Real Estate Talk:
Inspection process

A property may offer surprises that can cost a great deal of money

By Joseph Marovitch

Updated February 1, 2023

Whether purchasing an old home or a new condo, it is always recommended to have a condition inspection. An inspection indicates present or future problems with the property that can cost you money now or later. The inspector should be trained, experienced and certified by the Canadian Association of Home and Property Inspectors (CAHPI) or the AIBQ.

The inspector is generally responsible for everything they see, which is why it is better to have an inspector who uses a thermal imaging device. The thermal imaging device allows the inspector to examine what is visible and what is not visible to the naked eye such as cracks, ungrounded electrical wires, humidity in walls, hidden rooms, etc. Please note an inspection covers everything that can be seen. A home inspector is not responsible for latent or hidden defects which we will discuss in our next topic, With or Without Warranty.

Whether purchasing an old home or a new condo, it is always recommended to have a condition inspection.

The following paragraph is taken directly from a promise to purchase:

INSPECTION BY A PERSON CHOSEN BY THE BUYER
8.1
____This promise to purchase is conditional upon the BUYER being permitted to have the IMMOVABLE inspected by a building inspector or a professional within a period of days following acceptance of this promise to purchase. Should this inspection reveal the existence of a factor relating to the immovable and liable to significantly reduce the value thereof, reduce the income generated thereby or increase the expense relating thereto, the BUYER shall notify the SELLER, in writing, and shall give him a copy of the inspection report within four (4) days following the expiry of the above-mentioned time period. This promise to purchase shall become null and void upon receipt, by the SELLER, of this notification together with a copy of the inspection report. Should the BUYER fail to notify the SELLER within the time period and in the manner specified above, he shall be deemed to have waived this condition.

OR
____By initialling this box, the BUYER acknowledges having been informed of his right to have the IMMOVABLE inspected by a building inspector or a professional and having waived his right to do so.

The clause offers two options: Either to have an inspection or to be informed that an inspection can occur, but the buyer has decided not to have one.

On occasion the buyer will waive the inspection for a number of possible reasons:

1. The buyer is a contractor and is planning on renovating;
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2. To negotiate a better purchase price by offering fewer conditions to make the purchase easier and expedient.

‘It is better to make sure the property you buy is solid and allows you to sleep at night.’

Generally, it is always wise to have an inspection because a property can offer many surprises that can be very costly.

Surprises can include replacement of windows, cleaning and/or removal of an old leaky oil tank, repair of a major foundation or wall crack, faulty construction in the garage of a new condo complex allowing water infiltration and further damage. The list is endless…

It is better to make sure the property you buy is solid and allows you to sleep at night.

Process and implications:

• In the promise to purchase, 7 to 10 days are provided from the date of acceptance, in which to perform the inspection;
  .
• Following those specified days, the inspector and buyer have 4 more days to provide the report to the seller, if there is an issue. In the event no issue is submitted in writing to the seller by the deadline, the inspection condition is deemed satisfied;
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• The inspection lasts approximately 2 to 3 hours;
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• The cost is generally between $600 to $2000 plus taxes but can be higher depending on the type of property and location;
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• The inspection should include every aspect of the property such as roof, basement, ventilation, electric system, plumbing, bricks, grading, and more;
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• Cosmetic issues include items that are recommended repairs;
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• Structural issues are items that must be addressed sooner (i.e.: foundation, bricks, electrical, plumbing);
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• Upon completion of the inspection the inspector will provide the buyer with a written detailed report;
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• Should there be an issue in the report that can devalue the property, the seller must receive the report in the specified time period, along with the buyer’s request for a reduction in price, or a repair of the issue, or cancellation of the offer;
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• Upon receiving the request for a reduction or repair, the seller has 21 days to remedy the situation, or not;
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• In the event the seller will not remedy the situation, the buyer can either accept the property as-is or cancel the offer.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: To buy/sell with or without warranty and the implications

State of the market

CPI today (inflation rate) 6.32%
Bank of Canada interest rate 4.5%

I have been asked several times if now is a good time to purchase a property. There are two sides to this question.

Interest rates are still higher than pre-pandemic rates and so is the inflation rate, which indicates that the carrying costs of taxes and utilities are more expensive. Therefore, if a buyer cannot afford the carrying costs, it would be better to wait until rates recede and inflation decreases. The only problem is when the rates and inflation decrease, the price of property will rise. The buyer’s initial cost will be higher but their fixed costs will be less.

‘On the current path of rate hikes, we should see interest rates come down over the next year or two.’

However, real estate values have decreased with higher interest rates and inflation. This means that if a buyer has cash available and can afford the carrying costs now, it may be possible to purchase property at a discount.

In this case, the buyer’s initial cost will be less but their carrying costs will be higher, except for the payments on the house due to the buyer putting more cash down on a short-term mortgage, or all cash and no mortgage to avoid interest costs.

Note that the Bank of Canada interest rate hikes have been influencing the inflation rate to reduce. On the current path of rate hikes, we should see interest rates come down over the next year or two.

Have a great week!

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