London’s hot real estate market is spurring more frantic buyers to drop home inspections to win bidding wars.
Along with paying top dollar for the home, it could leave those buyers stuck with a “money pit’” full of old wiring, bad plumbing and a leaky foundation.
“They are going in blind. Some are paying way over the asking price with little knowledge of what they are purchasing,” said David Kelly of Valley Home Inspection.
The Ontario Association of Home Inspectors (OAHI) says business for its 550 members was down 30 to 50 per cent in the spring.
But OAHI president Murray Parish said the home inspection business is starting to turn around in the Greater Toronto Area.
In April, Ontario imposed new rules to curb foreign buyers and speculators and bidding wars subsided as sales plunged about 40 per cent in the last two months. Parish said some homes bought by speculators at the height of the buying frenzy are now sitting empty and buyers are getting more cautious.
But London is still riding the wave with six consecutive months of record-breaking sales. While movers, renovators and even storage businesses have benefited from the spinoff, it’s been the opposite for home inspectors.
“I’ve been in the business for 20 years and this is the worst year I have ever seen,” said Doug Carlaw, of the London branch of Pillar to Post home inspections.
Michael Balaban of Icon Home Inspections said his business was down 40 to 60 per cent in the spring. He charges about $400 for a home inspection to spot stuff most buyers would not notice.
The problems include mouldy basements, do-it-yourself plumbing — even homes that have been used as marijuana grow-ops.
“Why would you not do an inspection on the biggest purchase of your life? I don’t care about the pretty things in the house; I care about the other stuff — structural, plumbing, electrical,” said Balaban.
But realtors say buyers who have lost out on bidding wars are tempted to see home inspections as a luxury, even if it is strongly recommended.
“If you have seven to 10 offers on a property, to win you have to go in firm — no conditions,” said Jim Smith, president of London St. Thomas Association of Realtors.
Smith said some buyers are falling back on “pre-inspections” — bringing a home inspector along with them for an open house to check out any obvious problems before they make an offer.
Balaban said pre-inspection provides some protection in a hot market, but a thorough inspection takes about two to three hours.
“Finding every possible problem in a house in an hour is pretty tough,” said Balaban, who is a licensed electrician.
Smith said there are signs the London-St. Thomas market has peaked because July was the first month this year that sales did not set a record. That means home inspections may rebound as they have in Toronto.
The home inspection industry is on the verge of a major fix itself with the province moving ahead with a requirement for minimum standards and licensing.
Most home inspectors belong to the OAHI, which requires training and provincial registration, or other associations that requires some level of certification.
But until the regulations are passed, anyone can call themselves a home inspector.
Parish said licensing will bring more professionalism to the industry and protect consumers.
“Until we get licensing into effect, we are always going to have those untrained guys working out of the back of their truck,” he said.