Real Estate Talk:
Due diligence issues
The risk of incurring expenses is high when buyers do not stipulate conditions
By Joseph Marovitch
January 11, 2024
At the height of the pandemic, inventory was low, and demand was high, there would be 15 or 20 buyers making offers, competing to purchase a property. Many buyers submitted offers without an inspection or documents of condition, and buyers were offering all cash. The alternative was to lose the property to another buyer. Alternately, sellers were selling without legal warranty, meaning they would not be held responsible for hidden defects.
Between no buyer’s inspection and the seller selling without warranty, the seller would walk away with their cash and the buyer would have no recourse after possession if a crack was found in the foundation or the plumbing or electrical systems were faulty.
During the pandemic, I was always asked what I thought of not placing conditions. My answer was always the same: the risk is high, and tremendous expenses could be incurred.
It is important to have an inspection, whether the property is a new construction or from the last century, and to verify whatever is indicated verbally or in the seller’s declaration.
Today, in 2024, conditions are not the same. There are few multiple offers. Inventory is still low, and demand is not high. However, in the current market, the buyers searching for property are serious and motivated, not just getting their feet wet with random visits. It is important to have an inspection, whether the property is a new construction or from the last century, and to verify whatever is indicated verbally or in the seller’s declaration.
The seller’s declaration is a document completed by the seller stating the condition of the property to the best of the seller’s knowledge. The seller’s declaration asks questions that require a “yes,” “no,” or “I don’t know” response. Never guess at those questions. If not sure, always state “I don’t know.” The only way to verify the seller’s declaration, the property, and the expenses is to have a proper inspection and acquire a copy of invoices for stated upgrades, repairs, and expenses.
‘There is no obligation of the seller to provide proof of anything unless the buyer’s request and conditions are placed in an accepted conditional promise to purchase.’
The seller’s obligation of due diligence is to provide the documents they have. It is the buyer’s obligation in due diligence, to arrange an inspection and request the invoices and receipts. There is no obligation of the seller to provide proof of anything unless the buyer’s request and conditions are placed in an accepted conditional promise to purchase.
Finally, buyers should be aware that when they purchase a property and there is no written agreement that any items not permanently attached to the property are to remain, the property must be cleared before possession so as not to cause additional expenses to the buyer to remove these items. It is not a rule but rather proper etiquette to clean the property before delivering it to the buyer unless the buyer has indicated they intend to fully renovate.
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: What to know and look for when choosing an inspector
State Of The Market
Bank of Canada interest rate: 5 %
Canadian prime rate: 7.2%
Canada inflation today: 3.12 %
In the recent RBC Economics Report of January 9, 2024, it is stated that high interest rates will continue to slow down market demand until mid-2024 when the Federal Bank will reduce interest rates. This will only occur if the economy continues to slow down, causing inflation to further decrease.
According to a recent article in the Financial Post from January 8, 2024, economists believe the housing market could rebound in 2024. This is pretty much the same outlook as the RBC Economics Report. Both accounts depend on the economy continuing to slow down and cause interest rates to reduce.
‘… rates may come down and property values rise, but only if the geopolitical landscape remains stable.
Economists are cautiously optimistic that rates and inflation will reduce based on recent history. Usually, when we try to determine the direction of the economy, interest rates and even the stock market, the longer history is examined. This means rates may come down and property values rise, but only if the geopolitical landscape remains stable. All indications are that we are moving cautiously in the right direction. There are opportunities in the market, but not without risk. However, the largest gains always come with the most risk.
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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