Before you get a mortgage, most home buyers – whether they’re buying for their primary residence or buying for investment purposes – want to get a home inspection. Because in addition to reading the fine print of the mortgage agreement, knowledge of buying a property also includes knowing as much as possible about the structure itself. But as a buyer, what are your options for home inspections, and which option is the best one?
Home inspection
It’s generally not recommended that you buy a home sight unseen (although in hot housing markets offers that include a condition of a home inspection are typically seen as being weaker than those without one). You may assume that the listing is what it appears and that the MLS listing is truthful, but there’s always a possibility that the seller’s agent embellished on a detail here or there, and your ‘fixer-upper’ that you were willing to give some TLC is, in reality, a dilapidated shack. But the truth is, even homes that look just fine to the naked eye can be hiding some costly and even dangerous details.
A home inspection is a comprehensive visual examination of the home's overall structure, major systems and components. An inspector’s job is to make sure that appliances work, that windows open and shut properly, that the roof appears to be in good shape, and the general shape of the home.
Depending on the results of the home inspection and whether or not purchase offer was conditional on the results of the inspection, the buyer can then go back to the seller and request any number of things. They can request that certain items be repaired or replaced, or they can request that a certain amount of money be taken off the sale price to cover the cost of the repairs or replacements of the items on their own.
Pre-home inspection
Some sellers will provide a pre-listing inspection report, or a pre-home inspection. They commission the inspection of their own home and then provide the details of the report to prospective buyers either at an open house or upon request by a prospective buyer or a buyer’s agent. In a fast-moving housing market, this process saves time by eliminating the wait for the inspection once a buyer has put a bid on a home, or even by eliminating altogether the need for a buyer to get their own inspection, allowing them to have one less condition on their offer. But even in a balanced housing market, a pre-home inspection can make all the difference for the seller by giving them a leg up on the competition. The more information that a buyer can see upfront, the less work that they have to do for themselves.
There can be, however, a certain mistrust of home inspection reports provided by the seller. After all, it is in the seller’s best interest to have the report be as trouble-free as possible, downplaying the bad and playing up the good. If the report is provided by a reputable inspector, however, this mistrust is unfounded. Personal integrity aside, inspectors get clients in large part through referrals, and home inspectors are less likely to “fudge” a report for a seller because of this.
A buyer can also choose to get their own home inspection in addition to the seller’s provided inspection report, although they might do so with a bit more confidence that they won’t be any major repairs or replacements necessary.
Pre-offer home inspection
Similar to a pre-home inspection, this inspection takes place before any offers are placed on the home. The difference is that this inspection is commissioned by the buyer, not the seller. Why would a buyer pay for an inspection before putting in an offer on a home? As mentioned, in housing markets that are extremely competitive, putting conditions in your offer such as financing or a home inspection (which means that the buyer can back out of the deal if those things fall through) make your offer appear weaker than those without conditions. So in fast-moving housing markets, buyers don’t have a lot time to negotiate with the seller after their offer has been accepted; perhaps the buyers who submitted the first offer may want the sellers to come down in price to accommodate certain repairs, but are other buyers waiting in line who are willing to pay full list price, if not more, should that initial deal fall through.
Property disclosure laws
Whether commissioned by the buyer or the seller, home inspections do have their limitations. For starters, as good as the home inspector is, they don’t have x-ray vision. They can’t see into walls to check for any mould growing, for example, or see what the condition of the subfloor is like underneath the ceramic tile. Even something as seemingly fundamental as checking the roof for loose shingles can be problematic, especially since cold weather and slippery conditions exist for much of Canada for much of the year, meaning that inspectors are unable to actually get up on the roof for a visual inspection. In such cases, all you have to go on is the word of the seller.
It sounds less than wise to take the seller’s word for it, but in this respect you are protected under the law to a certain extent.
There are two types of defects: a patent defect and a latent defect. A patent defect is an obvious flaw that would be discovered by a superficial inspection of the property by layperson, such as water damage on the ceiling or a crack in the wall. In theory, a home inspection should catch any patent defects. A latent defect is one that is invisible to the naked eye and is presumably unknown to both the buyer and the seller.
A Property Disclosure Statement outlines all of the known issues and is provided by the seller. It is also known as a Statement of Disclosure, a Property Condition Statement, Seller’s Property Disclosure Statement (SPDS), a property condition disclosure statement or a Seller’s Property Information Statement (SPIS), depending on the province. It can be part of the Offer to Purchase form or it can be a standalone document. It’s generally not mandatory, but if a seller does complete the form, then they are held to it. So if a buyer’s home inspection didn’t catch a patent defect (missing shingles on the roof, for example) then the buyer has no claim to compensation from the seller. If the seller purposely withheld information regarding faulty wiring or foundation issues, then they could be liable, even after the sale closes. A seller must disclose any latent defects that renders the property dangerous or unlivable for whatever reason.
The disclosure forms can be tricky to fill out, and may require to disclose issues even after they’ve been properly repaired, so it’s best for a seller to get assistance when completing the document, either from a knowledgeable realtor or a lawyer.
Which home inspection for your mortgage?
In terms of getting a mortgage, it doesn’t make a difference whether or not you get a home inspection. It won’t affect how the appraiser values the home for the lender, nor will it affect your mortgage application or any part of your approval process. The different types of home inspections available to you will depend on your time frame and, to a certain extent, how much you trust the seller.
Whatever you decide to do, think long and hard before deciding to forego a home inspection all together, be it a pre-home inspection, a standard home inspection, or a pre-offer home inspection. If you do, it could truly be a case of buyer beware.
More Mortgage Guide
