I’ve also had sellers move out every single possession and have the place painted, cleaned, and staged. The money put into staging will pay off three to four times.
**Marketing **
People like to think that a house will sell itself, but that’s not true. Today, the “For Sale” sign on the lawn is no longer the best marketing tool. A MLS listing is no longer sufficient either.

  • You need a professional photographer, not photos taken on your Blackberry.
  • You need a virtual tour with dozens of photos – not just the nine you get on MLS. You need an open house from 1 – 5 pm on Saturday and Sunday, not 2 – 4 pm on one day. The lady walking her dog on a Sunday afternoon who pops into the open house at 4:30 pm might be a buyer and she didn’t even know it!
  • You need a Thursday night open house with “wine and cheese.”
  • You need to send “Just Listed” cards to every house/condo in the neighbourhood and try to solicit the renters and people looking to upsize.
  • You need to call the neighbours on the street and invite them to the open house.
  • You also need to use Twitter and Facebook to your advantage.

**Be proactive and address issues before they arise **
I pay for a home inspection as part of my service. I also leave the home inspection on the dining room table for every buyer to thumb through.
If there are any issues identified that might affect the sale price, I might encourage the seller to fix them before the listing. The key here is to eliminate any objection a buyer could put forth. Disclose, disclose, disclose. Put everything out there in the open and level the playing field.
As a seller, you would benefit the most from an unconditional offer. The last thing you need is an attractive offer that is conditional on home inspection because the risk is far too high to accept the offer. You need to ensure that unconditional offers come and providing a free, unbiased, comprehensive home inspection to every potential buyer is the way to get that done. For condominiums, I always obtain the Status Certificate (condo corporation financials, bylaws, declaration, etc) in advance for the same reason as a home inspection.

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Yes, the ‘condition’ for a home inspection must be removed before presenting an offer in a bidding war if the buyer wants to win the war, but that doesn’t prevent the potential buyers from having a home inspection PRIOR to submitting the offer. I always recommend it - it takes the heat off me (Toronto real estate agent). You inspectors provide education to the buyers, recommendations on home ownership/maintenance, etc, which is a valuable service. If the client doesn’t want to fork over the $400, I ALWAYS put that into the offer so they can’t come back later and blame me. Anyone who buys a product for hundreds of thousands of dollars and won’t pay one tenth of one percent of the value for a home inspection clearly isn’t thinking properly.

I had a client who didn’t want to pay for an inspection, asked me my opinion (“My opinion? I’m not a home inspector.”) and one of the things I said (about the wooden garage built circa 1920) “that garage is shot”. They agreed, saying they wanted to tear it down and put in a patio. After closing, they then tried to sue me for $16,000 to repair the garage. Huh???

The story which the OP mentions failed to disclose a few facts about the buyer: he’s a registered real estate agent (I wonder if he disclosed that when buying), he’s also a contractor who has renovated and built homes for quite a while now, and he had a copy of the survey of the property before submitting his offer. In summation: he knew EXACTLY what he was getting into. As an agent, he would know that he could have had the property pre-inspected. As a contractor, he would know (or should have known) about set-backs, structural defects, etc. This is just a guy whining and trying to put the blame onto everyone else but himself.

If you look at the before pictures (via Google Streetview) and the one above, it appears that garage was damaged extensively during the house construction.

Thanks for the upgrade much appreciated

I’m going to look at a foreclosure in pickering tomorrow, it’s amazing how cheap these homes are compared to toronto homes. My brother in law is considering a bid, his agent told him the foreclosure will probably sell for about 30% UNDER asking! Makes you wonder why people spend so big in TO. It’s a nice bungalow similar to the older homes in my area, asking is at about $300,000. Saying that they are cheap compared to Richmond Hill prices too, we had a similar home sell here the day it was listed for $450,000 I think, or more, torn down, Mcmansion now in it’s place. Maybe it s time to move to Pickering.

Nice to hear your opinion too Susan, my mind boggles at the people that won’t or don’t want to spend the $400 on the inspection! Seriously, if they can’t invest such a small amount then they are thinking wrong, with a little homework, you will discover that a home inspector, even if they only find small issues can more than pay you back with information and advise. If they find something big, then wonderful, you just got a massive payback on a little investment. Anyway, it’s nice to hear an RE saying this, even if it is only a CYA issue on your side. LOL.

Kathleen, tell your brother to ‘go in clean’ and with a fast (10 day) closing and the bank will be more inclined to accept his offer. If he does his due diligence first, it clears up all his issues, and makes for a better offer situation. I’ve seen people bid on houses with 13 other offers and they’ve even put the offer condition on the sale of THEIR property. Hello? What are they thinking?

Now, when clients ask of they should have a home inspection, I tell them it’s completely their decision. I did have a pair of clients who wanted me to pay for the home inspection, after I recommended one, when the inspection didn’t turn up anything substantially wrong with the house. I’m damned if I do, and I’m damned if I don’t recommend a HI. Now, I just say “if I was buying this house, I’d have it inspected for peace of mind.” That clears me either way. I also attend each and every HI, whether I’m the listing or selling agent, because I can always learn something, even after 27 years in the biz. That way, when I’m showing houses, I can give my opinion on whether it’s a good house or not, before we go through an offer process and before they fork over good money for an inspection. It also lets me tell my sellers what has to be fixed before listing, because I know it’ll show up later on an inspection report. Knowledge is power. Ethics help too!

Very good advice to see it is not always the Real Estate that is to blame for not getting an Inspection.
Your quote is what all RA’s should apply **“if I was buying this house, I’d have it inspected for peace of mind.” **

All above great Information I do hope more Buyers follow this .
("** also attend each and every HI, whether I’m the listing or selling agent, because I can always learn something, ") **.
I was doing an Inspection and the Buyers asked the Agent do you always go on the inspection and he said "I always go on Roy’s as I learn something new every time ".
Thanks again Susan Please come back often , we home Inspectors also love to learn from others…

Thanks Susan, we just got back from seeing the home, and I have a few pictures to add to one of Roy’s threads, unusual things I have seen.
Fortunately it wasn’t anything bad, just a good giggle at the end when we went back into the front yard and studied the odd circular tracks in the grass. LOL! Train tracks, model train tracks!
We discussed the chances of the offer being accepted with the RE agent, and talked of the best offer that the bank wants, which also includes no conditions, the house is good, no major problems, it needs a good painting, 2 windows replaced and a hell of a lot of TLC. But coming in 30% under asking leaves a lot of money to play with tarting up the house, so it looks like a good buy. They were on their way to discuss offer and sort out paper work as we left. I hope they get it. They rent right now and are good to go with no conditions in the offer. If their offer is the right one then it looks like my weekends might be taken up for the foreseeable future! LOL! I’m excited for them.