Few buyers of residential real estate are unaware of the warning when you buy property - buyer beware. The small print in an Agreement of Purchase and Sale is written to favour the vendor and to limit the issues that can be raised by a purchaser after the Agreement of Purchase and Sale has been signed.
More and more often these days, we are seeing a clause which the Realtors include in an Offer to Purchase making the offer conditional upon receiving a satisfactory home inspection.
Having a home inspection done is a very good idea. When the buyer inspects the property, it is usually for a brief visit, and the cosmetics of the property are what is most noticed. That's why realtors often suggest that you spruce up your home, add some paint, weed the gardens, etc., so that the house will "show well". It's the same as if you're selling a car - a wash and wax job will add to the value without costing you much.
A home inspector who is properly qualified and trained will attend at your potential new home and study the property with a critical eye. You will receive a written report which will point out immediate deficiencies and problem areas of which you should be aware.
A good home inspector will also estimate the length of time before you will have to replace the roof or undertake painting or other maintenance items in the future. A home inspector will advise you as to the need for up-grading of electrical services and other utility needs within the home.
Once you have received this report, if the list of deficiencies is too great, you may be able to back out of the contract depending on the wording used in the Agreement of Purchase and Sale. It may also put you in a position to bargain for a reduction of the purchase price in view of the up-grades and improvements that may be needed.
A recent case decided in the Court of Appeal of Ontario illustrates the point. A purchaser of a high-end property in Toronto was willing to pay $1,500,000.00 for the property and put in a deposit of $150,000.00 with the offer. The wording of the Agreement simply stated that the Agreement was conditional upon the inspection of the property by a home inspector and "receipt of a report satisfactory to the purchaser in his sole and absolute discretion."
The purchasers made no reference in the Agreement of Purchase and Sale as to their intended renovations. They wanted to create a roof-top garden and to re-design the existing garden patio doors. The property inspection came back identifying a number of deficiencies in construction and maintenance, most of which could be remedied at a minor cost. The property inspector described the house as well-built. However, in advising the purchasers on the roof-top garden and the re-design of the patio doors, the inspector's advice was that these repairs would be disruptive, costly, and extensive.
The potential purchasers, upon receipt of the report, immediately advised the vendor that the home inspection was not to their satisfaction, required an end to the Agreement and a return of their substantial deposit.
The vendor balked at this, claiming that the purchasers had not made their intentions known prior to entering into the Agreement, and that they were not acting reasonably, honestly, and in good faith.
Without going into the extensive reasons of the Court, it was held that the purchasers did not engage in dishonest or unfair conduct and were acting reasonably in rejecting the transaction. It was held that the purchasers could add their "subjective consideration of personal compatibility" into the mix in making their decision.
The Court held that the simple language in the contract did not tie the inspection to "operative fitness, structural completion, mechanical utility, or marketability". Had the language been much tighter, the objective standard of reasonableness would have been applied in favour of the vendors. As it was not, this case went in favour of the purchaser, who received the return of their deposit, plus substantial Court costs from the vendors.
One final word on house inspections - if your inspector is wrong or misses an important defect in the home, you may think twice before getting into extensive litigation. Very few home inspectors have negligence insurance to cover their mistakes. You might find you spend a lot of time and effort in suing a home inspector and then be unable to collect on your Judgement.
Even with home inspections...buyer beware.
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