Mastermind for November 30th, Did the Home Actually Fail the Inspection?
Happy Wednesday. Even the cold and drizzle didn’t keep the keeners away. For everyone else, you missed another exciting Mastermind here on Queen St. West. Today’s primary topic focused around conditional deals that fall apart. If you have sold a lot of homes you know that, from time to time, a condition does not get met. It is a fact of (real estate) life and it seems that it doesn’t matter what the condition is either; financing, home and/or termite inspection or even the sale of a purchaser’s property. We put conditional clauses in offers so that buyers can, in effect, do their own due diligence. For first time buyers, financing is incredibly important and while most are pre-qualified, the banks still needs to approve most purchases. Home inspections are also an integral part of the process but over the past few years this condition has stirred the most debate. I have tackled it in past posts ranging from agents getting sued for not being present during a home inspection to buyers getting out of deals even though there was nothing wrong with the home. At the crux of the situation is how the conditional clause is written.
Many years ago, the standard home inspection clause included a line which gave the seller the opportunity to remedy any deficiency. Today the result of home inspection is at the sole and absolute discretion of the buyer. So if, for instance, the buyer doesn’t like the fact that the roof is 5 years old and in perfect condition, he can walk from the deal. The seller has no recourse. It seems clear that the buyer isn’t actually trying to get out of the deal over something like the condition of the roof. There may be something bigger at play and in a previous post I wrote about a buyer who simply wanted to tie up one home while they were waiting to see if they were going to be successful bidding on another, better, home. Obviously, in this situation, the home inspection is being used for a more sinister reason. I only hope this is the exception rather than the rule. As we discussed in the morning Mastermind meeting, the home inspection actually has two significant roles. First, it acts as an introduction of the home to the buyer. It is the first time the buyer has an opportunity to really get to know the home. Secondly, the home inspection outlines the home’s assets and liabilities but more importantly, gives the buyer a snapshot of how expensive those liabilities will be to repair. For a first time buyer, knowing how much a repair may cost is critical to the decision-making process. As a selling agent, it is clear that the pre listing home inspection is an exceptional (although not foolproof) tool for recognizing and correcting any problems with the property before it goes to market. As a buyer’s agent it is their responsibility to explain that the intent of a condition is not meant to be a way out of a deal. Yes, sometimes deals fall apart because the home fails it’s home inspection miserably, and sometimes buyers and sellers agree to an abatement if there is a costly concern, but surely their has to be some accountability to those buyers who want out for other reasons.
So what is the expectation when buying a home? In my experience, homes are rarely perfect unless they are brand new (and even that could be argued). There is always something to do. It is also important to outline to a client all the pros and cons of home ownership. One of our agents mentioned that in their buyer’s package they specifically mention to buyers a need to set aside 2-5% (depending on age) of the home value per year for repairs. Seems like a good idea although I wonder who actually is regimented enough to but that money away for a rainy day.