The market this year (2016) has seen some strange influences with respect to Real-Estate sales. The combination of a widening price gap between entry-level and upgrade homes, the tightening of the lending markets and the restrictions placed upon CMHC covered mortgages has led to a reduced inventory.
The combination of all of these things has led to some interesting sales tactics from some Real-Estate professionals. Early advertising prior to listing, lengthy open-houses and delays to accepting offers have more often than not created situations where multiple-offers are applied to a single property. This in turn has led to situations where buyers are offering significantly higher bids for homes and more worryingly waived all conditions on the offers.
Beware of your risks!
This is leading to a situation where buyers are putting themselves in serious financial risk.
- The first risk comes from the ability to actually get the finances to support their offers. This is a straight up, “can pay – can’t pay” situation where an accepted offer fails and a contract is reneged upon. This creates financial penalties for the buyer, and can lead to serious delays in the home sale on behalf of the seller.
- The second risk comes from not having a home Inspection. While many people think they (or uncle Joe) may know better. Having a Home Inspection is still the best protection from purchasing a lemon.
- The third risk is in not being able to get insurance. Believe it or not, Insurance on a property that has not been inspected is not a given! Insurers will sometimes ask for an inspection of a home to be made before Insurance cover is given, and if a defect is found, you will have a limited amount of time to fix this defect before the Insurer will decline to cover you and the home. You will then be obliged to tell other insurers you have been declined when applying.
So the upshot of this is, new or old, custom-built or re-sale, don’t buy a home without an inspection!
Now comes the second dilemma. In this cash-tight environment, who should you select to perform your Home Inspection?
Engaging a Professional Home Inspector.
Code of Ethics and Standards of Practice
If the Home Inspector you choose belongs to an Association they will be required to follow a Code of Ethics and Standard of Practice when performing a Home Inspection.
If your selected Home Inspector is not a member of an association, you have no guarantee of how they will carry out the home inspection.
Commitment to the profession
Professional Home Inspectors will have a commitment to continued professional development and be prepared to prove it. Designations such as the NHI (National Home Inspector), CCHI (Canadian Certified Home Inspector) have strict requirements that demand all designation owners have passed certification requirements and continue to pass re-certification requirements to maintain their designations. Other professional designations equally require a Home Inspector to have high levels of skill, but the level of audit on the designations is not as stringent. These include designations such as the CMI (Certified Master Inspector) and RHI (Registered Home Inspector).
Commitment to your protection
A Professional home Inspector will have provided their Association, or submitted to, a police background check. The CCHI and CMI designations both demand this requirement. Inspecting a home gives an individual ample opportunity to engage in criminal behaviour. We want to ensure inspectors are beyond reproach in this area. A Criminal background check provides at least some level of comfort in this area, and goes some way to protecting you as the client and the home owners property.
Only the CCHI designation DEMANDS a Professional Home Inspector carries current Errors & Omissions and General Liability Insurance. Other designations (like the RHI) will allow their inspectors to sign a waiver stating they are not insured. Some like the NHI, CMI and CPI (Certified Professional Inspector) are silent on this issue.
A number of regulations exist that affect the way in which a Home Inspector actually inspects a home.
- For example, if the home is being purchased as an income property, and you as the client are not going to reside in it, or someone else is going to pay the inspector for the inspection, then your inspector will need to be registered for WSIB and provide you with a WSIB clearance certificate PRIOR to the inspection. Failure to do so could leave you with financial penalties.
- Another example is recent Labour Safety laws prevent a Home Inspector from climbing on a roof. This leaves the inspector with three ways to inspect the roof, using binoculars, using a camera attached to a long-pole or using a drone with a camera. The latter currently (as of writing) requires a Special Flight Operations Certificate (SFOC) from Transport Canada. Without it, the inspector, and you as their employer are breaking the law. Again severe financial penalties can be levied.
Commitment to service
A Professional Home Inspector will act as a professional. They will discuss the services they offer, agree a confirmed price and provide you with a written agreement BEFORE the home inspection.
A Professional Home Inspector will be able to skillfully navigate a home, identify defects, discuss them with you and more importantly provide you with an inspection report that allows you to make an informed decision on your property purchase. This generally involves an electronic, online reporting service that you can access for a period of time following the inspection.
The days of an inspector providing something that appears to be no more than a glorified spreadsheet are gone.
Cost of the inspection
This brings us to the cost of the Inspection. If you want a Professional Home Inspection from a Professional Home Inspector, you are going to have to expect they have taken the education, committed to continued profession development, registered properly with an Association, regulatory authority and have the requisite tools and equipment to provide the service you need.
None of this is cheap and the inspector cannot work for nothing. Like you they probably have a mortgage, vehicle expenses, mouths to feed and kids colleges to pay for.
A Professional Home Inspection should take no less than 2 1/2 hours (for a regular size 2 storey home) and the cost of it should be in the range of $425-$500. Larger, older homes may cost more, and ancillary services such as septic, well, WETT and Thermal inspections may push the price up.
If you are opting for a home inspection that is offered at less than $250, chances are you will not be getting a Professional Home Inspection, and more often than not you won’t even be getting your moneys worth.
Word of warning to “cut-price” advertisers.
Home Inspectors that choose to offer “cheap” inspections, or services such as eBAY, Facebook, Kijiji and other social sites, and then fail to provide the inspection at that indicated price you may be in breach of the Competitions Act.
Subsections 74.01(2) and 74.01(3) of the Competition Act prohibit the making, or the permitting of the making, of any materially false or misleading representation, to the public, as to the ordinary selling price of a service or product, in any form whatever. If you are unable to prove you have provided a substantial number of inspection at the represented price you may find yourselves subject to a monetary penalty.
If you are using a low-price to encourage people to contact you for a home inspection you have no intention of offering for that price, you may also be in breach of subsection 74.04 of the Competition Act for “bait-and-switch” selling.
If you are found to be contravening either of these subsections in the act, the monetary penalties can be up to $750,000 in the case of a first time occurrence by an individual and $10,000,000 in the case of a first time occurrence by a corporation. For subsequent offences, the penalties increase to a maximum of $1,000,000 in the case of an individual and $15,000,000 in the case of a corporation.
That’s an awful lot of cut-price inspections to pay that back!
This post is also available in: French