Monday, August 27, 2012

Mandatory Home Inspections on Resale Homes in Ontario

Since the mid-1970s, consumer demand for home inspection services has grown in Ontario. Home inspectors and related industry and consumer groups consider a home inspection to be a worthwhile part of the resale process for the following key reasons:

It provides the buyer with a list of repairs including time frames and other recommendations.
It discloses conditions not readily apparent or understood by a non-technical buyer, or that may have been misrepresented.
It reduces the liability of the realtor and meets the realtor’s need to disclose material facts and act in their client’s best interests.

Although inspections may not find all problems, they provide a reasonable degree of consumer protection at a reasonable cost. The home inspection process also encourages upgrading of Canada’s housing stock to meet current requirements and expectations concerning health, safety, maintenance and use.

However, the voluntary inspection process has been ineffectual in addressing the needs of many homeowners. An increasing number of resale homes are inspected, but not by qualified or certified home inspectors. To better understand the home inspection industry in Ontario and options for improvement, a 2002 research project, funded by Canada Mortgage and Housing Corporation’s External Research Program, looked at the possibility of having mandatory, rather than voluntary, home inspections.

Those surveyed included Ontario government representatives, the home inspection industry (private and public), insurance companies, the real estate industry, financial lending institutions, CMHC and various consumer associations.

Mandatory Inspections


Closely linked to the question of mandatory home inspections is the timing of an inspection: should it be prior to listing, or as part of a conditional offer? Approximately 90 per cent of respondents agreed that an inspection should be conducted as early in the selling process as possible, so that findings do not cause negotiations to be changed.

Pre-listing home inspections could benefit sellers, giving them the option of remedying any major problems or adjusting their price. Inspections at this point do not face the same time constraints as those tied to conditional offers. Financial, government and consumer respondents saw pre-listing inspections as having merit for the vendor. Consistency of service would require properly trained inspectors and minimum standards. Realtors saw prelisting inspections as contributing to mandatory seller disclosure and reducing the risk of future disputes. Home inspections are not meant to be used as tools for renegotiation, but this is now often the case. Pre-listing inspections would avoid this problem.

Some thought this approach, though, would result in inspectors being less accountable to the buyer and increase liability.A pre-listing inspection could also be a disadvantage to new and uninformed buyers, who would miss the benefit of going through the inspection process.

Implications for the industry

Almost all respondents agreed that if mandatory inspections were imposed in Ontario today, there would be too few qualified home inspectors to handle the increased volume.Vendors would be disadvantaged if there were not enough registered inspectors to conduct mandatory inspections, as this would result in delaying sales.

Changes in the market over time will make it difficult to maintain a sufficient level of qualified inspectors. During a hectic market, realtors and buyers often expect next-day service, which drives up demand for more inspectors. When the market is slow, fewer inspectors will survive.

Many respondents were mixed in their reactions as to whether mandatory inspections could in fact be imposed. Many thought that inspection services are not readily available throughout the province, especially in rural and remote areas. Standardized training, testing and qualifications for all home inspectors would have to be legislated. Industry self-regulation would produce better qualified and certified home inspectors, although there would still be those offering services with minimal qualifications.

Training and the scope of work are important issues for the industry.The qualifying criteria for someone to become a certified or registered home inspector determines the technical skill levels required. Narrowing the inspector’s focus would be seen as a step backwards. Broadening the focus would add to an already wide knowledge base that professional inspectors must maintain. Other professions provide technical advice to real estate buyers and can augment the work done by inspectors.These include architects, technical designers, engineers, contractors, builders and other building specialists.

No comments:

Post a Comment