Real Estate Talk:
What are a buyer’s options if the inspection indicates major issues?
By Joseph Marovitch
February 1, 2024
I was recently asked what the buyer’s options are if the inspection report indicates issues with the property. There are several factors to consider when answering this question.
Remember, as indicated in a previous article titled The Inspection Process, the inspector can only report what they can see on their own or with a thermal imaging device. If there are possible issues they cannot see but can detect, the inspector will advise to have a specialist examine those issues.
What the inspector does find and provide in a written report are two types of issues that must be separated. The first type I will discuss is cosmetic issues. These are issues that the buyer can live with and do not need urgent repair. Examples of cosmetic issues are the house requires a painting, the buyer wants to remove the carpets or change the windows because it is indicated in the report they are dated and may eventually require upgrades. Other cosmetic issues are that the kitchen and bathrooms are dated. The report may indicate the outside brick wall will eventually require brick pointing.
Cosmetic issues can be seen by the buyer upon their first visit and help determine what the buyer will offer. These are not issues that the buyer will use after the inspection to renegotiate the price.
These are factors that may influence the buyer’s offer price before the submitted promise to purchase, however, these are issues that can be seen by the buyer upon their first visit and help determine what the buyer will offer. These are not issues that the buyer will use after the inspection to renegotiate the price.
The other type of issues are structural issues. These are issues that must be addressed immediately since they may be costly to repair and possibly dangerous if not repaired soon. Examples of structural issues are a new roof is required, the electrical or plumbing system is faulty, the brick walls are crumbling and require immediate brick pointing, the windows are cracked, causing cold or humidity to enter the property, there is a crack in the foundation that will get worse, the front or back balcony supports or deck are rotting, there is dangerous mould in the house, and so on. These are dangerous issues that will be costly to repair and significantly devalue the property.
Before discussing the buyer’s recourse, the seller’s declaration must be discussed. When a property is listed, the seller must complete a seller’s declaration, a document indicating the condition of the house to the best of the seller’s knowledge. The seller’s declaration must then be uploaded with the listing to Centris.
‘The other type of issues are structural issues. These are issues that must be addressed immediately since they may be costly to repair and possibly dangerous if not repaired soon.’
When a buyer decides to submit an offer, they must sign the promise to purchase, and both read, accept, and sign the seller’s declaration. Both documents are then submitted to the buyer. By the buyer accepting and signing the seller’s declaration, they have considered and are accepting all the declared issues, meaning the price for those issues cannot be renegotiated.
Now we can answer the question of what is the buyer’s recourse if there are issues in the inspection report that are not declared in the seller’s declaration and that significantly devalue the property.
If there are issues that significantly devalue the property, the buyer must acquire the full inspection report and provide the full report with a written document stating what the issues are and what they wish to do to resolve the situation, such as reduce the price. The report and written request must be submitted to the seller before the deadline for inspection, as stated in the promise to purchase.
The buyer would then have three choices:
- Renegotiate the price
- Purchase the property “As is”
- Cancel the offer
The seller would then have the following options to resolve the situation:
- Remedy the issues in the next 21 days
- Reduce the price and let the buyer repair the issues
- Refuse to do anything, in which case the buyer can cancel the offer or purchase the property “As is”
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: Criteria for purchasing a condo
State of the market
Bank of Canada interest rate: 5 %
Canadian prime rate: 7.2%
Canada inflation today: 3.4 %
The Bank of Canada continues to hold the key interest rate at 5%, which, as stated in the past, would indicate a possible reduction in the next few months if the economy slows down further. Most sellers appear to be waiting for rates to fall and values to rise before placing their property on the market.
‘… some core buyers and sellers must move now. This means there is less supply and demand but the transactions taking place are quick and strategic.’
Buyers appear to be in a holding pattern as well, with a wait-and-see attitude towards interest rates. Lower rates would bring more buyers and sellers to the table. According to an RBC Economics Report dated January 29, 2024, property values will decrease in the first quarter of 2024 but the possibility of rate cuts in the following quarters will increase values, supply and demand.
In the meantime, some core buyers and sellers must move now. This means there is less supply and demand but the transactions taking place are quick and strategic.
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Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or firstname.lastname@example.org