How to protect yourself if you decide to forgo a home inspection

Searching for a house in the Oshawa, Ont. area this winter, prospective homebuyers Nadeem Sumar and his wife Gurleen Saggu knew it was their job to keep a close eye out for anything that seemed questionable, from a crack in the foundation to a mysterious water stain.

"We had some strict guidelines," Sumar said. "If there were any red flags at all, we just wouldn't go for that property at all."

In 2022, many Canadians with no experience in construction or home repair are suddenly finding themselves in the position of evaluating shingles, gutters and caulking.

That's because, like Sumar and Saggu, they're competing for a home in the country's red hot real estate market — a market where the home inspection clause, once considered a standard and essential part of any real estate contract, is no longer an option in many locations.

"We put in about 12 or 13 offers," said Sumar, adding the couple was ultimately unsuccessful in finding a home and have decided to wait a few months to see if things cool off before trying again.

"We knew that putting an inspection clause in was not even a possibility."

According to the most recent statistics from the Canadian Real Estate Association, home sales in this country rose 4.6 per cent in February. Sales levels for the month were roughly 35 per cent above pre-COVID norms, as buyers raced to lock in historically low interest rates that are set to rise this year.

Prices also continued to surge, with the national average Canadian home price in February nearly 30 per cent higher year-over-year. In some regions, the growth was even more extreme — Calgary's housing market has exploded, with the benchmark price up 34.6 per cent over the past three months alone.

In markets like this, buyers often find themselves competing against multiple offers. Not only does that mean that homes are selling over the asking price, it also means that many buyers are making unconditional offers.

"In this market — especially the Toronto market but it’s also shifted to Ottawa, Barrie, Burlington, and elsewhere — it would be very rare to see a condition on a home inspection," said John Lusink, president of Toronto-based Right At Home Realty.

"Most realtors would be saying, 'If you put that condition in, you will never ever get a home in the current market.'”

So is it still possible for buyers to protect themselves against hidden defects and costly repairs, and still obtain a home in an in-demand neighbourhood? Experts say yes, as long as they're willing to think outside the box.

Lusink said some buyers who know they won't get a home if they make their offer conditional on a home inspection choose to hire a licensed home inspector or someone else with specialized knowledge to come to showings and open houses with them instead.

"Doing a pre-inspection — yes, it has to be on your own dime — is still something I highly recommend," he said. "Find an expert, maybe a home inspector or someone with a good construction background, to do a walk-through with you."

If that can't be arranged, another option for homebuyers is to request access to the property for an inspection between the time when a deal goes firm, and possession date. While getting out of a deal after the closing date isn't necessarily easy, it can potentially be done if an inspection turns up a major problem.

"Buyers should discuss with their reps to see if they can get something like this into their agreement," said Joe Richer, registrar with the Real Estate Council of Ontario. "Yes, ideally the home inspection would happen before, as a condition of the purchase, but there’s nothing to prevent it from happening immediately after it goes firm as well.”

In a worst-case scenario, buyers always have the option of hiring a home inspector after they take possession. At the very least, doing so gives new homeowners a better understanding of the property they purchased, and may help them with prioritizing and budgeting for future repairs and maintenance, Richer said.

Richer said it's important to remember that even in the absence of a home inspection, sellers have the legal obligation to disclose any "latent defects" that are significant enough to either render the home uninhabitable, or that come at a very high cost to repair. Both sellers and their realtors can face lawsuits if they knowingly fail to disclose a major issue with a property.

Ultimately, it comes down to individual buyers to decide what level of risk they're willing to accept as part of their house hunt, Richer said. Some, like Sumar and Saggu, may decide to postpone their homebuying experience altogether.

“For those buyers who are feeling pressure, and may feel they have to waive that home inspection condition, they have to be comfortable with that," he said. "At the end of the day, they just need to be comfortable with the risk they’re taking on.”

This report by The Canadian Press was first published March 24, 2022.