May 17th 2021
With pressure on residential home transactions higher than ever, a home buyer may be willing to do anything to present an offer that looks the most appealing. This can often mean presenting an unconditional offer where the buyer waives their right to a home inspection. This has a considerable risk to a home purchaser, and it is the focus of this article to review the purpose of a home inspection and the possible challenges that a home buyer may face if they enter a contract for the purchase of a home without the benefit of a home inspection.
A home inspector’s primary task is to identify underlying problems with a home’s structure or its major home systems such as heating, electrical, A/C, and plumbing. When a home is made conditional on an inspection, a buyer will have the right to amend their purchase price to account for a discovery that the home requires additional costs to repair defects. A seller can refuse such an amended purchase price, meaning the contract is at an end, so it may not be in the purchaser’s interest to amend the terms of the contract even after such discovery. Regardless, a home inspection is valuable for addressing problems that could worsen over time, saving a new homeowner money and headache in the long run. Ultimately, the information uncovered by an inspection means that a seller cannot claim not to know about certain defects, so if inquiries are made about these issues by future offerors, the seller must disclose the extent of their knowledge on the issue. Ultimately the discovery of a major home issue by an inspection could impact the value of the home for all future dealings.
When an offer to purchase a home is submitted without an inspection, a buyer takes on considerable risk. If the defect was present at the time the offer was made, then absent any misrepresentation from the seller, the presumption is that the purchaser will have no recourse to escape the contract. There are various circumstances where negotiation might be required, so legal advice is recommended if a defect is discovered after a contract is formed.
It makes sense to avoid last-minute variations as a rule for contracting parties. Let us consider the position of the seller. Imagine you agree to sell your home after a buyer waives their conditions for a home inspection. Closing day is in two months, and the price that you have agreed to sell has influenced the price of the home you are willing to move into. It is now one week before closing, and the buyer brings their electrician friend to the premises, who alerts them that nearly $20,000 in repairs will be required to fix the electrical. Even though the defect exists, a conversation about the electrical could have happened before the contract was formed. The buyer had an opportunity to perform their due diligence and chose not to. If a buyer were able to argue “I should not be required to pay you $20,000.00”, the seller’s own home purchase could be compromised. This is clearly unfair to the seller who might not even have known about the issue. A contract should be predictable.
Purchasing real estate comes with risks. However, working with a trusted real estate professional can help you navigate these risks so that you feel confident in your transaction. For all of your real estate closing needs, please be sure to contact Liddiard Law today.
Michael Craig Liddiard, BA MA JD | Liddiard Law Professional Corporation | michael@liddiardlaw.ca