Hot market hurting home inspections
Rush to seal deal can lead buyers to cut corners
By Laura Severs - Business Edge
*Published: 05/11/2006 - Vol. 6, No. 10
As the housing market across Canada grows hotter, some buyers could get burned by opting to bypass home inspections, industry officials say.
The trend is most prominent in Alberta, Ontario and parts of B.C. - all provinces experiencing a high demand for homes and a low supply of product.
While the Canadian Association of Home and Property Inspectors (CAHPI) calls a home inspection “consumer protection at its best,” it is not a mandatory part of a home purchase.
“If there is no home inspection, it’s buyer beware,” says CAHPI national president Michael Guihan. “If there are problems after the fact, you have to prove an intent to defraud or conceal on the part of the vendor.”
Jack Dagley, Business Edge Certified Edmonton home inspector Terry Fikowski has seen a rise in inspection cancellations. Guihan, a certified home inspector who operates out of Newfoundland, says he has heard some bankers have advised buyers to get a home inspection, "but that’s very rare. It’s not policy. Most insurance companies are starting to recognize the benefits of a home inspection in a report, but they don’t require it.
“At this point in time, the only reason to do it (a home inspection) is because someone wants it done,” says Guihan.
Richard Golumbia is a Calgary-area franchise holder and area manager for HouseMaster, a New Jersey-based company that offers home-inspection services and home-inspection franchises throughout the U.S. and Canada. He says his home-inspection business is down by about 30 per cent.
“Basically, what buyers are doing is paring down their offers to make them as clean as possible,” says Golumbia, referring to the elimination of conditions, including a home inspection, on an offer to purchase.
He adds the real estate market is hotter than it was during the late 1990s, when “it was a similar situation with multiple offers, upbidding of the asking price and the elimination of conditions,” he adds.
The situation isn’t as bad in Edmonton, says HouseMaster franchisee Terry Fikowski. "We tentatively book inspections for people, but we are also having a lot of cancellations because they call the next morning and say: ‘We didn’t get that house,’ " says Fikowski, a certified home inspector.
“We’re still extremely busy,” he adds. “I’ve talked to a few buyers who waived the (home inspection) condition to get the house. I suspect we’ll probably be getting some of those calls in June, July or August (to do an inspection after the fact).”
Fikowski and Golumbia point to a shortage of houses on the market as a main reason why home inspections are being waived.
Both the Edmonton and Calgary real estate boards have recently noted that there are fewer homes available for sale in their respective cities when compared to the previous year.
“If you’re desperate to buy a home and you’re moving here, and you’ve sold yours, buyers are doing whatever is necessary to get a home,” says Fikowski. "Buyers have to make their purchase decisions fairly quickly, if you wait a day and don’t put in an offer you’re probably going to have look for a different house.
“It’s probably not wise to waive a home inspection, but this is something they have to decide themselves.”
In B.C., a strong housing market across the Lower Mainland is causing a unique effect. Either you’ll find a number of home inspectors at one property at the same time - to get the inspection done as quickly as possible - or you won’t find any at all.
“From time to time, we will have multiple inspectors in a home at the same time and certainly there will be some people who have not gotten the home inspection due to the activity in the market,” says Bill Sutherland, president of CAHPI (BC).
What concerns Sutherland is the fact that some people are not even attempting to get a home inspection.
“It’s not the lack of home inspectors,” he says, referring to buyers who waive a home inspection. “The market is hot and people are trying to make offers that have no conditions on them at all, or have a very short time to remove any conditions.”
Much depends on the area of the province and in some cases the real estate agents involved, Sutherland adds. "I think (some of) the agents are saying … ‘you want this house, you buy it now, as is.’ " He adds that the home inspection issue is not necessarily a problem in northern B.C., the Okanagan or even Victoria.
“(But) in the Lower Mainland, I understand, you have half an hour to make up your mind.”
In Ontario, officials at Carson Dunlop Consulting Engineers have also noticed a drop in the number of home inspections by prospective buyers.
“I don’t believe the houses are flying off the market quite as fast as they are in Calgary,” says Graham Clarke, vice-president, engineering for the Toronto-based company that performs home inspections and also trains home inspectors.
“The real estate market seems a little bit slower than it was last year, but once a house is on the market it does seem to generate a lot of interest.”
Carson Dunlop is now placing a larger emphasis on pre-listing home inspections, where the house is examined on behalf of a vendor before it hits the market.
“This allows the vendor a few options,” says Clarke. "They may choose to take any defects that are found and have them corrected before the house goes on the market, or they can simply make the home inspection report available to anybody interested in the house.
“Even if there are defects in the home, the house is going to sell more quickly if the information is known up front, and this actually encourages people to go in with a clean offer with no conditions.”
Several years ago, pre-listing inspections accounted for less than five per cent of Carson Dunlop’s business. Now, it represents about 20 per cent of the inspections done. “It’s only over the last year we’ve gotten serious about it,” says Clarke.
Meanwhile, a national standard to create and certify home inspectors is about to be introduced.
CAHPI is in the process of implementing the voluntary program and will be ready to start the certification process this fall.
“We’ve created a baseline, a minimum national standard for home inspectors and it’s the highest in the world,” says Guihan.
“We’ve created (the designation of) National Certificate Holder. You do not have to be a member CAHPI or any CAHPI provincial association, but CAHPI is the certifying authority. If you prove competency and meet the requirements, you will be issued a certificate and enter into a legally binding agreement with CAHPI to perform according to CAHPI standards.”
Certificate holders will be able to work in any province or territory and will need to be re-certified every five years. However, three provinces, British Columbia, Alberta and Quebec, are already looking at their own legislation to license home inspectors.
“Alberta wants to license home inspectors, the province of Quebec anticipates licensing before end of this year and B.C. is going through the process,” says Guihan. But Guihan is hopeful that talks CAHPI has had with the provinces will mean there will still be one national standard, and any additional regulations will only push the bar higher.
“They are aware of the national standards (we’re introducing) and hopefully they’ll be modelling their licensing requirements on these established national standards,” he says. “The response from every provincial government we’ve been talking to has been extremely good.”
Still, even with national standards, Guihan emphasizes that home inspectors are only human. “We’re not God. I don’t have x-ray vision. I don’t have crystal ball but I’m going to do my best,” says Guihan. “As a home inspector I have a responsibility to my client to be honest, thorough and realistic.”
**Home Inspection Tips**
The Canadian Association of Home and Property Inspectors (CAHPI) suggests that home buyers protect themselves by calling several inspectors in advance to find out their qualifications.
Here are some questions to ask:
* To what professional associations does the inspector belong?
* Is the inspector a member of one of the provincial/regional organizations of CAHPI?
* Does the inspector supply a written report?
* How long has the inspector been in business as a home-inspection firm?
* Is the inspector specifically experienced in residential construction?
- Does the company offer to do any repairs or improvements based on its inspection? CAHPI says this might cause a conflict of interest.
- How long will the inspection take? CAHPI points out that the average time for a home inspection is 1.5 hours to 2.5 hours, and that anything less isn’t enough time to do a thorough inspection.
* How much will the inspection cost?
- Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity and an inspector’s refusal should raise a red flag, CAHPI claims.
- Does the inspector participate in continuing education programs to keep his/her expertise up to date?
- Source: The Canadian Association of Home and Property Inspectors
(Laura Severs can be reached at firstname.lastname@example.org)