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Is the future rosy? Unlikely!

Over the last 3-4 months most Inspectors in Ontario have seen a decided down-turn in the Home Inspection business.  While a lot of this can be attributed to people waiving the home inspection condition as part of a multiple bid scenario, this is not the only driver.

High prices restricting entry

Ontario has seen a fairly steady rise in the prices of home, and in hotter markets such as the GTA, Oakville Hamilton and Barrie area, price rises have been astronomical.

While the Canadian Real Estate Association (CREA) is consistent in their opinions 2016 home prices, in Ontario, will rise yet again, by as much as 8%, a more balanced view from outside of the industry is showing that prices may have peaked, and to some extent may be much higher than the market can stand.

The Huffington Post for example states “Those massive increases in house prices we’ve seen in recent years (at least in the greater Toronto and Vancouver areas) are beginning to create serious affordability issues – and not just for people trying to get into the market.”

Less incentive to move

TD Bank,  the largest Mortgage lender in Canada points to another area that is causing buyer gridlock in their report of May 27th of this year.  Beata Caranci, Chief Economist at TD says in the report:

“The widening price gap between an entry-level home and a trade-up home becomes a ‘barrier to entry’ for existing homeowners. This reduces churn in the market, elevating prices and scaling back the  election of choices. This buyer gridlock effect is made worse as homeowners respond by renovating their entry-level homes”

Limited supply

The outcome of high prices, the widening gap between entry-level and trade-up homes, the uncertainty in the job market and the instability of the future of interest rates is all leading to a limit in the supply of properties.   This further, and artificially, drives up the prices of homes or reduces the likelihood of a listing.

The outlook therefore is that less and less people will be selling their homes in the near future.  The recent downturn of between 5-7% many Home Inspectors are reporting is likely to be the tip of the iceberg, and could be a significant, but overlooked indicator of something more sinister in the housing market.

For the Home Inspection Professional, things may be worse.

The average life expectancy for 70% of small businesses in Ontario is around 5 years, with 32% failing in the first two.  Home Inspection businesses have typically fallen into the latter category. With even successful inspection businesses failing in the a shortened lifespan of anywhere between 2-4 years.  Surviving Home Inspection businesses are more recently bleeding from the lack of work.


False promises 1

False promises 2
New inspectors, fresh out of college, are entering the profession bolstered by the false promises of educators of high incomes.   The new inspectors often have no idea of the cost implications of the business, and many offer cut-prices to get established. This has multiple effects:

  1. The price cutting is forcing many established Inspectors to use up contingency funding that is stored for quiet periods.   Once these funds are gone, it is likely they will be forced out of the profession
  2. Cut-price inspectors cannot, generally, afford the high prices of professional indemnity insurance, and the ongoing costs of properly calibrated equipment or software to provide a professional service.  Many are having to squeeze multiple inspection in in a day just to survive. These inspections provide lack-lustre service and poor reporting neither of which is great for the consumer or the profession.
  3. Many cut-price inspectors find their approach to inspections actually puts them out of business.  This leaves their clients with virtually no ongoing support or protection.
  4. With the more established, well skilled inspectors leaving the profession, and the less experienced, although not necessarily less trained, inspector in the market, the fear is that the desire for profit, indoctrinated at college level, is taking precedent over customer service.

While many Realtors and their representative associations are publicly putting a brave face on the market, those that have their noses to the grindstone know there is something coming, and most are already looking for ways to find different careers or other ways to support them.

With licensing on the horizon in Ontario, and added costs that will inevitably force the price of home inspections up how long will it be before the cost of the home inspection is too much for buyers to bear?  When you consider how close to the wire buyers are with the actual price/income ratio already, I suspect that point in time is not far off.

A world without Home Inspections

In almost every other form of procurement, there are strong consumer protection mechanisms in place to protect the buyer.   Vehicles have to be roadworthy, and warrantied by the manufacturer.  Electronic equipment and appliances have to be fit for purpose. Food, clothing, garden equipment etc. all have fairly strong consumer protection that allows one to get your money back or some other form of compensation if the item you purchase is faulty.

A home, which is without doubt the most costly item you are ever likely to buy, has none.   A professional home Inspector may be the only way buyers have of identifying that the prospective home has defects that will cost them money after the sale.  And those costs could be the difference between happy ever after or a mill-stone around their neck.

Nearly everyone has heard of the saying ‘Caveat Emptor’ or buyer beware.  This is a nice easy phrase to remember, but it is derived from a much longer Latin phrase, “Caveat emptor, quia ignorare non debuit quod jus alienum emit” .  This translates to “Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party.”

Unless, like a professional home inspector, buyers are prepared to become knowledgeable in the way in which all the components in a house work as a complete system, the a Home Inspection is the only thing standing between them and unnecessary, long-term financial hardship.

The unfortunate thing is, that with the market headed in the direction it is, it may only be a matter of time before the Home Inspection profession as we know it ceases to exist.  If that happens then, as it has always been it’s back to the buyer looking out for themselves with no pro-active protection at all.

About OntarioACHI

Founded in 2012 the Ontario Association of Home Inspectors is a not-for-profit association of members with aims to improve the quality and standing of Home and Property Inspection for the benefit of consumers and our profession. The association is run by, and for, Home & Property Inspectors in Ontario. Our goal is to ensure all Home Inspectors are qualified to the highest standards and comply with the most exacting professional Code of Ethics, Standards of Practice and Duty of Care. A consumer hiring an OntarioACHI qualified Canadian-Certified Home Inspector (CCHI) will know they have they hired a truly Professional Home Inspector.
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