Toronto bidding wars pushing out home inspections

[Raymond Wand]

By Tess KalinowskiReal Estate Reporter

Thu., Aug. 18, 2016
Toronto bidding wars pushing out home inspections

Buyers should be getting inspections before they bid, say realtors and inspectors.
With realtors telling clients they won't win a bidding war in the GTA if they make their offer conditional on a home inspection, few buyers are willing to fork out $400 or $500 to have one done before they put in the bid.

https://www.thestar.com/business/201...spections.html

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[Claude Lawrenson]

The problem being that most sellers will not entertain a pre-inspection without an offer, unless it is for their own (sellers) purpose. Of course the other consideration for a seller in a hot market is why bother, unless they are smart enough knowing that it could possibly save them from future claims.

As a home inspector would you really want the seller to pass on the inspection report to a 3rd party?

WOW Now we can get into the questionable ethics that can possibly arise out of this situation. Should the seller/vendor simply use the knowledge and not disclose a significant issue to a person caught in a bidding war?

As they say some sellers and sales may opt for the higher price if they can get it in the bidding war scenario; while others may be looking at future growth in representing claims as an expert witness.

Perhaps mandatory inspections may become the reality.

[ROBERT YOUNG]

If Ontario was serious about protecting real estate consumers, they would stop using the shell game .................................................. .look over here, we are legislating home inspector with regulations and licensing,........................................ ................................................ and employ a two step strategy:
1: No REA inspector referrals.
2: Inspections are part of a purchase offer.
As the fox protects GDP.
Real Estate Now Represents Half Of Canada's Economic GDP Growth

Its like watching the blind lead the blind.
fox and hens.JPG

Perhaps mandatory inspections may become the reality.

I think that is the case in my province. Amen!

[Raymond Wand]

From the article:

Buyers should be getting inspections before they bid, say realtors and inspectors.

I find that recommendation strange. I have yet to hear an agent utter 'get an inspection before submitting the offer'. This is contrary advice since the agent stands to gain a larger commission.

Vendors know there are purchasers who will not even entertain the idea of an inspection since many are submitting closed bids. Agents are telling buyers to go in without any conditions. From my experience buyers are waiving not only the inspection but in some cases financing (paying cash), and opting for long closings or short closings dependent on the vendor wants.

Money is cheap right now, and there is a lot of money being spent on overpriced housing. Also in many cases purchasers plan on renovating anyway.

Again only my experience, but purchasers will have an inspector walk through the house prior to putting the offer in.

Also fueling the prices is a shortage of listings. And sellers are also getting over asking so in some cases it becomes affordable to move up.

[Claude Lawrenson]

My son more recently sold his house. We would not entertain an offer without having a home inspection, but most particularly only after an offer was placed. The only glitch that seem to be an issue is the findings of the home inspector became a negotiating tool, most particularly because the "appraiser" reported a lower market value. (It was an older furnace, well maintained, but near replacement time.)

So it raises two interesting points about market value and of course high bid offers that causes a short fall in the purchasers offer. Of course they looked for using anything in the inspection report and from the appraisers report to lower their offer.

Just saying....a purchase and sale of a home can be a very challenging experience. And who actually believes that home inspection reports cannot be used as a negotiating tool.

BTW: My son ended up selling the house and dropping the price to help the first time home buying purchasers, reflecting the agents agreed upon reduction in his commission.

[Len Inkster]

The problem being that most sellers will not entertain a pre-inspection without an offer, unless it is for their own (sellers) purpose. Of course the other consideration for a seller in a hot market is why bother, unless they are smart enough knowing that it could possibly save them from future claims.

As a home inspector would you really want the seller to pass on the inspection report to a 3rd party?

WOW Now we can get into the questionable ethics that can possibly arise out of this situation. Should the seller/vendor simply use the knowledge and not disclose a significant issue to a person caught in a bidding war?

As they say some sellers and sales may opt for the higher price if they can get it in the bidding war scenario; while others may be looking at future growth in representing claims as an expert witness.

Perhaps mandatory inspections may become the reality.

Claude, you make some interesting points. If I may I'd like to address them one at a time.

1. The problem being that most sellers will not entertain a pre-inspection without an offer, unless it is for their own (sellers) purpose.
   
   When a seller refuses a pre-offer inspection, it should send a red flag up to potential buyers. Any seller who is adamant they don't want their home inspected prior to selling can only be considered suspicious and possibly/probably hiding a known defect. In this instance, if the buyer has the refusal documented, and then has a home inspection immediately after taking possesion of the home (assuming a successful bid) any material defects found can be attributed as known defects on the part of the seller and they (the sellers) could be opening themselves up to fraud accusations.
   
   
2. Of course the other consideration for a seller in a hot market is why bother?
   
   Indeed, this is why pre-listing inspections are not typically happening in hot markets.
   
   
3. unless they are smart enough knowing that it could possibly save them from future claims.
   
   If they are smart enough to know this, and have an inspection, they are smart enough to know there may be a problem that would be found as part of the process outlined in 1. above. Unfortunately, we seen greed generally overtaking common sense in this market.
   
   
4. As a home inspector would you really want the seller to pass on the inspection report to a 3rd party?
   
   If the home inspection was a pre-listing inspection then yes, I would. That is it's nature. The caveat that the report is for the client still holds true, and is utterly defensible. Again, buyers are recommended to have their own inspection either prior to closing, or if unable immediately after possession. This time they should ensure whoever performed the pre-listing inspection also performs the post purchase inspection. This ties the inspector to both the seller and the buyer and removes any doubt of conflict of interest or collusion on the part of the inspector.
5. Should the seller/vendor simply use the knowledge and not disclose a significant issue to a person caught in a bidding war?
   
   This is a straight out fraudulent act on behalf of the seller and again easily caught with a post-purchase inspection. It's messy, but it eradicates those who are greedy enough to take advantage of the RE situation. If they are hiding material defects found as part of a pre-listing inspection, then the realtor, who is usually privvy to the report, would be culpable too. This is why in public Realtors promote pre-sale inspections but privately hate them and don't go out of their way to recommend them. The same happened with the SPIS. Realtor liability went up, so they stopped getting filled in. Now it's just a check box on an OREA form. How long before inspections go the same way?
6. As they say some sellers and sales may opt for the higher price if they can get it in the bidding war scenario.
   
   I don't believe in this market any report will affect the home price. What a professional inspection and report provides is the ability for the buyer to go in eyes open. Realtors who dissuade their clients to waive an inspection, either subliminally or intentionally, are, in my opinion, putting a bag over their clients head and asking them to play Russian Roulette with their finances at the same time.
7. Others (I assume you mean Inspectors) may be looking at future growth in representing claims as an expert witness.
   
   This is more of a probability than a possibility. Lawsuits will increase. We only need to look at the "blip" in the market in 2013 and the uptick in lawsuits against sellers in 2014. 2013 had nothing on what's happened this year. I see 2017 and 2018 as a bumper year for lawyers and misery for sellers and Realtors. Only time will tell.

[Len Inkster]

From the article

Buyers should be getting inspections before they bid, say realtors and inspectors.

I find that recommendation strange. I have yet to hear an agent utter 'get an inspection before submitting the offer'.

...

Again only my experience, but purchasers will have an inspector walk through the house prior to putting the offer in.

Ray, it appears your experience mirrors that of other inspectors and also confirms that indeed some Realtor are telling their clients to 'get an inspection before submitting the offer'. If they weren't then these "walk-through" inspections wouldn't be occurring.

My concern for the profession is that when an inspector provides any service to a client who is basing their buying decision on the professional advice of the inspector, a "walk-through" places a higher level of liability on the inspector without the due diligence of being able to perform a full inspection.

How would you suggest such elevated liability is minimised and yet still provide a valid service to the client, or would you, like me recommend Inspectors just don't do it?