The property inspection condition is one of the most common and widely used contract conditions in Alberta real estate. The property inspection condition in the standard AREA purchase contracts provides some guidance for the wording of the condition itself, but what about its use in practice? What are some practical considerations when using this condition in a residential purchase contract?
REALTOR® recommendationIf you have been practicing real estate in the same area for a while, chances are you have interacted with several local home inspectors. I’d bet you also have your favourites for various reasons – price, personality, attention to detail, specific knowledge, etc. – and in best representing your buyer client, you want them to hire a great inspector like… WHOA, pump the brakes. Like REALTORS®, home inspectors are regulated to meet a certain standard, but you should never recommend just one home inspector. When you recommend a single service provider, you will wear any resulting problems like a cheap suit. The best practice is to recommend three or more service providers, if any, and allow your client to choose without your influence.
Remember: if you are going to recommend inspectors or other licensed service providers, you have an obligation to confirm they hold a valid licence. Home inspection licences can be verified here.
Necessary or no?Yes, yes; a thousand times, yes. A property inspection is crucial because your client needs to understand what they are buying! When the question comes, “This is such a beautiful house. Do you think we need an inspection?” Answer, “Yes,” without exception. Employing a property inspection condition allows your client to obtain independent, professional advice before financially committing to the deal. There will still be times when your buyer insists they don’t want an inspection. When this happens, the best practice would be to put a big showy strike through the property inspection condition; write a big showy “DECLINED” beside it; and have the buyer initial and date the deletion. This provides certainty that the buyer understood but declined the option for a property inspection and creates transparency for the seller too.
Paying for the inspectionJust don’t. Not paying is the best practice because paying for the service gives the impression that the inspector works for you, not the client, eliminating the arms-length advice provided to the client without bias. When the buyer hires and pays for the inspector themselves, the inspector understands whom they work for and whose interests they are protecting.
Expectations of the inspection reportFor most buyers, this could be their first inspection in several years, or ever. Help your client understand in advance that some items WILL be discovered by the home inspector, with their specialized building knowledge and cool gadgets. Going in knowing that this is normal and part of making an informed financial decision may help curb some buyer anxiety about an imperfect inspection report. Also, encourage your buyer to clarify what sort of report they can expect from an inspector because there is no provincial standard and inspection reports may vary widely.
Remember: cosmetic or obvious items known before negotiations should be handled in the contract during negotiations. Using a home inspection as a tool for future negotiations can be considered a violation of the good faith clause in the purchase contract.
Buyer to inspectThe standard AREA purchase contracts contain a prewritten property inspection condition but it only applies if your buyer will use a licensed property inspector. Because the purchase contract is an agreement between the buyer and seller, confirm the buyer’s intention to hire a licensed inspector. If the buyer insists, “Uncle Larry built houses for 30 years and we want him to do the inspection,” make sure the wording of the condition is altered appropriately and initialled, so the seller clearly understands the buyer's intentions. Adherence to the signed purchase contract is key.
On inspection dayThe Provincial Harmonized Rules require all buyers’ REALTORS® to attend the full duration of the home inspection from start to finish. The care and control of the property lie with you as a REALTOR® member granting access to the property unless you obtain written consent from the seller for an alternate arrangement. As the best practice, also clarify with your buyers onsite, if they attend, that the home inspector works for them and not for you. Because of this, your interaction with the home inspector during and after the inspection should be minimal. Allow the inspector the space and opportunity to explain their findings to the buyer client without interruption. Once the buyer has obtained that independent professional advice, they can decide what they need to share with you for the sake of continuing the purchase process.
Although the home inspection process is routine for most REALTORS®, remember that this may be a time of great uncertainty and turmoil for your buyer. Use the chance to share your expertise on the process and expectations of hiring and using an inspector to improve the buyer experience.
Remember: facts fight fear, and fear unresolved collapses contracts.
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619