In the spirit of Halloween, Amit & Roy Bhandari will be running a daily anecdote that we are calling “A Week of Real Estate Horror Stories”.  These are real stories that we have heard from our fellow colleges.  These stories are not designed to scare you from buying or selling Real Estate, but rather offer a friendly reminder that the Real Estate Transaction can be extremely complex and without the proper guidance, things can (and have) gone horribly wrong.

So far we have discussed Theft During an Open House and Overly Pushy Buyers Agents and their Ramifications – this next horror story is one that we are hearing more and more as we enter in a very strong sellers market.  Multiple offers are becoming a common place in this marketplace (we reported that 1 in 8 homes sold had competing offers), especially in certain pockets within Mississauga (Churchill Meadows, anyone?) and in order to compete, it is very typical for buyers to put in offers with no clauses (a FIRM offer).  Typical clauses when buying a home include conditional on obtaining satisfactory financing, and conditional on obtaining a satisfactory home inspection.

In the event of a multiple offer the rules change a little, and in order to make the buyers offer stronger it is not uncommon to eliminate these clauses and thus eliminating the opportunity to have a professional home inspector go through the home before finalizing the deal.

There are a number of stories where people have been stung with unexpected expenses following closing a home that was not inspected before it was purchased, however, my story is one that happened very recently to a fellow agent and is very relevant.

In this horror story, my colleague and his clients were competing against 6 other offers on a 14 year old home that the clients fell in love with.  The clients were advised to offer 8% over asking price, and also to eliminate all the clauses (financing and home inspection).  The clients ended up winning the multiple offer and got the home of their dreams.

Or so they thought (dun dun dun).

Shortly after moving into the home, things started to go wrong.  Within a few weeks of taking possession of the keys, they realized that the roof needed to be replaced, a few windows were inadequate and finally, the furnace did not turn on (they bought the home in the Summer, so they never got a chance to test the furnace).  After doing some research, they realized that the home inspection would have outlined that these three items (typically the three most expensive items to fix/replace, and usually on the top of the home inspectors “to check” list) as problem areas and given an idea of how much it would cost to replace these.

To make matters worse, they found a leak in the dining room directly below the washroom that looked like it was a recurring leak with evidence of water damage.

In total, the clients have forked out approximately $12,000 to date in additional fixing or repairing items that they had not budgeted for (on top of the 8% that they went over the asking price)  since they took possession of the home.

As it stands, the clients have threatened legal action against my collegue stating that they were not informed as to the consequences and dangers of waiving the home inspection.  They argue that had they known about the expense involved in the three major items (furnace, roof and windows), they would not have gone forward with the offer.  Do they have a case? I’m not so sure, but we can all learn from these mistakes.

I have been in a number of multiple offers, we have won some and lost some as is the nature of the beast.  However, I will never ever tell a client to remove the home inspection clause, and only remove the financing clause if they are 101% sure that financing will not be an issue.  The typical time frame that buyers ask to do a home inspection is within five business days of an accepted offer, and we have, in the past entered into an agreement where we only ask for one business day to do the home inspection.  This allows us to still get the inspection done, meanwhile it keeps the sellers happy as they will have a firm yes or no within 24 hours.

Before you remove the clause for an inspection, understand the pros and cons of what you are getting yourself into.  The pro is that yes, your offer will be stronger to the sellers, however, you are throwing a lot of liability onto yourself by not knowing anything about the home that you are about to purchase.  In a typical home-buying scenario, as a potential home buyer you may have spent 30 minutes to 1 hour in the home before making a decision to put in an offer.  This is not enough time to get a feel for the state of the home.

Always discuss removing the home inspection clause with your agent in great detail before you make a decision either way.  It is your agents job to look out for YOUR best interest, make sure they are doing that.

Thanks for reading, and join us for our next Halloween Horror Story!