In a hot market, when it is a sellers' market, most of the time, because of multiple offers, buyers are forced to go in with firm offers. Meaning, you submit offers without conditions of financing or home inspection. Now, how does this impact you, as a buyer? This is more important for freehold home purchases. Condo properties (apartments and condo-townhouses) have their structures covered by the building insurance component of the maintenance fees. However, even in the case of condo-townhouses, there may be concerns other than the structure like the furnace, airconditioner, etc. which a home inspection would determine.

First of all, the Financing condition is meant to protect you, as a way out of the deal, if, for whatever reason, your financing does not get approved, or go through. Now, one can get around this by ensuring that you are pre-approved for the amount you are willing to pay for the property. Make sure, though, that your Mortgage Specialist is aware of the possibility of multiple offers and how much your offer may go up to. Second, and possibly the more important condition, is that of a home inspection. If you submit an offer without a home inspection, you run the risk of buying a home that could, potentially, have issues that may be latent, or unnoticed. This may not happen often, but the possibility exists and a buyer should be aware of that, because this is probably the biggest investment you'd make. Let me explain this to you with a summary from an article I'd recently read.

The story of the article revolves around responsibility when something goes wrong after a home purchase: who is responsible? While the idea of “trust” and taking someone's word about any issues when purchasing a home sounds great, it’s always a concern, regardless of who you are dealing with for the home purchase.

In the example, after the closing took place, the purchaser hired a contractor to paint the house and update the basement. The contractor noticed that the basement carpet was damp, and discovered moisture under the floor covered in mold. It was then discovered that there was no vapour barrier between the concrete and the carpet. This also led to mold formation on the baseboards and drywall, all of which had to be removed and replaced. Even further, mold spores were discovered in other parts of the basement that needed to be cleaned out as well.

There were other issues that were discovered within the house too. The remediation costs amounted to about  $85,000, which the buyer sued the seller for. However, the court stance on home purchases was buyer beware. The claim was thrown out. Now, if there was a home inspection done, the buyer could have either opted not to buy that house, or gone in with a different purchase price. Yes, there's also the possibility of losing the bid, but which is better? A possible solution to this is to do an inspection prior to the offer date. Yes, if you lose the bid, you'd lose $500, or whatever the cost of the inspection is. Think about it; it's the lesser of two evils - $500 or the bigger cost of possible repairs. If you win the bid, your $500 investment is worth it, anyway, as you now have peace of mind. Buyers should weigh all options and make an informed decision as to whether they'd like to do a pre-offer inspection or not. Examine the visual condition of the house: roof, windows, furnace, a/c, basement walls inside and out, when you visit the home. Also consider the age of the house if you'd still like to submit an offer without the inspection condition. It's up to you.

“If there are no representations, or warranties, in a purchase agreement, a seller is not liable in damages to a buyer. There are exceptions, though:

  • Where the seller fraudulently misrepresents or conceals an issue;
  • Where the seller knows of a hidden defect which makes the house unfit for habitation, and fails to disclose it to the buyer;
  • Where the seller is reckless about statements made relating to the fitness of the house for habitation.

The lessons to be learned are:

Rule 1: Always insert a home inspection condition in an offer to purchase;

Rule 2: If you have to omit Rule 1, insert representations and warranties in the agreement about the condition of the property;

Rule 3: If you ignore Rules 1 and 2, don’t expect to be compensated for any problems you discover after closing.

The above is mostly for freehold homes or condo-townhouses. But, what if you're considering a condo-apartment? You need to check the financial health of the condo-corporation that manages the building. This is done by reviewing the Status Certificate, which a buyer's lawyer normally does. Now, if you're a seller and have set a specific offer date, it is suggested that you order the Status Certificate in advance so that prospective buyers can ask for, and review, this document prior to submitting an offer (this also applies to condo-townhouses). Your lawyer would check the financial standing of the corporation that manages the complex/building. They must have sufficient "reserve" funds should there be any unforeseen expenses. Otherwise, individual owners would have to pay what is called a "special assessment" to cover the shortfall, when needed. There should also not be any court cases against the corporation or liens on the property. The Status Certificate would also indicate whether there are any restrictions on unit owners like keeping pets, installing satellite dishes, etc. You need to know all this prior to submitting a firm offer. The same guidelines for the condition of Financing apply as indicated above.

Now, I'd like to add some "food for thought": you've probably received calls, or met door-knockers who come to your house, stating that they "have buyers" looking to pay top dollar for homes in your neighbourhood and that they can get you a high value for your home, if you'd like to sell. Or, they will tell you a higher price that you "could" get for your property which entices you. What you may not be told, or asked, is what do you do once you sell? That is a key question to ask yourself. What are your plans? Why do you want to sell? Do you not like your location? Where do you go, once you sell? If you try to buy another home in the same neighbourhood or even in the same city, you'd probably pay a similar high price too at the current market. Are you OK with moving out of the city? Further away from work, family, friends. Are you OK with downsizing? If you buy within a similar price range, does it make sense to lose the equity gain from your home? Remember, the equity gain in your home may be your nest egg in later years.