107 replies to this topic

[Mike K.]

Yes, I totally understand and appreciate that, but that’s what buying a property should be like, just like it is for commercial purchases.

People need to know what they’re getting into because eventually the responsibility rests with the new owner, not the previous two or three etc.

[MarkoJ]

Yes, I totally understand and appreciate that, but that’s what buying a property should be like, just like it is for commercial purchases.

People need to know what they’re getting into because eventually the responsibility rests with the new owner, not the previous two or three etc.

 

There is no legislation that forces due diligence on commercial properties, it is simple a function of the marketplace that sellers and buyers typically agree on conditional offers. You can buy huge commercial properties unconditionally as well. 

[Mike K.]

Totally, but as we know, there doesn’t need to be legislation for commercial purchases because that segment of the industry operates in that way.

And that’s the irony, right? A hardened commercial buyer has every opportunity to conduct DD on a $1.0 million dollar land buy, but the first-time buyer with a 25-year-old agent who has only sold two condos to immediate family is expected to stick handle a $1.5 million purchase of 50-year-old house with a first-time buyer.

[m3m]

The cooling off period is not a fix, I agree.

But the rush to place offers and forced blind bidding environments agents are willingly fostering is eroding confidence in the industry, and ultimately that will be far more damaging than the cooling off period legislation.

I mean right now the industry is in bruised shape. Sentiment towards realtors isn’t good, whether it’s frustration over high commissions in light of price run-ups, frustration over failed bids and dampened hopes, the rush to buy without due diligence, the sexual harassment allegations, and the various ethical dilemmas encountered by purchasers.

Now on the flip side, commercial property sales are not laden with these unknowns and a rush to complete the sale. Commercial buyers expect and pursue a litany if due diligence with 2-4 months in which to do it all. Even if the property is no more expensive than a residential listing, commercial purchasers cover all of their bases, and yet the current residential market rewards forgoing due diligence by encouraging zero condition purchases and bidding wars.

Surely we can appreciate the disconnect here.

 

Buying a property, whether new or old, is always a risk.  If buyers want to reduce that risk through inspections, etc. they should be willing to pay for it. They can do that by offering a higher purchase price if they want to add conditions. 

Edited by m3m, 08 November 2021 - 01:47 PM.

[TallGuy]

Responsibility, and consequently liability, currently rest with the party that commissions the report.  So the seller and/or the agent become liable for the report contents which have consequences if relied upon by the buyer.  Also if you've ever read an inspection report you'll notice the limiting factors, visual inspection restrictions, waivers of omission and the release of liability of the inspector should something be missed.  So while inspections can be useful, they can also be waste of time and money, so why we're thinking they're some sort of holy grail of consumer protection is a mystery.  Homes were bought and sold forever without inspections and the system didn't fall apart. 

 

Having a pre-contractual "cooling down" period would make the most sense if there has to be some government mandated protection for buyers from themselves.  Consider offers after a 7 or 10 day exposure period during which whoever can do whatever due diligence they want.  Understand however that this would only matter in current market conditions, in a normal market it is common to have conditions in a purchase contract.  Remember-no one is being forced to write offers on anything, it's a choice.  Of the 15000 or so local sales in the past 20 months how many buyers have come forward to express regret? So do we want government to regulate based on the way the wind is blowing on a particular day, keeping in mind that government has the ability to regulate much more than real estate?

This is the issue. Home inspectors should be professionals with professional liability and liability insurance. Their current out clauses make them a complete waste of money.

 

There, of course, is a reasonableness expected of this, and they wouldn't catch everything, but there should be a minimum level of detail that they should be professionally responsible for.

 

The whole real estate sector is layers of "professionals" who add to the costs and take their piece while adding little of value.

Edited by TallGuy, 08 November 2021 - 02:01 PM.

[Mike K.]

Buying a property, whether new or old, is always a risk.  If buyers want to reduce that risk through inspections, etc. they should be willing to pay for it. They can do that by offering a higher purchase price if they want to add conditions. 

 

Of course they should pay for it, and they already do.

 

My remark about providing an inspection report is borne out of the rush of the current market. Seller's agents are encouraging no-condition offers in exchange for an accepted offer.

[Mike K.]

This is the issue. Home inspectors should be professionals with professional liability and liability insurance. Their current out clauses make them a complete waste of money.

 

There, of course, is a reasonableness expected of this, and they wouldn't catch everything, but there should be a minimum level of detail that they should be professionally responsible for.

 

The whole real estate sector is layers of "professionals" who add to the costs and take their piece while adding little of value.

 

There are many home inspectors, some of whom are former municipal inspectors, builders, carpenters, etc. They know what they're doing.

 

But they also can't extend liability insurance to you for a two hour surface level inspection worth $500, on a home worth $1.5 million. That's a lot of risk they're taking when they cannot legally pull back the layers and inspect internals, etc.

[Victoria Watcher]

Like a previous poster said, there isn’t much for them to uncover anyway.

[Mike K.]

Not when there's not much to uncover. But remember, the seller is not obligated to tell you anything they don't know.

[Victoria Watcher]

there are lots of unknown unknowns when the inspector arrives for sure.

Edited by Victoria Watcher, 08 November 2021 - 02:43 PM.

[m3m]

They're also not obligated to tell you about any defects that are obvious on a cursory inspection, even if they are aware of them. 

[Mike K.]

Well, that's not exactly true, right? They sign off on an entire matrix of questions about the home and property.

[Victoria Watcher]

As another poster said, unless the house is sliding off its foundation the most expensive repair is only a tiny fraction of the house cost.

Roof, furnace etc.

Edited by Victoria Watcher, 08 November 2021 - 02:50 PM.

[m3m]

Well, that's not exactly true, right? They sign off on an entire matrix of questions about the home and property.

 

Well you can't lie on the PDS, obviously.  But if you have no obligation to tell buyers that there is a hole in the floor if the hole is obvious on a superficial inspection. Caveat Emptor and all that...

[Barrrister]

The simple solution is to give a one week cooling permit where the buyer can do whatever inspections they want. This was a standard condition for years with few problems and at least some fairness. I am surprised, well maybe not, that the real estate agents seem to be predicting that the sky will fall when this is pretty well have house sales had been successfully done for decades.

 

But lets give the real estate agents something to really complain about and legislate maximum commissions at a much lower rate, 

[Mike K.]

Well you can't lie on the PDS, obviously. But if you have no obligation to tell buyers that there is a hole in the floor if the hole is obvious on a superficial inspection. Caveat Emptor and all that...

I’m pretty sure that’s what the matrix covers, no?

You can’t pretend not to know about the giant hole in the floor.

[Victoria Watcher]

But lets give the real estate agents something to really complain about and legislate maximum commissions at a much lower rate,

Wouldn’t that just leave lesser skilled individuals in the profession?

[MarkoJ]

The simple solution is to give a one week cooling permit where the buyer can do whatever inspections they want. This was a standard condition for years with few problems and at least some fairness. 

 

You could never do whatever you want. For example, if you wanted an hazmat study you would have to get the seller's permission and many sellers would reject that request even in a slower market. 

[MarkoJ]

It makes 100x more sense to have the cool off period ahead of time, like mandating offers be delayed 7 to 10 days as David mentioned. The thing with the up front cool off period is it is gets rid of tire kickers which protects sellers and competing buyers and allows time for due diligence. 

[Mike K.]

It also forces buyers to spend a lot of money on due diligence for homes they won’t be able to buy. And it also puts the buyer in a bad negotiating position as the seller’s agent now knows his colleague has a serious buyer, and they’re likely to spend more because they are now invested into the listing. In commercial real-estate, no money is spent until an accepted offer is in place.

I don’t know what the solutions are to the current situation but the market as it currently functions is not at its best.