McClelland Minute - September 05, 2010

Do Your Diligence

If you are purchasing a house or acreage, ask your Realtor for an ancillary services form to guide your diligence strategy.  This document outlines all the types of inspections that may prove useful for the property you are considering.  I don’t advocate that you use every one of course, but it does serve as a good review of the components that deserve your attention.

For example, our Group always recommends a professional home inspection plus additional in-depth inquiries that may arise as a result of that report.  In particular, we stress those aspects related to safety and structural integrity.  For example, GFI outlets in bathrooms need to work properly or someone can get electrocuted.  If the furnace is over ten years old, check to ensure the heat exchanger is not cracked, otherwise lethal carbon monoxide may be released into the home.

If it is a rural property, the buyer should request, and be prepared to pay for, independent reports on water quality and quantity.  If you don’t have a sufficient supply of water for domestic purposes, or it is significantly contaminated, then not only do you have a potential problem for your family, but it can also impact a future sale. 

The increase in the number of distressed properties on the market as a result of this last economic recession has prompted a trickle of foreclosure actions by mortgage companies.  While it is true that this may provide an opportunity to buy a property below market value, integral to the purchase agreement will be a schedule from the seller outlining a term of sale called “As Is – Where Is”.  In other words, what you see is what you get.  It’s what you don’t see that can cause an issue, like mould, covered up cracked foundation walls, or inadequate insulation.

As these are properties that have likely been vacant for some time, the utilities may or may not be connected.  We have even seen a few surly mortgage holders who won’t allow the utilities to be turned on for a thorough inspection of the electrical, heating, or plumbing systems by the buyer or professional tradespeople.  As in all such deals, common sense should prevail and allowances made for potential problems that may occur after the buyer takes possession.  Has the water frozen in the plumbing requiring the pipes to be replaced?  Maybe it would be appropriate to plan to pull out all the copper anyway, and upgrade to Pex.

A simple tactic we sometimes use is to try to track down the former owner and politely ask them about the integrity of the property when they occupied it.  Of course if it was a rental unit, this may be more challenging.  However, one thing I have learned over the years is that tenants are never shy on commenting about the housing they have lived in.  Even neighbours can be an enlightening source of information.  And while you can’t always rely on getting the truth, there may be aspects that come up in the conversation that will prove to be useful.  A gift card to the local coffee shop can sometimes go along ways in showing your appreciation!

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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