Buying a home is among most significant purchases you'll make in your own life, so how can you ensure you're not putting an offer on the money pit?
The good news is: with regards to verifying that the house is in good condition, homebuyers possess a few tools at their disposal – one which is really a home inspection contingency.
What is an inspection contingency?
This is really a clause that homebuyers can put in their property contract which makes the sale conditional upon the results of a home inspection the buyer finds satisfactory. The clause could be put into offers on existing homes as well as new builds.
According to Daniel La Gamba, a founding partner at Toronto-based real estate law practice LD Law, inspection contingencies aren't a standard element of most offers, but he recommends his clients include them, even during bidding wars when conditional offers tend to get overlooked.
“Sometimes when individuals get emotional there are 10 other offers, they may put in an offer with no home inspection at all,” he says. “You're buying completely blind and hoping nothing's likely to appear after you get the keys. A lot of crazy things do take place in this kind of market.”
Even with a home inspection contingency clause, buyers need to taking action immediately. The timeline for any home inspection contingency is usually short – about three to seven working days. If the report reveals that the house is looking for major repairs or upgrades, they can leave behind their offer entirely and receive their deposit back.
But if the issues aren't an overall total deal-breaker, the customer can attempt to use the inspection results like a bargaining chip in negotiations, either to get the seller to accomplish any repairs or upgrades themselves, or to lower the sale price to take into account the extra work the customer will have to do after relocating. La Gamba says he's seen buyers successfully reduce their offer by $5,000 to $10,000 while using outcomes of a house inspection.
What must i consider when searching for a home inspector?
A home inspection may cost around $500, therefore it is vital that you seek information prior to hiring someone. You should review their qualifications, certifications and training, experience and references, and if they're a person in any industry associations, such as the Canadian Association of Home and Property Inspectors.
With Canada's real estate market “going quite bananas,” La Gamba says he's seeing more sellers conducting their very own home inspection and sharing the outcomes with all prospective buyers to encourage them to make unconditional offers. He encourages buyers to workout caution in these scenarios. “It depends on the kind of home inspector they've hired – is it a reputable one and may you even depend on it as being a purchaser? -There are lots of risks which go along with that approach.”
In today's red-hot housing industry, unconditional offers have become standard. Buyers might feel pressured to agree to removing a house inspection contingency using their offer, but shouldn't let competition scare them from doing their research.
What's included on a house inspection checklist?
During the house inspection, the inspector will evaluate the home's exterior, including the roof, and flashing, chimney, gutters, downspouts, doors and windows, wall surfaces, as well as the house's foundation and grading. Indoors, they'll inspect the insulation, plumbing, ceilings and walls, doors and windows, electrical, heating and air conditioning, and ventilation. When the house includes a wood-burning appliance – just like a wood stove or fireplace – you should think about searching for a home inspector who's certified in wood energy technology transfer, and specifically ask that they evaluate it.
However, a house inspection has some limitations. The inspection is solely visual, so your inspector are only able to tell you about what they are capable of seeing following a walk-through. And when the inspector finds issues past the scope of the inspection and recommends bringing in an expert – for example low water pressure that may require further investigation with a plumber – La Gamba says the customer may likely need the seller's permission to return for the next visit or get an extension around the contingency window.
While it's not an absolute guarantee of the house in good repair, a home inspection contingency can save you 1000s of dollars – and many headaches – over time.