Home Inspections Are Back!
As you’ll all remember the 2021 real estate market was an extreme sellers market with many sales ratios over 100%, meaning everything that hit the market was selling, often significantly above list price and subject free.
Unfortunately that meant that for a lot of transactions buyers were purchasing without a home inspection, or at best were getting pre-offer inspections. There certainly wasn’t any negotiating after a home inspection, that was for sure. The listing agent would simply yell ‘NEXT!’ out the door and they’d probably get an extra few thousand dollars!
Thankfully the market has cooled significantly, due primarily to the interest rate hikes the Bank of Canada are making to try to combat inflation, and a by-product of that has been a return to balanced markets across much of the Lower Mainland and Fraser Valley. Multiple offers are no longer the norm, and subject free offers are becoming extremely rare, which means that home inspections are back!
Arranging Your Home Inspection
With significant inventory on the market there’s a good chance we’ve been able to successfully negotiate a contract of purchase and sale for you, including a home inspection subject. Subject removal timeframes remain around 5-10 days, which should be plenty of time to arrange a professional home inspection. At this time we’ll be able to provide a list of qualified home inspectors, all of whom we’ve observed in the past. We can’t arrange the home inspection for you, it’s essential that there’s arms length between the Realtor and the home inspector to ensure there’s not even a hint of the agent and inspector conspiring simply for ‘the deal to go through.’ Anyone that knows us knows that’s not how we operate, but we always want to ensure we’re above reproach in our all our dealings. It’s also important you hire the home inspector to make it clear that you are their client, not us.
Timing is going to be one of the toughest elements. According to Paul Friesen of I Find It Home Inspections, whom I have used personally, the timeframes for the inspection and report are:
- A house takes approximately 3 hours, the buyers should plan to arrive 2.5 hours from the start of inspection.
- A townhouse takes approximately 2.5 hours, the buyers should plan to arrive 1.5 hours from the start of inspection.
- A condo takes approximately 2 hours, the buyers should plan to arrive 1 hour from the start of inspection.
That means we’ll need to find two to three hours, and sometimes more, that work for us as the buyers agent to be on site, that works for you to attend for the report at the end, that works for the sellers, and of course that also works for the home inspector! That can be a bit of a juggle but we’ll always do all we can to make it work and have never missed a home inspection subject removal because we couldn’t find a time.
The Day of The Inspection
As your representatives we’ll arrive at the property to provide access to the home inspector. It’s rare for a listing agent to be present at a home inspection as the home inspector is working exclusively for you, the buyer. The inspector will usually get to work immediately as they have a lot of ground to cover. They’ll run the rule over the major systems of the home, appliances, and structures – often utilizing a number of investigative devices from infrared scans to test the heating to moisture meters to test if any stains are active leaks. Usually the home inspector will be producing a report with images as they go, which can be reviewed and referenced later, beginning with the report.
As described above, as buyers you will usually arrive for the last half hour to hour of our time at the inspection for the report from the home inspector. We’ll usually remind the buyers at that moment that they’re the home inspector’s clients here, so don’t be afraid to ask questions. We’ll usually have reminded them too that a home inspection report can seem daunting, but that it’s the inspector’s job to find problems – they are ‘bad news bears,’ that’s what they’re for! The report will usually begin with any major items of concern and then will proceed through a review of all the major systems. The inspector won’t tell you how to respond to the findings, but they can often offer suggestions about how to repair certain issues or recommend a specialist.
How To Respond To The Inspection?
In a more balanced market we usually explain to our clients that a home inspection and accompanying report can be utilized for four purposes:
1. Walk Away – There may have been issues discovered that cause you as the buyer to walk away entirely. We once had a home inspector call the buyers within half an hour of the inspection beginning and say, ‘if you tell me to stop now I won’t charge you, the second level of the home is held up by jacks hidden by boxes in the garage!’ The buyers instructed the inspector to stop, he didn’t charge them, and there were some awkward conversations with the sellers. The home inspection subject is for the buyers’ benefit, you can choose not to proceed with subject removal if the issues are too significant. This is rare as it would usually be a major hidden issue, but it does happen and it is the buyers’ right.
2. Negotiate Repair – If there are more minor issues that weren’t patent at the initial showing then we will often return to the sellers’ representative with an addendum requesting those issues be repaired by a licensed tradesperson to a standard comparable with the rest of the property and that the proof of repair is provided by sending us copies of the receipts. It’s unheard of for every item to be fixed unless it’s a brand new home going through a deficiency report, which is a different topic, so usually buyers need to identify which items should be prioritized. Often sellers prefer this option to the next one as they have control over what trades are employed. Buyers appreciate it as the repairs are required to be made prior to possession, allowing them to move in without having to hire their own trades in the weeks and months following possession.
3. Negotiate Price – Sometimes a seller can be overwhelmed by the prospect of ensuring issues are repaired, or the buyers are more comfortable hiring their own trades following possession. In this case sometimes a price reduction can be negotiated on the purchase price. This can be tricky as often there’s not the opportunity for specialists to assess the work required, which inserts a significant degree of uncertainty into the negotiation. Usually buyers would like a price reduction larger than the actual cost to repair, and as you’d expect often sellers would prefer that number be as low as possible. When we’re representing buyers and the sellers appear to be lowballing repairs, we’ll often revert to negotiating the repair, ‘if you think it can be done for that little, then please go ahead and have it repaired prior to possession by a qualified tradesperson and submit us the receipt.’ The price adjustment will be reflected in an addendum signed by both parties prior to subject removal.
4. Identifying Items To Deal With Following Possession – The two negotiations above have been incredibly rare in the market generally over the last few years due to the high sales ratios and other buyers waiting in the wings. As a result, when we were able to get home inspections in recent years our buyers would often either choose to walk away or to use the home inspection to build a list for repairs they’ll make themselves on the home when they receive possession. If it’s a strata property this may also include alerting the strata to items that would be under their purview.
We’re Here To Advise The Whole Way
Ultimately how you decide to respond to your home inspection will be your decision. You won’t ever feel pressure from us to buy a home you’re not ready to invest time, money, and energy in. When a negotiation’s involved we’ll certainly try to help set your expectations appropriately, nobody gets everything they want in any negotiation, but we’ll always give it our all and almost always arrive at a solution our clients are satisfied with. If our buyers aren’t happy, then we’re comfortable with them walking away and we’ll go find another home!
We’re really happy that home inspections are back as a more common component to a real estate transaction, they do provide a massive degree of risk reduction and that certainly serves buyers well. If you’ve got any questions about your own home inspection or on anything real estate related, as always don’t hesitate to reach out!