Dana Collette, VIU Professor, Raises Concern about Decreasing Home Inspection Rates
It’s hard to go a day without hearing about soaring real estate prices and expanding bubbles in Toronto and Vancouver. Canada’s red hot real estate markets on opposite ends of the country have been a national topic of conversation for some time and continue to fuel the 24-hour news cycle.
In recent weeks, Vancouver levied a tax on foreign buyers looking to buy into Canada’s most expensive real estate market. On the other end of the country, in Ontario, the Toronto Real Estate Board (TREB) has filed a formal appeal related to the judgement that TREB must make listing information available to the public.
While both of these issues centre heavily on real estate law and are extremely timely, a less publicized problem is brewing, and, if left unchecked, could potentially lead to serious legal issues in the future.
photp/ SimonP via wikimedia commons
In order to compete with the plethora of buyers in the current seller’s markets in both cities, buyers are opting to skip the home inspection phase to get in on the bidding war as soon as possible.
By circumventing the inspection phase, buyers are essentially buying homes blind, which leads to problems down the road.
Recently, veteran Toronto home inspector Yuri Olhovsky, owner of Home Inspections 4U, raised his concerns of the considerable drop in his inspection business compared to the rising real estate sales rates. Olhovsky pointed out that buyers are in such a rush to compete in the market they are willing to disregard the need for a home inspection.
“They don’t realize later on they may face issues that don’t cost hundreds of dollars, they cost tens of thousands of dollars and at that point it’s too late,” said Olhovsky.
On the west coast, where housing prices have been on a non-stop upward trajectory, there have also been issues when it comes to lack of home inspections. The trend has gotten so severe, the Home Inspectors Association of B.C. (HIABC) estimates that today just 10 percent of homes sold in Metro Vancouver and the Fraser Valley are getting the much needed home inspection, compared to 75 percent a year ago.
As a result, “People aren’t getting good information on what they’re purchasing and they’re just sort of rolling the dice,” said Vince Burnett, HIABC president.
This sharp decrease in home inspections has prompted inspectors across the province to call for a province-wide 7 day cooling off period after an offer on a home is accepted.
“That cooling-off period would give them a chance to have a home inspector come in and do the inspection, and if there were any significant repairs that need to be done … at least they’ll know about it,” notes Burnett.
The Vancouver market is also heating up the market on Vancouver Island. Here, Dana Collette serves as a business law professor at Vancouver Island University (VIU) and has a longstanding interest in Vancouver Island’s real estate market. Collette thinks the proposed mandatory cooling off period is a positive idea.
With the price of homes reaching new highs, “it’s shocking to think people are spending hundreds of thousands to millions of dollars without an inspection,” said Dana Collette.
The VIU professor said cooling off periods are not uncommon in consumer contracts and are already used in some real estate sales. “In B.C., we have cooling off periods of varying lengths in a variety of areas, including gym memberships, car leases, and when buying in new real estate developments. Providing a period of time that ensures every home buyer is able to do their due diligence to help them make a good investment makes a lot of sense,” Dana Collette added.
Time will tell if the trend of home inspection avoidance continues. However, with little sign that either the Toronto or Vancouver market will cool down soon, realtors and real estate experts should advise buyers to be weary about skipping inspections.
Guest Author: John Bailey
