Real Estate Talk:
With or without warranty

The pros and cons of buying or selling with or without warranty

By Joseph Marovitch

Updated February 9, 2023

Imagine! You just purchased your dream home. You followed all the right steps, from using a qualified broker to having an inspection. All conditions are complete to your satisfaction, possession has taken place, and you are now enjoying your new home.

One day, not long after you have moved in, you are gardening on a beautiful warm sunny day when, all of a sudden, as you’re digging a hole to plant your tulips, you strike oil! Not the Beverly Hillbillies’ kind of “get rich oil” but rather the oil from a buried, leaky oil tank in your backyard that was used long ago as part of the heating system.

You bring in a city inspector, tests are performed, and you find you have an environmental contamination problem in your backyard. Who do you call, and who is responsible to clean up the mess and remove the tank?

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 that can be seen. 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 home without issues that can devalue 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: The selling process

State of the market

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

The real estate market is now the opposite of what it was a year ago during the pandemic. A year ago, buyers were scrambling to purchase homes at premium rates. Demand was very high, and supply was extremely low. This caused a bubble in the housing market. At the same time, inflation was increasing like a tidal wave causing carrying costs to increase. In a tidal wave, the waters recede before they come crashing back. Well, the waters are crashing back.

‘… we are looking at decreasing property values for a while longer. For buyers and investors, this is an opportunity to purchase residential and income property at a discount if there are any sellers.’

According to the Quebec Professional Association of Real Estate Brokers (QPAREB), home sales in Quebec decreased by 36%, the lowest since 2009. The largest decrease is on the island of Montreal at 39%. The Bank of Canada has increased the interest rate eight times in the past year to offset the rising inflation rate. The inflation rate is slowly decreasing and this is a requirement for the average person to afford living expenses.

However, we are looking at decreasing property values for a while longer. For buyers and investors, this is an opportunity to purchase residential and income property at a discount if there are any sellers. Sellers may be inclined to wait a while for prices to increase as the inflation rate comes down to 4.5% causing interest rates to stabilize and maybe decrease.

Have a great week.

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Other articles by Joseph Marovitch