BY SHANNON MONEO
Russell Cass and his team used to do between 60 to 100 home inspections per month in Greater Victoria. Cass, a home inspector and owner of Home Check, hit a low of four for the month of November 2021. In March, his company did 54 and April was steady.
In today’s undisciplined market, inspections handicap the buyer, says Cass, whose company has completed over 20,000 home inspections since 1985. Knowing the faults of a home results in a lower offer, so the buyer loses the bid and it can cost them money. If they’ve gone that route two or three times, by the fourth or fifth offer, they’re ready to chance it to attain their dream of home ownership.
It doesn’t matter if the would-be purchaser is considering a single-family home or multi-family unit/condo, the risks of not doing their due diligence can result in substantial costs.
“People buying unconditionally are taking huge risks,” says Cass.
A faulty electrical system in a home can cost up to $20,000 to remedy, he says. At a strata property, an almost $9-million repair job was going to inflict financial pain on the owners, who had only $1 million saved for the work.
The Big Five
When Cass does a home inspection, he’s looking at the Big Five: the roof and upper structure, plumbing, heating, electrical, and the foundation and lower structure. Common problems include substandard perimeter drains and wet crawl spaces, illegal suites, faulty electrical work, failing roofs and second-rate plumbing.
While some buyers figure it’s less expensive to forgo the inspection report and pay for repairs, costs are going up. A perimeter drain restoration can cost 50 to 100 per cent more than a few years ago, from $40,000 up to $80,000, Cass says. A new roof costs 30 per cent more this year.
Jane Johnston has been selling real estate in Greater Victoria for almost 17 years and was the top agent at RE/MAX Camosun for 2021. She recalls a buyer who discovered the home they were considering had knob-and-tube wiring, so they pulled their offer on the older home.
“In a regular market, they would negotiate that off,” she says.
Today, the process works to the seller’s advantage. Their property is listed, stating that offers will be reviewed in five days. Three offers come in near deadline, but another six, which are above the asking price, come in at the deadline. The ball is in the seller’s court and they know it.
Often, bids come in over the asking price; owners can sell homes that need repairs or are in undesirable locations.
“I’m telling people, if you have an investment property, now is the time to sell,” says Johnston.
Homes with wear and tear or the non-A-class properties are selling at the listed price.
When things go wrong
Johnston is aware that a lot of homes have sold without inspections, even though she considers them the first line of defence. Increasingly, buyers are relying on the property disclosure statement (PDS) and the latent defect disclosure (LDD).
While sellers have the option of filling out the PDS, most do, Johnston says. The LDD, meanwhile, is for items that are not observable by a visual inspection, such as work done without permits or damage inside walls. The seller or listing realtor must disclose any known latent defects.
But as Cass points out, owners are only required to disclose what they know. If a lawsuit arose, a judge would likely agree that a prior homeowner didn’t know that the plumbing done during a long-ago renovation was responsible for a flooded bathroom.
When a home inspector conducts an inspection, the report contains “what you saw on the day,” says Cass. For example, an older hot water tank would be red-flagged for replacement. A newer hot water tank would not be mentioned on the report, and if it flooded the main floor six months later, the home inspector would not be liable. As protection, Cass pays almost $15,000 each year to insure his company. His insurance provides $1 million for errors and omissions and $1 million for liability for each inspection.
Johnston recalls a Bear Mountain home where the owners altered their cathedral ceiling by building a loft bedroom in the new second floor. The work was done without a permit. The new owners happened to view an old real estate listing and saw a cathedral ceiling.
“They can go back to the seller and sue them,” says Johnston.
A step ahead
It’s the threat of lawsuits by new, hoodwinked homeowners that prodded the provincial government to unveil its Homebuyer Protection Period scheme. It would allow buyers to ruminate on their offers, secure financing and get a home inspection.
“I’m already getting calls from people who bought and have found problems,” Cass says.
But as Johnston points out, “It’s always buyer beware.”
One solution that would not require government over-reach is where the seller has an inspection done for buyers’ perusal. All information and defects are disclosed, insurance concerns are satisfied and buyers get peace of mind.
“I say to sellers, consider a pre-inspection,” Johnston says. Costs range from about $350 to $600 and more for a larger property.
Cass recalls that 10 per cent of the inspections he did before the market overheated were requested by sellers. Once the market flamed, those were extinguished. To cool the market, compulsory inspections would level the playing field with buyers having access to equal information, Cass says.
But for some, it doesn’t matter what regulations are in place. They are desperate to get into home ownership and even if warned the septic field is failing or they’re paying $50,000 too much, rainbows remain.
“They have rose-coloured glasses on,” says Johnston. “They are very motivated to purchase as they see the prices rise. They are willing to take the risk.”