Real Estate Talk:
With or without warranty
The pros and cons of buying or selling with or without warranty
By Joseph Marovitch
Updated January 26, 2022
During the pandemic, with low inventory and high demand causing increased competition among buyers, sellers have been receiving offers to purchase without conditions that were standard in the past. One of the conditions that buyers have decided at times to forego is inspection. When a broker receives several promise to purchase offers on a property, they are required to inform all interested buyers and their selling brokers so the other buyers can have an opportunity to enhance their offers by either removing conditions or increasing the offer amount.
In many cases, buyers have removed the inspection condition if they deemed the property appeared to be in good condition, causing many sellers to sell without warranty. Most homes were sold with warranty before the pandemic. Therefore, if the buyer purchased without inspection and then, after possession, discovered an issue such as faulty wiring, cracked foundation, roof requiring repair or replacement, or any other problems, the previous owner, who would have been responsible for the issue, is not.
The seller is supposed to sell the property without issues that can de-value or render it unliveable, unless they sold the house without warranty, as is, at the buyer’s risk.
If you purchased the property with warranty, the previous owner would be responsible. However, the previous owner could hold the owner before that owner responsible. In fact, all the previous owners are responsible until you find the owner who was aware of the issue or the last living owner.
To understand what warranty or without warranty means, first know that the home inspector is only responsible for the issues in and around the house he or she can see. The home inspector is not responsible for issues they cannot see such as structural cracks, broken linings in the chimney, or buried old oil tanks. The issues that can pose a problem but cannot be immediately detected are called hidden or latent defects. The seller is supposed to sell the property without issues that can de-value or render it unliveable unless they sold the house without warranty, as is, at the buyer’s risk.
The words sold without warranty, as is, at the buyer’s risk must be placed in the following areas:
- The brokerage contract
- The Centris listing
- The promise to purchase
- In the deed of sale
There are reasons to sell without warranty and there are cons to selling without warranty.
Reasons for buying and selling without warranty:
- The vendor inherited the house but never lived in it, therefore, does not want to be responsible for hidden defects.
- The vendor is aware the house may have hidden defects and again does not want the buyer to hold them responsible for issues that may come up.
- The vendor is moving far away and does not want to be bothered.
- The buyer may intend to completely renovate the house and is not concerned with hidden defects.
- The buyer wants a lower purchase price and is prepared to take the risk of hidden defects in exchange.
In most cases, where the seller lived in the house and maintained the house in good condition, the house is sold with warranty.
Cons to selling without warranty:
- The vendor may end up with a lower selling price or take much longer to sell, since selling without warranty raises many red flags of warning.
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: Purchasing a home vs. buying land and building a home
State of the market
On Wednesday, January 26, Tiff Macklem, the Bank of Canada Governor, announced that the key interest rate will remain at 0.25%. However, Mr. Macklem also clearly indicated that interest rate hikes are coming this year to curb inflation, which is hovering around 5%. The Bank of Canada is aiming for a normalized 2% inflation rate by the end of 2022. Rates are expected to rise starting in March 2022. This is the plan, however, nothing is for certain in the age of COVID. It has been reported that another sub-strain of the variant has been detected in Canada and around the world, called BA.2. It is not known yet what the effect of the new variant is, however, as we have all experienced, nothing is certain.
‘The Bank of Canada is aiming for a normalized 2% inflation rate by the end of 2022. Rates are expected to rise starting in March 2022. This is the plan, however, nothing is for certain in the age of COVID.’
Nevertheless, for those planning to purchase, err on the side of caution and acquire a pre-approval now to lock in the current low rates.
In this market there are two choices; either purchase now with a low-interest rate but pay a premium for the property due to high demand and low inventory or, buy later with a higher interest rate but market prices. Higher interest rates lend to less competition and more negotiable prices.
Have a great week and stay safe!
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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 email@example.com