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Home inspectors feeling the burn of Ontario’s hot housing market

Home inspector John Hansen looks over the furnace in a house in Hamilton on April 21, 2017. The number of homes Hansen inspects has decreased in recent times as home sellers reject buyers whose bids are conditional on a inspection, moving on to the next unconditional bid.

Glenn Lowson/The Globe and Mail

Home inspectors are taking a substantial hit to their businesses amid the frenzied bidding for houses taking place in Toronto and the surrounding regions.

In desperation to come up on top in bidding wars, many home buyers are forgoing conditions that may make their offer less appealing to a seller. One of the first conditions to go is need for a home inspection.

"Nobody has a clause for home inspection in this hot housing market," says Murray Parish, president of the Ontario Association of Home Inspectors, who says his 550 members have experienced a 30 to 50 per cent drop in home inspections over the past few months.

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Toronto has seen consecutive years of double-digit price gains. The average sale price for detached homes in the central 416 area code in March was $1.56-million, up 33 per cent from a year earlier. In the 905 region that surrounds the city, detached homes went for an average of $1.12-million, up 34 per cent.

Prices for semi-detached homes, townhouses and condos are all up sharply.

Alan Carson, president of home inspection agency Carson Dunlop, says that while the city of Toronto may be the epicentre of the issue, his business has felt the shock waves even in regions such as Kitchener-Waterloo, Oshawa and Hamilton.

In February, the number of home inspections his company did was down 30 per cent overall. "Buyers aren't forgoing the inspection because they want to; it's because they feel like they have to," says Mr. Carson.

But while there has been a decrease in home inspections on the buyer's side, Mr. Carson says he's also seeing an uptick in home inspections being conducted by the seller. When sellers conduct a home inspection and offer the results in a report, they are finding that more buyers are coming to the table, he says.

However, this isn't enough to completely offset the decline in buyer home inspections.

"We're frustrated," Mr. Carson says. "We know people want to protect themselves and are just finding it so hard to do."

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In a more balanced market, 60 to 70 per cent of deals include a home inspection clause, says John Hansen, who runs a home inspection business in Hamilton. "This year, I don't think it's even 5 per cent. The market in Hamilton is crazy."

According to March data, Hamilton home prices shot up 28 per cent from the previous year. In a city where the average price is half that of Toronto, bidding wars are increasingly becoming the norm, as buyers priced out of other regions make aggressive moves to close deals in areas nearby.

The number of home inspections Mr. Hansen says he conducted in March was fewer than half of the amount he did a year prior. It's making it harder for home inspectors to bring in money, he says, and some have gone out of business. Mr. Hansen says he's been relying more heavily on his work on septic, well and fireplace inspections to keep him afloat.

In addition to the impact on their businesses, home inspectors warn that forgoing inspections puts buyers at risk.

"You wouldn't buy a car without taking it for a test drive," says Mr. Parish. The same rationale, he says, should apply for a purchase that is much bigger.

Mr. Hansen says he worries that buyers – particularly young, first-time home buyers – are placing themselves in a position of financial vulnerability. "They tap out all their resources to get their house …What happens when they find out they have a $20,000 fix?"

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The effects are starting to spill over to other businesses as well, says Mr. Parish. Electricians and plumbers who receive business following results from a home inspection are feeling the impact from the lack of referrals.

Mr. Carson is hoping the Ontario government measures announced on Thursday, which include a 15-per-cent tax on foreign home buyers, will cool the housing market.

"I hope it has a positive impact on housing availability and affordability for the average home buyer."

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Video: Reality Check: Is an Ontario foreign-buyers tax the solution to Toronto’s hot housing market?
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