TRESA: Securing a Pre-Listing Inspection under the New Rules

Once the new disclosure rules came into effect under TRESA, agents have had second thoughts about the pre-listing inspection.

In many cases, they were a very good idea. With an older home, there may be issues. If some concerns on the part of potential Buyers could be eliminated, then, we might generate a bidding war with Buyers having fewer reservations.

Here’s an outline of the new steps:

  1. Get a Listing signed,
  2. Secure the Seller’s informed consent about a pre-listing inspection,
  3. Identify a Home Inspector with a solid, reputable reputation,
  4. Ensure that the Home Inspector is covered by insurance,
  5. Ensure that the Home Inspector will permit its Report to be published,
  6. Ensure that the Home Inspector will write the Report in favour of the successful Buyer for a nominal fee,
  7. Have the Seller’s lawyer order the Report,
  8. Have the lawyer review the unsigned draft Report,
  9. If the draft Report is not acceptable in the opinion of the lawyer, simply proceed without any further involvement,
  10. Assuming the lawyer is satisfied with the Report, the lawyer should order the signed, completed Report,
  11. Proceed with respect to disclosure,
  12. Publish the Report as a schedule on MLS,
  13. Leave a copy of the Report on the dining room table,
  14. Forward a copy upon request to interested parties,
  15. Include a clause in the Agreement of Purchase and Sale which obligates the Buyer to purchase the Report for a nominal fee directly from the Home Inspection Company and include a limitations of the Seller’s responsibility for matters addressed in the Report provision,
  16. That clause should be specified in the Listing Brokerage’s Schedule “A”, drafted specifically for this transaction,
  17. Permit and encourage potential Buyers to arrange an inspection of the property by their own trusted home inspector at their own expense before “Offer considerations”.

If the above steps are followed, the Seller’s liability should be reduced, as well as the agent’s disclosure responsibility.

So, for those agents who have effectively used pre-listing inspections, this is a good option and works well under the new TRESA legislation.

Hopefully, it will generate higher Offers and ultimately a higher price for the property. Also, the Buyer should be in a position of “full knowledge”, meaning that the likelihood of any future lawsuits for holding back information will be substantially reduced.

Brian Madigan LL.B., Broker

Comments 6

    1. Post

      Your choice. At the outset you would not acquire the actual Report. That means there is nothing to provide to anyone.
      However, it does likely indicate that there is a serious problem of some nature.
      The Seller should then discuss this matter with their lawyer.
      If repairs are required, and they proceed, then, the Inspector can return and complete a Report which would be favourable.
      But, if there’s a suspected problem and no potential solution at hand, then, the Listing agent should strongly consider not proceeding with the Listing.

  1. Good afternoon, Brian.

    My name is Jason Cherry. I own and operate Cherry Home Inspections, Inc. I’m in the Brantford area. I read your post about pre-listing inspections and I like the detail and thought regarding the creation of professional relationships between the inspector and potential interested parties.

    I have a question for you about #6 on your list: “Ensure that the Home Inspector will write the Report in favour of the successful Buyer for a nominal fee”

    My assumption is that you are suggesting to ensure that the home inspector will enter an obliged professional relationship with the successful buyer? Is that correct? The ‘in favour of’ language has caused a dicussion in an inspection group and I was hoping for clarification.

    Thank you!

    1. Post

      There are many Inspectors who will rewrite the Report in favour of the Buyer for a fee of $50.00 to $100.00.

      This isn’t a second Report. It’s dated the same day as the first Report. Naturally, there would be a qualification, namely, that the inspection was undertaken on XX date.

      It does create a contractual relationship between the Inspection Company and the Buyer.

      This doesn’t actually increase the Home Inspector’s liability. It’s just the same, but now the Buyer can sue the Inspection Company directly in contract. Previously, the Buyer would have to sue the Seller and the Seller would have to sue the Inspector. This arrangement just takes the Seller out of the loop.

      The “in favour” reference, simply meant “in the name of” rather than “a more favourable Report”.

  2. This is just smoke and mirrors to again get the “Full Disclosure” principle watered down.

    A Home Inspector can only do a snapshot inspection of the property, and any hidden (latent) defects that are known to the seller can get missed.

    If a buyer contracts for a Home Inspection, then they do indeed absolve the Seller of any risk bar fraud.

    As I understand it, under the current legal rules, it is better for a Buyer to not ask for a Home Inspection, relying instead on the assumption in the Sale and purchase agreement that a Home Inspection will not take place, and then sue the Seller and any responsible realtors for any unmade disclosure that is to the detriment of the property and the buyer’s interest.

    All these current “processes” are there to leave the Inspector holding the bag,, for a meagre Inspection fee, while those who, in my opinion, appear unable or not willing to do their utmost to protect both parties (i.e. the Realtors) to escape liability and still earn the largest sum for doing nothing more than acting as a Sales clerk in a Property Store.

    1. Post

      No, this is simply a method of ensuring that Home Inspections will not be entirely eliminated at the pre-sales time. In bidding wars, Buyers will drop the home inspection condition. Then, they are fully at risk. Here, they at least have one Report.
      There’s no increase in liability for Home Inspectors. The person who is going to sue them is the Buyer. The Seller is no longer involved. Once there is a direct contract between the Buyer and the Inspector, there is no need to sue the Seller for the Inspector’s mistakes. Naturally, they may still be sued with respect to misrepresentations.

      Hopefully, there will be “more” information available and not “less”.

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