Same old - same old

Here we go again. I know a lot of inspectors are hurting because of the downturn in business, but hang-in there. Here’s a post from 2013. sound familiar?

** Can I ditch the home inspection when I buy a house? **

Ricky Chadha
Special to The Globe and Mail
Published Friday, Apr. 05, 2013 12:48PM EDT
Last updated Tuesday, Apr. 09, 2013 11:22AM EDT

The question:
I’ve been house hunting for months and finally found a great house, but I know there’s going to be a lot of interest. I know everyone says I need a home inspection, but I’m afraid I’ll lose the house if I put any conditions on the offer. Should I ditch the inspection?
The answer:
Finding the right approach to offer conditions, is hot button topic these days, especially in the Toronto market where multiple offers have become the norm. Sellers with multiple potential buyers will often look to offers with the minimum of conditions, and the home inspection clause is often one of the first to go.

My advice: Don’t succumb to temptation or pressure to ditch a home inspection. If a client wants to skip the inspection, I always outline the ramifications.
Savvy buyers do have several options to protect themselves while staying competitive in the marketplace. Let’s take a look at the most common scenarios and some options to better equip yourself for success:
Scenario 1: You are not in a multiple offer situation
This one’s simple: put in a home inspection clause. If you get any resistance from the seller, you can offer to tighten up the timeline for the home inspection as a negotiation chip (perhaps 2 business days instead of the standard 5).
Scenario 2: You are in a multiple offer situation
Option 1: Put in a home inspection clause
Be aware that including the clause risks your offer not being accepted. However, your bigger risk is that you’ll discover a heap of problems down the road with all the cost and inconvenience that means. In this case, you have to balance how much you really want the property and all the other options available.
Option 2: Do a pre-offer home inspection
This is my preferred option if you are willing to spend the money for a home inspection (typically $350-500) without any guarantee of securing a successful agreement of purchase and sale.
Provided there is enough time prior to offer date, getting a pre-offer inspection done will fully inform you about the major components of the property, and give you some peace of mind about moving forward. This option hinges on the seller allowing for a pre-offer inspection, which I’ve found isn’t usually a problem.
If it is a problem, that’s a red flag that they may be trying to hide some issues with the property.
Option 3: If the seller has provided a home inspection report, do a walkthrough
Prudent listing brokers will get a home inspection done prior to listing a home. The issue with this approach is that you’re relying on a home inspection paid for by the seller. Objectivity and thoroughness can be brought into question.
If you do decide to rely on a seller-supplied home inspection, contact the inspector and ask for a walkthrough of the report. This is becoming a more common practice in today’s market, and home inspectors will usually charge a nominal fee (about $100) to do this.
Option 4: Skip the home inspection
This should be your last choice. If you skip an inspection and later find problems, you have little recourse. Pre-printed wording in standard agreements states in bold: “The Buyer acknowledges having the opportunity to include a requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the property” (Clause 13. Inspection, OREA form 100).
In a multiple-offer situation you may be tempted to take this option. In that case, caveat emptor (buyer beware).

This is an ongoing occurrence and seems to be gathering momentum! So much for helping out consumers. Contact the Ministry of Government Consumer Services to get your voice heard!

Home Inspection is an elective service.

The MGCS (or any other Government agency) won’t do diddly squat to force people to protect themselves unless there’s a buck to be made or a public outcry to appease.

A lawsuit or three against those engineering the situation and leading people into making stupid decisions might. But that’s unlikely to happen either.

Only if the courts fill up with lawsuits, where the disgruntled buyers are suing the sellers for hiding defects or the realtors for coercing them into waiver all conditions will the legislators do anything.

The only thing to do is to ride out the storm, and wait for common-sense to kick back in again. We can lobby in the meantime, but I guess the best outcome we can expect is the ability to say “I told you so” when the excrement hits the air moving device.

A home inspection should be a right by law and not an optional condition that can be waived. It should be illegal to use that as a negotiation tactic. If someone chooses not to do one, that’s they’re prerogative, but every real estate agreement should have the right to a home inspection that shall not be waived. We should actually push to lobby for that law. I know the banks would sure benefit from it in the long run, as would our interest rates.

There are 4 parties, other than commission holders (realtors), that have, in most cases, a financial stake in a house transaction. The seller, The buyer, The lender and the insurance underwriter. While the first 2 seem to be quick on the draw to eliminate the home inspection from the offer, which is their right to do so as it is their choice, the latter 2 receive no such say and must choose to do their part on faith. Instead of lobbying for mandatory inspections which draws a lot of resistance, imho we should be lobbying the latter 2 about the benefit of a home inspection to their risk-benefit analysis. If the buyers knew that a home inspection would be most likely required to secure final approval for a mortgage or insurance then the buyers would be less likely to waive the condition knowing that an inspection prior to a signed deal would allow renegotiating of the offer whereas an inspection after the deal is firm might result in a commitment to buy a home with repairs require before the mortgage pays or insurance coverage is extended. I just wonder if mandatory inspections, forced by government regulations instead of all 4 party say, is the way to go.

Lender only cares the buyer can make the payment and the insurer already has risk assessment actuarial tables that tell them what to charge to ensure their profit. No benefit to them to hold up the process in a hot market.

Not true.

Lender cares if the collateral they are lending the money for is worth the investment. That’s why there are appraisers. The problem is that appraisers can only go on the external condition of the property and a comparative analysis of similar properties that have sold in close proximity in recent months.

A home inspection is a much more thorough investigation of the properties condition, but does not include the financial comparatives.

Any lender that wants to limit their risk, should ensure that they insist on both a financial appraisal and a home inspection. The Home Inspection should be first, requested by and paid for by the lender, and the results supplied to the appraiser.

This would provide the lenders with the greatest level of risk management.

BAM! Exactly. Until we get into the “do anything to make a sale” type of mortgage brokers. You know, the type that e-mail the appraiser with the amount that the offer on the house was accepted for in order to ensure there are no hiccups with financing due to the appraisal… I’m sure those ones will love all the untrained and soft inspectors.