When David Boyles and his wife, Caitlin, bought their first home last month, they took a risk.
The couple had been house-hunting in downtown Toronto for a year, but hadn't yet managed to land a deal.
"We had made about 20 or 25 offers [on other houses] in that time span. Lots of big surprises. We'd be aggressive, we'd go in at $150,000 over [the list price] and get blown out of the water. We wouldn't even be close," says Mr. Boyles, 30.
It was getting frustrating, he says, because prices were going up every week, "enough that you're worried about getting priced out entirely," he says.
Then on a Saturday last month, they looked at a new listing – a three-bedroom, two-storey home in the Bloor and Dufferin neighbourhood, an increasingly buzzworthy Toronto area in the city's west end. From its appearance, the home clearly needed work, says Mr. Boyles. It was at least 50 years old and hadn't been recently renovated or "staged" to sell. As well, the buyer hadn't provided a home inspection.
"You could tell it had good bones, but you could also see you would need to replace the roof. Definitely not the most up-to-date finishes," he says. "We didn't really think it would be the one we ended up buying because we knew, inspection or no inspection, it was going to be a lot of work."
They put in an offer on another, more updated house the following Tuesday – losing out by $200,000 in a 20-buyer bidding war. After that, the rundown, three-bedroom started looking a lot more attractive. There wasn't much time to consider further – the seller was taking offers the next day – but the couple decided to take the leap of faith.
"We said, we know there's no home inspection, we know what we could be potentially getting into, but here's our offer, less than what we'd offered for other houses, under the idea that if we get it for this price, we will still have money left over to do some renovations right away," says Mr. Boyles.
With four other bids in play, they got the house for about $100,000 less than they had offered on other properties. Mr. Boyles says that after the sale, they've been able to inspect the house further and have found happy surprises, including updated electrical work and good hardwood under the aging carpet.
"It really worked out in the end and we couldn't be happier," he says. "But no doubt, when we bought it, we had some sleepless nights."
Pressure to buy
Buying a fixer-upper can be a nerve-racking proposition for would-be homeowners worried about ending up with an endless money pit. But in a market as hot and as competitive as Toronto's, buying a house that needs work is often the only way to land a deal. A record number of homes were sold in the Greater Toronto Area in August, at an average price of $700,000 (an increase of 17.7 per cent from the same month last year). Detached homes in the City of Toronto proper cost on average of $1.2-million (up 18.3 per cent from last year).
This buying frenzy has meant that bidding wars and "bully" offers – when a buyer submits an aggressive price before the scheduled offer day – happen frequently. Consequently, buyers are often willing to rush in with a bid on less-than-optimal properties without having a chance to conduct a home inspection or thoroughly examine the property, says John Pasalis, broker owner of Realosophy Realty in Toronto.
"It's been common for some time because there's so much anxiety in the market," says Mr. Pasalis. "It's beyond not getting home inspections, it's like they see a house, they like it and they make an offer in an hour."
He says that rushing to buy is a function of the current state of the market. Because multiple offers are so common, sellers are unlikely to accept any conditions on the sale and bully offers just heighten the fear buyers have of missing out.
"If you're waiting a week until the offer date, you have time to do some homework and think about it, go back a second time. It's usually in these bully offer situations, people can't do that," says Mr. Pasalis.
"Even if you're not the buyer who's making the bully offer, you're going to get the call from your agent at 7 p.m. [saying]: 'Someone's made a bully offer, do you want to offer as well?' And you need to make a split-second decision, yes or no."
Brendan Powell, broker with BREL Team/Sage Real Estate (and Mr. Boyles' real-estate agent), notes that even though some buyers forgo home inspections, the risks are usually mitigated by the sellers doing their own home inspection prior to putting it up for sale.
"Now that we've had a seller's market for a while, to increase the chance of having multiple offers, the seller is often doing the home inspections," he says. "It's in the seller's best interest to give the buyer's comfort and say, 'We're not hiding anything, we're laying everything on the table.'"
There can be a risk, though, notes Mr. Powell, because the inspector isn't accountable to the buyer.
"The way I say it to my buyers is, the risk is much lower if the home inspection is a reputable company that I know," he says. "It gives me comfort to say, this is a big company, a professional inspector, they would have a lot to lose if they were anything but fair."
Mr. Powell says he always recommends clients get a home inspection before offer day in order to get insight into the property, but if there isn't time to get your own inspector in, he suggests bringing in friends with construction or contracting experience to give it a look-over during the walkthrough.
Inspections in decline
Tara Valley, president of Toronto's Environmental Services Group, says she's definitely seen a drop in home inspections in recent years. "Our residential clientele has dropped off significantly in the last few years because the interest rates are so low and people just want to get into the market."
Old homes can hide surprises even if they are renovated, she says, and she's seen some doozies.
"One house, they did a brand-new kitchen reno and everything seemed to be redone, but they never insulated the walls. It doesn't matter how long you run your oven, you're never going to be warm in there," she says. "And who wants to tear out a brand new kitchen?"
In terms of her red flags, Ms. Valley says that deteriorating brick foundations in older homes can mean trouble, as well as houses that have poor grades, no weeping tile or extensions that drain into the neighbour's foundation. Moisture is always a red flag, she adds.
"You're buying a 100-year-old house, so nobody out there is saying, 'I'm selling my house, I'm going to waterproof it for the next guy,'" she says.
Mark Weisleder is a Toronto lawyer, author and speaker for the real-estate industry with realestsatelawyers.ca. He has received calls from buyers who didn't get a home inspection, including one who ended up with a mould problem that will likely cost thousands of dollars to remediate.
"Right after closing, they walked in and they smelled mould," he says. "It turns out the windows were open when the sellers showed the house, but apparently, because all the windows were shut when they came in after closing, they noticed it."
While the buyers might be able to sue the seller for concealing the mould, it's a problem most buyers won't want to face, notes Mr. Weisleder. "An inspector right away would have caught the problem," he notes.
At the same time, Mr. Weisleder appreciates that there is a great deal of pressure to make an offer without an inspection these days. In addition, paying $500 per inspection can add up if you end up losing bidding wars and having to make multiple offers.
Mr. Boyles says that he definitely learned a lot during his year of fruitless house-hunting through working with home inspectors and Mr. Powell, the real estate agent.
Though he and his wife hadn't originally planned on buying a fixer-upper, he says that now they know they got a good one, they are sleeping easily.
"It's still going to take a lot of work, but we're ready for it," he says. "We get to put our own touch on it."