It looks like Toronto homebuyers are so desperate to enter the market that they are skipping the home inspection process, says a new report from the Financial Post. This is a trend that screams housing bubble in the Big Smoke.
As the average detached home in Toronto comes with a price-tag of $1.21 million, homeowners looking to win the bidding war will often drop the idea of an inspection, which can spell doom for the new occupants. The newspaper noted that one firm saw a 34 percent decline over the last 12 months, while another company reported a 30 percent decrease in the same period.
Interested prospects can place a conditional offer, but if you’re competing against 15 other people then you risk losing the home.
Here is an excerpt from the article that suggests it’s all about speculation:
Removing the inspection clause is a sign that “speculation has entered the market,” said Simon, owner of Ekko Title in McLean, Virginia. Some buyers believe property values are appreciating so quickly they can’t lose.
“People think they know the worst-case scenario, but their imagination doesn’t always serve them well,” he said. “They don’t realize how bad or how expensive it can get.”
There is one group that doesn’t see much of a problem with the decline in home inspections: mortgage providers. Banks are far less concerned about costly repairs that may arise later and are instead focused on the appraised value of a property, Dasgupta said.
“The home inspection is really more for consumer protection,” he said. “From a home value standpoint, the appraisal is really the key indicator for the bank. Lenders aren’t liable from the perspective of any deficiencies in the property.”
Even the rural areas of the Greater Toronto Area (GTA) are skipping inspections:
Just as Toronto’s surging prices have stretched to other parts of Ontario, so has the decline in inspections. The city of Barrie, about 65 miles (105 kilometers) north of Toronto, has “gone nuts” in the last three months, said Peggy Hill, a local broker with Keller Williams Experience Realty. Hill said she now sees offers with no conditions about 80 percent to 90 percent of the time, compared with 10 percent to 20 percent previously. Like his counterparts to the south, Derrick Vogel, owner of EnerOne Inc., an inspection service in Barrie, said his business is down too — by about 45 percent this year.
Although some realtors may scoff at the notion of a home inspection, arguing that it is outdated and unnecessary because of municipal government standards, anyone with a little bit of common sense will understand the importance of an inspection.
Here are a few reasons why you should never skip a home inspection:
– You can detect safety issues like mold, radio or carbon monoxide.
– It can reveal illegal additions or installations.
– An inspection can determine potential future costs.
– Homeowners may not receive insurance if an inspection is waived.
– Older homes need an inspection since you have no idea what is hiding behind those walls.
– Prospects can calculate how much extra they’ll need to spend on things like faulty ceilings and cracked walls.
This is one of the reasons why Toronto’s real estate market is definitely a seller’s one. People are willing to buy anything in Toronto, even if it is dilapidated. Home inspections are necessary and can protect you down the line.
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