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Thursday, August 03, 2006

Inspections M.I.A. in Edmonton

The following article from the Edmonton journal should be a warning to sellers and buyers in the Edmonton area. That's right, buyers AND sellers.... Sellers who could have been made aware of problems via a buyer's inspection can face a costly situation down the road; if indeed there are problems the sellers could have disclosed or known about, the buyers may choose to sue.

It is however an oversimplification to say inspections should be mandatory. If the inspection industry was properly legislated with a mandated code of conduct, required errors and omissions insurance and training minimums, I would think the lending institutions themselves would require inspections from such inspectors. Until that time, not all inspectors or inspections are created equally, atleast in my opinion, and buyers should be as careful in the hiring of their inspector as their real estate agent.

Hot real estate market burns home inspectors
Desperate buyers waive conditions on purchase

Richard Warnica, The Edmonton Journal
Published: Wednesday, August 02, 2006

While everyone else in Edmonton's housing industry scrambles to find workers, Michel Bourgeois -- a home inspector -- is laying off staff.

Bourgeois's business has plummeted 45 per cent in the last four months, even as home sales have soared in the other direction. Business is so slow, Bourgeois recently had to lay off one of his six inspectors.

"May, June and July have been just terrible," the owner of North Edmonton's Pillar to Post inspection company said.

Right now, more houses are being sold and at higher prices than ever before in Edmonton's history, according to the Edmonton Real Estate Board.

But fevered competition among buyers means more sales are being completed without a home inspection. And homebuyers who sign contracts without a detailed inspection are running "huge" risks according to many in the industry.

But when the average home for sale lasts just four to five days on the market and more than half are selling above list price, buyers often have no choice; you either buy as is or you don't buy at all.

"People are getting so anxious to buy a home," said Jean Sills, an agent with Realty Executives Challenge.

Sills sold a house recently which had 12 offers the day it was listed and was sold by that night.

Her experience is not unusual.

In July, eight houses listed with the real estate board sold in two days, according to John Hall, the board's marketing manager. The average length of sale, which should sit around 18 days, is down to four or five.

While sellers are seeing their property disappear in record times, buyers have to slog through house after house before closing a purchase.

One realtor Hall knows recently took a client to 14 doors and made 14 offers, but the client kept getting outbid. Another realtor lost a house after bidding $80,000 over the list price.

"The market becomes irrational because of the desperation of a single buyer," Hall said.

So irrational in fact, that house prices in Edmonton were up an unprecedented 31 per cent in July compared to the same month last year.

Buyers often make home purchases conditional on a number of factors, including, usually, that the house be inspected. But when there are multiple offers on a single property -- as is the case in 74 per cent of house sales in Edmonton right now -- sellers can afford to demand that buyers waive those conditions.

Or, as is more often the case according to Hall, desperate buyers can make unconditional offers, convinced is the only way they will close a deal.

Sills says she always urges her clients -- buyers and sellers -- to have an inspection. "It can save the seller too, that's the irony of it," Sills said.

But according to many in the home inspection business, many buyers are not taking her advice.

Shawn Kroeker, owner of Inspect Express Home and Building Inspections Ltd., has seen his business fall dramatically since spring.

In March, his company inspected 35 to 40 houses a week. Today, he's lucky to do eight to 10 in the same stretch.

Not all home inspectors agree, however. Edgar Castillo, who owns a franchise in a large home inspection chain, says the hot market has not affected his business. But most of those The Journal spoke to say the surge in housing sales has meant fewer, rather than more, home inspections.

Buying a house without an inspection can have devastating consequences.

Steve and Norma Dima spent more than $250,000 on a home just west of Stony Plain in April without having it checked by an inspector.

Within weeks they discovered cakes of toxic mould packed into the walls of their basement. The growth drove them from their home; they now sleep in a van in the yard and face possible bankruptcy.

Michel Bourgeois says he has inspected a number of houses after they have been sold. Often buyers don't realize the extent of the renovations the home will need, he said. Already stretched by prices in the overheated market, they cannot afford to fix the problems they did not know were there.

Some inspectors want house inspections to become mandatory.

But that is unlikely to happen, says Petar Juric, a board member with the Alberta branch of the Canadian Association of Home and Property Inspectors.

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