This is our first home. We already knew we were in for quite a long road ahead with like potential renovations, maybe renting it out like we were biting off a lot. And then to have this idea of like, maybe the soil not being remediated in time or whatever was like very stressful, and just definitely something that we didn't really want to have to explore in our first home.
Bethan Moorcraft: Welcome back to Half Banked. I'm Bethan Moorcraft.
Cadeem Lalor: And I'm Cadeem Lalor.
Bethan: Thanks for joining us for the second episode of our three-part real estate series, The Next Generation of Homebuyers.
Cadeem: In part two, we're exploring house horrors and being house poor. We'll be joined by a real estate agent and a home inspector to help us shine a light I want young buyers are dealing with in today's market. They'll point out red flags for the home buying journey and share why getting a home inspection before buying is so important.
Bethan: So let's say you're a millennial who's been able to buy a house. You've beaten the final boss, you've saved up for a down payment and have some backbreaking labour you're now moved in.
Cadeem: But the joys of homeownership are just getting started. Did you budget for everything you need? Maybe you want to renovate the kitchen, repaint some rooms, now you either fork out a few 1000 to have someone else do it or pay less but spend a while getting it done.
Bethan: There are some expenses you can try to budget for as best you can. But there are some that might be unforeseen, especially if you bought your home without inspection.
Cadeem: For the second part of our home buying series, we want to discuss ways to avoid being house-poor and things to look for to avoid being stuck with a house that's a money pit.
Bethan: Many Canadians are in this situation. According to a recent Ipsos poll, 46% of Canadians are $200 or less from not being able to cover their monthly household expenses. 57% also say they'll be in financial trouble if the prime rate goes up since it can affect loan interest and mortgage payments.
Cadeem: Today we'll be discussing home buying with Dusko Sremac, a Calgary-based realtor. We’ll also be talking to Leigh Gate, professional home inspector based in Ontario. We also have the real-life story of a young Toronto couple who had a headache of a home-buying experience that can serve as a warning to any first time buyer.
Bethan: Our first guest is Dusko Sremac, managing partner with The Real Estate Partners at Real Broker based in Calgary. Welcome Dusko.
Dusko: Thank you, guys, for having me today.
Bethan: It's great to have you on the show. So just go across much of Canada, it is harder than ever for first-time homebuyers to get on the housing ladder. What extra hoops are young homebuyers having to jump through in order to buy a home?
Dusko: In our market, for instance, inventory’s down anywhere from 40 to 60% depending on the market segment that you got, that you're in. Every decade, we do see this inventory crunch, so it won't last forever. But I think it's here to stay for at least another few years.
Bethan: Absolutely. Well, I think Cadeem probably knows other people like I do who have moved from Toronto or this kind of Southern Ontario area out west, because it seems like the only affordable place at the moment. Is that fair, Cadeem?
Cadeem: Oh, absolutely. So I know a few, personally. And also looking at areas like Manitoba, Calgary, that's just being done basically to find somewhere that is more livable, kind of get more bang for your buck, in a sense. I guess I'm also wondering, since we are discussing, you know, homebuying, are there any basically home buying horror stories or regrets that you've come across in your work so far? Are there any that stand out for you?
Dusko: I think every market will see the horror stories, the horror stories of “oh, I didn't know I backed onto LRT,” meaning like public transport onto a train. Or “hey, like, I didn't know that this home had asbestos or ABC.” And it always comes down to due diligence. Whether or not the market is hot, proper due diligence is key.
In a hot market or as a market is picking up, a lot of buyers tend to take more risks because it's more competitive. So they're willing to do no financing, no home inspection or no condo doc review. And it's a calculated risk that sometimes needs to be done for you to be competitive and get a home. But it is a calculated risk, at the end of the day. And you need to be able to afford potential liabilities that come with that.
Bethan: You mentioned due diligence there, Dusko. I mean, what does that look like for a first-time homebuyer? Have they've got all these other challenges and things to think about? What is sort of best practice due diligence in this process?
Dusko: This is going to be a corny answer, but I promise you it's coming from the heart. Before I got into real estate, I was in construction, and I use multiple agents. And the number one thing that can help first-time homebuyers, that can help any buyers is having an agent that knows and understands the community. And think about it like this: since COVID started, we've had 2000 plus real estate agents join the industry. Same thing with Ontario.
If someone's an agent and only does 1-2-3 deals a year, they're not going to have that in-depth experience like maybe they should in certain areas. So maybe they don't know that area has a high water table and is known for overland flooding. Maybe they don't know that the sewer systems need to be up needed. So number one is having an agent who has the inside track and that specific knowledge that comes with time. That's number one.
Number two is being comfortable and preparing yourself for those multiple offers. So, ensuring that financing is in place. I see a lot of home buyers saying, “hey, I want to look at this home,” then they get very excited, and they want to write an offer. But unless financing is in place, because you might be dealing with a lot of cash offers, or offers where they know that they can close. So if you don't have financing, I'd say that's step number one, step number two, finding an agent that knows that specific community and specific marketplace that you're interested in, because agents are not created the same, right? People have different levels of experience.
Then lastly, understanding that there is liabilities in not doing a home inspection. Realistically, a home inspection, you're gonna see the age of items, which can be done during the home inspection. They're gonna open up the panel, they're gonna go through the mechanical, they're gonna look in the attic, things that we are not able to do as realtors. We can give you a general timeline like, “hey, this home was built in 2003, the roof most likely needs to go the hot water tank is past its life expectancy and the furnaces getting there.” Right?
We can't quote on it, but we can connect with the right people to quote. So it really just comes down to would you rather rent at two to $3,000 a month or compete, get the property and potentially budget another 1015 $20,000 in repairs after.
Cadeem: Leading off of that. So you're looking at kind of the cost of going into a new home, things that might get missed, you know, without a home inspection, so forth. I'm wondering, you know, going into what some people call this the biggest investment you'll make in your lifetime. What are some of the questions you want buyers to ask themselves before they put an offer in?
Dusko: I feel like in this market, you have to have urgency, but you can't have too much urgency. The way that I like to do it is I just like to have a conversation and just understand what's important to you. Why are we buying here? Because what I see a lot of in this market, especially with first-time homebuyers, and it’s very unfortunate is we go from “you know what, Dusko, I want a three bedroom, a large yard and a double detached garage, developed basement doesn't matter.”
We go from that on day one to fast forward two weeks late, after losing out on maybe one or two or three offers to say, “I'm okay, it was just one bedroom, I don't even care if it has a yard, I don't even care if it has a garage, I just need a home to live.” And it's like that panic-induced offer writing right that we just need to avoid. And that's where we come in as the professionals to calm everything down because it is a process. And just because things are selling day one very quickly, it doesn't mean that we need to be the one submitting.
It's just about narrowing it down and just ensuring that the home works for them and their lifestyle and not forgetting what the important features of that home are. If you require a three-bedroom for two children, and you want to be on the same level, let's not sacrifice. There's things that we can sacrifice.
Maybe we're not in the neighbourhood, maybe we're in the neighbourhood past. Maybe we lose a little bit of square footage. Maybe we’re not south-facing yard, maybe we’re north-facing yard. But when it comes to the structure and the bones, we can't sacrifice on that too much.
Bethan: Dusko, you mentioned that people get a bit desperate after missing out on one or two offers, etc. In a house market like we're seeing today, as you said, very hot. How many offers can you expect to miss out on? How long is this taking? And is it gonna get into 20, 30 and you're struggling to nail a deal?
Dusko: In some cases it is and like there is FOMO, there is fear of missing out where people think “well, if I don't buy now, will I be able to afford in the future.” And I completely understand because based off of inventory, we're way behind what we projected even two, three months ago. Because for me, if you came to me, and you didn't have a realtor and you said “hey, I've missed out on six homes.” The first thing I'd say is what is the price point?
Because if you're pre-approved at $500,000, you should not be looking at homes that are listed for 500,000. Because it's not a matter of what they're listed for, it matters what they're worth, and what the comparables are showing that they're worth. So I just viewed two homes as examples I just showed my client these two homes last night, they're both listed at 500,000. Both of them sold over 560.
It doesn't mean that they were worth 500 and they sold a 560. They were worth 550 to 560 already, they're just under-listed as a marketing strategy. And it's so important for people to understand that just because it's listed 500 doesn't mean it's gonna sell at 500. I feel like a lot of people misunderstand, “well, this home selling 80,000, $100,000 over asking, well, I could list it 150, $200,000 under ask.” Just because it's selling over ask doesn't mean it's selling over market value.
Cadeem: I will say from my own home-buying journey as well in the Hamilton area, we have been to open house where the real estate agent for the owner has said that they're, you know, listing it under in order to basically incite a bidding war that will kind of push the price back up, you know, another 100,000. And we personally witnessed trying to get a property that's listed for a certain price and then ended up selling for about 200,000 over and this was back in November 2021 area, I think that's like one of the hotter periods you get relative to now.
Definitely can relate to that piece of it in terms of the home buying process, but then also coming across the reality of blind bidding, where basically you don't know what other people are putting in, you just know they put in a bid. And we end up losing on one spot, it was like less than $5,000 because we didn't know how much, and we have a limit set. We're not going to go over that. And then you're dealing with all that in GTA.
I kind of wonder too, are you able to share any insight? Is there more people moving to like Western Canada in general, you know, including places like Manitoba, Saskatchewan?
Dusko: We're seeing a huge shift in the financial and tech sector. I think a lot of positions have become mobile, like remote positions. And when you look at an Ontario market, and for what you get, like we can still be in a new world build, something built in the last five years, let's say infill 1800 to 2000 square feet, anywhere from, you know, 800, 850 to less than a million dollars. When you look at the Toronto market, you might be double that, and you're within 10, 15 minutes of downtown, the core. So price-wise, we're still significantly less.
Yeah, we may miss out on some of the culture that you guys have, obviously, because of the population and some of the amenities. But realistically, we have the mountains, clean air, it's a very clean and safe city. We are seeing quite a bit of growth, but the influx of people coming in because of remote living is incredible.
Bethan: Dusko, I'm a renter, still I do not own a home. And that sort of thing really scares me because, you know, I probably go into it with a budget. And I don't know how far or below the target I am. If I wanted as a first-time buyer to buy a home without getting into a really tricky, uncertain bidding war, what do I have to do?
Dusko: Okay, this is a tough one. So I can't speak on your market, but I can speak on mine. But this, I guarantee this applies for whatever market you're in across North America, almost. So if you would purchase a home today, do you think that you could? Would you lose money or gain money in the next three years? What do you think?
Bethan: I mean, I'd like to gain money. But I imagine I would lose money in three years, maybe earn it back in five?
Dusko: Short term, unless you have a magic ball, nobody knows. But in 10 to 15 years, it's a very safe assumption that you will make money. Nobody can time the market. And I always tell my first-time homebuyers, even my investors, if you're in it short term, it could be volatile and you could lose. So homeownership should be looked at as an investment because it is a very large investment.
But long term, you have always made money in a Canadian market for the most part, if you're holding it long term.
Cadeem: So just want to ask, you know, with the issue of renters trying to make the jump to homeownership, how would you define house for like, how does that look in the market now?
Dusko: I would define it as if you are stressed or if you think that there is a potential that you cannot pay your mortgage or that it's going to be tight, I define that as house poor. I define it also as if you do not have an emergency fund or the ability to pay for an unforeseen expense for your home, that is house poor.
Cadeem: And how can people try to avoid that?
Dusko: Just because you're pre-approved at 5, 6, 7, $800,000 doesn't mean we need to go there. I always tell my clients this,” where are you comfortable? I don't care about your pre-approval, I don't care. Let's just talk about where you're comfortable financially. Because I don't want two things to happen: a) I don't want you to settle for a home and come home every day regretting that you purchased it. 2) I don't want you to reduce the amount of enjoyment that you get out of your home, I don't want you to be stressed, am I going to pay the bills this month, because you've tapped yourself out.”
Realistically, if you're pre-approved at X amount of dollars, I don't want to even get close to that 10% mark, I'd like you to be at 80 to 90% of your pre-approval. If you're comfortable to go into 100%, let's go at 100%. But let's also talk about the additional factors and fees associated with homeownership, such as property tax, such as maintenance, such as insurance. And I feel like a lot of people don't take into that account.
If your furnace goes, it's 5,500 to $6,000. If your roof is ready to renew you’re 15, $20,000 for repairs, and that doesn't include windows, and that doesn't include unexpected items that could fail early as well.
Bethan: Yeah, there's lots of unexpected home costs for homebuyers. I think they are particularly scary for first-time homebuyers who've slogged and put the hard graft in to get that down payment. So Dusko, thank you so much for sharing your insights. It's been a pleasure having you on the show.
Dusko: Thank you, guys.
Cadeem: So, Bethan, as someone who's looking to buy a home in the next few years, I'm guessing, what are your thoughts?
Bethan: So definitely, I have a lot to think about. What stood out to me I think was the importance of doing appropriate due diligence and also sticking to your plan. So if you, either by yourself or with a partner, have decided you want a three-bedroom house, stick to that plan and work with a realtor to find that plan if you can. You may have to make compromises elsewhere.
For example, I would love to live, you know, stay here in downtown Toronto, but I know for a fact that I'm going to struggle to afford a three-bedroom house in downtown Toronto in the next few years. But perhaps I can kind of look elsewhere and still find that dream home that I'm looking for. What about you?
Cadeem: In terms of looking at his other points, I think the under listing as he mentioned it, because I think we kind of came across that in our home buying journey, like, you know, like I mentioned that kind of fall 2021. And that's something we sort of learned the hard way. It was, you know, trying to go for a house that was listed for this. And then turns out, it actually sold for literally at that time, 200,000 over. And we got used to that cycle after a while too.
With our budget, we had to kind of aim for much lower than it in order to basically work out that by the time the bidding war engages, and so forth, probably gonna balloon to this price, and then we're good at that price.
Bethan: Well, this shows just how new I am to this process, too. Because when he said that, I find that quite shocking. For me, if someone, the bank said, you know, you're approved for $500,000, etc, I would be so excited. I would go and look for houses in that price range, not thinking that I actually need to be looking, perhaps below because the true value of houses is being undervalued on the marketplace. Yeah, that was an eye-opener for me
Cadeem: It is a bit of a kick in the teeth. So it's just a good thing to keep in mind that you know your budget, you have to sort of aim for underneath it and account for a bidding war in order to get to where you want to be.
Bethan: So it's kind of tough, because a lot of first-time buyers like myself, we're currently renting, the rental market seems to have gone crazy. I'm paying a lot of money for rent in Toronto. And then when you do get this opportunity to buy a home when you think you can afford one for an X amount of money that actually, you know, that's going to be a bidding war or the price is actually going to be hiked up X percent.
It’s such a hard thing to plan for when you're, you know, splashing out $2,000 a month in rental, whatever it is. So it's really challenging.
Bethan: We talked to couple Chris and Julia, who've chosen not to share their last name for privacy reasons, all about their experience of buying their first home in Toronto in June 2021. We asked them to share their story and to tell us about the lessons that they've learned that they want other first-time homebuyers to know.
Julia: We started looking for homes, I guess it was October of 2020? Took quite some time, but we knew it was going to take a lot of time and there was going to be many a bidding war. So we looked for several months. We finally found a spot that, you know, it wasn't obviously perfect, but we knew we weren't going to get perfect. And it was more of like a we saw it as an income property because it had several rooms, it was a fixer-upper for sure but we were willing to like put in the work to make it ours.
Chris: We bid on a lot of hoses, maybe four?
Julia: No, I think it was like seven.
Chris: Maybe seven, yeah, over like four or five month period of time. So we had the offer accepted and one of the stipulations upon closing, so that we were made aware that there was a buried oil tank that was going to be removed. I think like legally, you can't sell a house without removing a buried oil tank, you can have an oil tank, you just can't have it buried and then sell your house.
It’s the owner’s obligation in the sale to remove the oil tank. In the instance of a buried oil tank, there needs to be an analysis on the soil done to ensure that there's no like remediation that's required for the soil. And so I guess one of the stipulations of close was that the seller was required to both remove the oil tank and then complete the soil analysis and essentially validate that there was no need for soil remediation.
Leading up to our close, obviously, like you have-
Julia: Many things to do. There's like so much paperwork, meetings with lawyers, visits with our agent, visits with family to check out the space. We had a contractor like onboard to help u,s you know, we were going to do a few renovations here and there because it was a fixer-upper.
Chris: Yeah, there was a deadline call, like out from the closing date where the paperwork was required.
Julia: And we didn't receive it on the day that we were supposed to receive it. We continued to follow up to check-in. There was a lot of like back and forth not getting like really like a lot. There was a lot of miscommunication. We weren't getting answers. And we were getting quite concerned with the idea of this closing and us not having confirmed if the soil was like contaminated or not. And we really didn't want to have to take on this new-
This is our first home, we already knew we were in for you know quite a long road ahead with like potential renovations, maybe renting it out, like we were biting off a lot. And then to have this idea of like, maybe the soil not being remediated in time, or whatever was like very stressful, and just definitely something that we didn't really want to have to go, have to explore in our first home.
Chris: Yeah, we chatted with our lawyer. And like, I guess like the options that were put forth to us were that like, you can withhold money at a close relative to the value of the work that you anticipated, right, that was required. I think the challenge for me with that were, for us with that one was like the scope of the project can really grow on you. So remediation can range from, like, you know, a couple grand to a couple 100 grand, depending on like what's happened.
If you're paying, you know, top dollar in Canada's hottest housing market, like, as a buyer, you have very little power, especially at that time. But I think like for us, I think it was important that that wasn't a concern that we had to bear. In a conversation with our real estate agent, we effectively communicated that if they weren't able to provide the paperwork prior to close, we weren't going to close.
I took issue with like it being characterized as us having cold feet. Whereas like, it was a term of a contract that wasn't being met. And in my mind, it's breach of contract. It's not cold feet.
Julia: So we ended up walking away from this house. It was a very, like unique home. Like it wasn't for everyone and I thought, “we’re walking away like, this is good, like we didn't want to take this one.” Truly, I think was like a day later, it was up for sale, on HouseSigma. We were like, “what the hell?” And then it sold, like within 24 hours
Chris: For more.
Julia: For more! It was wild, it was so insane.
Chris: We just took a break.
Julia: We did take a break, a few months, because we were like that was not okay.
Chris: The house that we ended up purchasing, I think we had like three inspections. The amount we've paid on inspections over the last, over that time was enough to you know, put it down payments. So our story, like on the inspection side was just like ensuring that the other side honoured their obligations as a consequence of the inspection. I would like definitely want to have a home inspection. And like, if there's an obligation, this is a decision that people have to live with for quite some time.
I would definitely recommend that anyone in the buy-in position, even though the market might be favoured to the seller at the time, they leverage all the power that they have. And honestly don't give an inch. And I think one more on a larger scale. Like there's a lot of FOMO, like people are buying houses, you're worried about not getting into the housing market, there's like, there's a dynamic at play that's very intense and that may might make you lose sight of the bigger picture in that like, this is the biggest financial decision you'll make in your life.
You need to think about that within this, over a spectrum of time and not make a decision based off of a moment. The market dynamic at a specific point of time isn't a forever thing. And so you need to keep meaning to maintain perspective over time. I think it’s like a really important thing and not like, just get caught up.
Julia: Yeah, it's very easy to get caught up.
Chris: Because you want to hope. You want an outcome and you feel very, like you just want to make it work. But executing some patience and like thinking about the bigger picture is really important.
Cadeem: I have to say, I think a piece of the story that stuck with me, I mean, oil tanks aside, was just the fact that that property, once they walked away from it, you know, back posted again and then sold within 24 hours as well. And you know, from someone who's trying to buy during that time period as well, you know, with the bidding wars and so forth with the demand for places, you know, seeing an open house with a line of 20 plus people outside, it definitely rings true.
Bethan: Cadeem, so, you know you've been through the process of buying a home. Do you think that Chris and Julia made the right choice walking away from that first deal?
Cadeem: Oh, absolutely. It seems like that's, at the very least saves them a lot of stress. I think peace of mind. It’s in, you know, could be 1000s of dollars if there was that issue, the soil remediation needed, you know, 1000s upwards from that. I think not having to worry about that issue and then just taking some lessons on to the next place just seemed like the best course of action.
Our next guest is Leigh Gate, owner of Home Advantage Property Inspections and a full time professional home inspector since 2012. Welcome, Lee.
Leigh Gate: Thank you for having me.
Cadeem: Well, since we've been dealing with a recurring topic on this podcast definitely is the hot real estate market. So I wanna ask you, how's the heightened competition in the housing market affected your business?
Leigh: In 2020, it was great because as the market was heating up, business was accelerating in good fashion. And then we hit a tipping point where it became more of a seller's market than a buyer's market. And what was happening was realtors were holding off for presentation nights, which certainly serves the selling clients very well. But it forced people to go in with basically a blind bid situation.
They had to go in with as an attractive offer as possible, and that sometimes led to over ask purchase offers. And it also resulted in removing as many conditions as possible. So home inspections is one of the easy conditions to remove, it's fairly quick and easy to take out of the offer. And business for home inspectors actually plummeted for 2021 and 22.
Cadeem: Thank you. Well, I myself also did buy in 2021. And I think that was something that we experienced as well. Thankfully, no real repercussions from that yet.
Leigh: Good news.
Cadeem: Definitely, of course, absolutely.
Bethan: One of the reasons why people may choose to waive the inspection, perhaps, is that they're just trying to save a little cost upfront. And at least you know, how much does it cost to get a good home inspection?
Leigh: Well, the average inspection, it all depends on the size of the house and the makeup of the house. But really, the average cost of a home inspection is five to $600. And if you think you know about the purchase price that we are putting out there 700, 800, 900, over a million for a house, really what we're talking about is less than a fifth of 1% of purchase price.
To put that in perspective, people will spend perhaps four times as much on a real estate lawyer as they will on a home inspection. They might spend twice as much on a moving company as they will on a home inspection. And yet, the home inspection is the one device, the one mechanism that allows a homebuyer to determine whether or not the house is safe and functional and it's going to last.
Bethan: And are those prices average across Canada?
Leigh: It varies across Canada by market and it varies of course, by inspector. Because we have right now, at least in Ontario, it's an unregulated profession. So we have some folks that will up be out there working part-time. And they might be inspecting a house for, let's say, $400 instead of five or six. But they're not carrying the same business costs, because they may not be properly insured, they may not have taken building code courses, and they may not have been properly mentored into the profession.
There's certainly a wide variety of home inspectors out there and the services they offer. But really, primarily, I think $600, $500 is a pretty good price for a home inspection.
Bethan: Seems like one of those situations where a smallish cost upfront can save you quite a lot in the long run. With that idea in mind, you've talked about people waiving inspections. Why is that a bad idea?
Leigh: Well, there's two things. The first, and perhaps the smaller issue is a home inspector goes in and not only do they learn the home and figure out what it is that needs to be fixed or protected, and they educate you on how to do that. But they also educate you on how to keep the home in really good shape. They find those vulnerabilities and they let you know how to protect them.
Cadeen: Thank you. Well, as I began mentioning about that home 2021. So we did get it inspected kind of shortly after moving in. And you know, not kind of the ideal time to do it. But thankfully, no, no big issues. And as you touched on, too, it wasn't just about finding defects per se, which is what people might focus on. It's also hidden, good looking at things that we can upgrade that can help to boost the resale value. So when- you're also looking at that issue.
So do you have any home inspections, I guess stories that don't end as simply as that where you just get some ideas for improvements? Do you have ones that basically become kind of horror stories?
Leigh: Sure. You know, I could probably fill two or three podcasts worth of stories. Every home inspector probably has, you know, a dozen anecdotes at our fingertips. But there was a young couple with three children and they were trying to buy a house in Orillia. And as soon as I pulled up, I could actually see that the foundation wall had somehow sunk in rotate. And when I started my home inspection to realize that all of the houses on that street, you look around and you try and get a sense of the neighbourhood. All of the houses were all on angles.
It looked like a Dr. Seuss book. It was crazy. So as I'm going through the house, I'm finding that the floors are sloped. The refrigerator in the kitchen actually was shored up because it would roll across the floor if you didn't at least shim it up so that it was level. And this was a fairly significant structural problem and it turned out to be a soil issue. And when I spoke with the young couple with their young kids, trying to figure out what their renovation budget was, they said, “Well, we're really putting everything that we have into the downpayment, we don't have a renovation budget. So we're just trying to do the best we can.”
That's concerning for everybody involved because if they bought this house, it would have become a money pit for sure. I drove past the house a couple of weeks later and it was gone. They had actually bulldozed it.
Bethan: How often is it the case that people come for home inspection, they talk to you, and actually they don't have that budget to make necessary renovations?
Leigh: Realistically, it's not that common. A lot of what we do is protecting people from, you know, electrical hazards, or water hazards, things like that. But every once in a while, there is a significant, perhaps a septic system malfunction, or it's at the end of its life expectancy, or there's a safety issue in a house. But really, by and large, it's all the small stuff.
Cadeem: He's mentioned electrical hazards, like what are other kind of smaller issues that people maybe don't think of that you can guess end up saving money on in the long term with a home inspection?
Leigh: Yeah, so I commonly find a breaker in a panel that might be a 30 amp breaker, but it's serving a wire that's too small for the breaker. These are things where a homeowner perhaps or the homeowners, you know, Uncle Steve goes in and they install a new breaker, but it's too big for the wire it serves. And it seems like a small issue. But if that circuit overheats, the breaker won't trip, the wire becomes a fuse. So that's a fire hazard. Right? So I find that fairly common.
Every home inspector will talk about GFI outlets and where they need to be positioned near sinks and that sort of thing, handrails and staircases all that kind of stuff. They're small safety items. It sounds basic, but those are the things that can hurt us in our home.
Bethan: Young homebuyers, they don't have a huge money part, they're excited to get on the first rung of the housing ladder. This could be their final stumbling block of their dream home. If they have an inspection, everything's you know, they find that things are wrong. How do you see young homebuyers kind of approaching this?
Leigh: The key with a first-time or younger homebuyer is to make sure that we put everything in perspective. So when there's a smaller deficiency that really should be fixed, but it's not an expensive deal. Communication is key for us so that we know how to put things in perspective, we know to say, you know, this might be a $200 fix, but it's an important thing, right, versus the things that might be a $10,000 fix. And that could be a deal breaker.
Bethan: That's interesting. And the other thing, I actually wanted to take it back to when you're home buying horror, inspection, horror stories, the house that was on the slope, was that visible to the naked eye, you know, to someone who's not a home inspection? Would I have been able to walk in there and see that deficiency? Or would I have needed a professional home inspector to help me understand that?
Leigh: For me, it was completely visible. As soon as I pulled up in my truck, I didn't even get into the truck yet and I saw it and I knew we were in for some trouble. But I'm trained in knowing what to look for. So no, for those folks, they had no idea. They knew that the floors were sloped, they didn't know why and they didn't know what the ramifications were.
A properly trained professional home inspector is going to be able to look at a tilted wall or a sloped floor, and they're going to be able to relate it to a window that doesn't work properly, or a door that won't close. The key is putting all of those components together and being able to analyze all of the systems in the house and how they relate to each other and what the cause and effect is.
Cadeem: I was actually curious about that too, because in the case of my home-buying journey, our real estate agent was also a contractor. So there were some things he was able to look for that I guess maybe the average real estate agent wouldn't in terms of looking at something for it's like that was an example of one place we checked out where he kind of just, you know, put a pencil on the floor, just looking at rolling, just seeing that that was too much of an issue. And then he basically knew at this another place for us right away.
I guess I’m curious too, because I know that there's some people might do basically bring a home inspector with them. They just want to kind of have a quick walkthrough as they do a tour. I guess I'm wondering, do you feel that that's effective enough? Or do you kind of need definitely need more in-depth look at things?
Leigh: Yeah, it's it's really not. So during the pandemic, when the market really accelerated into a seller's market, the inability to get a home inspection done resulted in buyers asking home inspectors to come with them for a showing.
Cadeem: Right.
Leigh: Now, if I'm going into a house, anything under an hour, I'm of no service to a buyer. Because really, I don't have a chance to get a sense of like I was saying before, how all of the systems of the house work together. I know that in various markets in Canada while the pandemic was going on and while the market was a strong seller's market, there were home inspectors that were out there doing 30-minute walkthroughs a walk and talk consultation. But that doesn't protect the buyer, right?
Bethan: You mentioned earlier that people can use an inspection to keep their home in good working order. Is there any other way that kind of young people, young homeowners, they might be in their first or second home, can kind of keep using inspections to their advantage you know through their journey?
Leigh: The big thing, talking about keeping your home safe and healthy, it's all about how to manage all the systems in the home. And that's as simple as how often do you change your furnace filter? Does your home have air exchanger? Should those filters be cleaned? How often do you test your smoke alarms? How often do you drain off the bottom of your water heater because that sediment builds up in the water heater?
All of those little things, people really don't, it's not front and center for a lot of people they go through, they'll fix things that they think are broken. And that's it, but they don't do the preventative maintenance to keep things from actually breaking down in the first place.
Bethan: Yeah, as someone who does not yet own a home, all of these things really scare me. I don't know how anyone could go through without an inspection because I have no idea what to look for, so.
Leigh: Some of the highest-cost things that we find, they're not even that dramatic. It could be if you're buying a house that's 30 years old, which is only a 1993 build, I actually live in one right now. Furnaces, air conditioners, water heaters, and roofing, all of those things, they have lifespans under 20 years. So when you're looking at a house that's maybe 30 years old, or 25 years old, you have to have somebody come in and assess it.
Because if you had to replace your furnace and air conditioner and your roof, let's say just those three things. Right there, you're you're probably $15,000 depending on the size of the house. That's money that people who are putting in as much as they possibly can as a down payment may not have for immediate repairs go in one room.
Bethan: Yeah. Well, the one other thing that you said as well, you explain that often, you know, inspection confined small and common issues and in all homes or any home. But are there any common issues that you typically find at least a few that will help homebuyers save, you know, a good amount of money in the long run if they kind of make a few small tweaks?
Leigh: Yeah, absolutely. One of the one of the least expensive maintenance items that I find regularly on a home inspection that will save you big dollars, is changing the furnace filter. It's amazing to me how many times I go into a house and the furnace filter is absolutely full of pet hair and dirt and dust. The problem with that is it slows down the amount of air that's actually passing over your furnace heat exchanger. And if it overheats, if you limit that airflow, it can actually wear out the furnace a whole lot faster than its typical life expectancy.
A furnace should last, you know, in the neighbourhood of 20 years, 25 years. But if it's not well kept, it can need replacement in 10 or 15 years and the furnace is four to $5,000 easily, right? Insulation in older home attics, ventilation in the attic, loose toilets are a big problem. So if a toilet is loose, it's a five or $10 wax seal that can actually fail. And then you have a toilet and you can do a ceiling. Those types of things. So those are all the things that we look for, and it can save you big dollars down the road.
Cadeem: So if you point those things out, I guess you want, I'm wondering if you've had situations people kind of reject the advice. And if that happens, are there anything you need to do legally to sort of separate yourself from that?
Leigh: No, as long as we document the advice properly, and we have educated those folks, and we've said, “here's what's wrong, here's what could happen if you don't fix it, here's what you should do your next steps in order to fix it.” We document all of that and we pass it on to them. I think we've done our job pretty well. The trick with the home inspection is we don't have the authority in most cases to enforce changes, right?
There was a time where I saw a furnace installation in Toronto, this was actually last fall at the beginning of heating season. I don't have the authority to affect change. But I saw a furnace that was so badly installed, it was actually a safety hazard. The carbon monoxide is building up in the house. What I had to do was contact the utility provider and have the gas shut because the homeowners had refused to fix the problem. And it really was a life safety issue.
Cadeem: Okay, very interesting.
Leigh: So there are extremes, but I can tell you that in a decade of doing this job, that's the only time I've ever had that.
Bethan: Well, I can tell you when I do eventually, hopefully get around to buying a house. The first thing I'm going to do is check the furnace filter.
Leigh: Yeah, it's actually a very important but minor thing. Yeah.
Bethany: Great. Well, Leigh, thank you so much. Lots of great tips there and advice for our listeners. So really appreciate you coming on the show.
Leigh: Great. Thanks for having me.
Cadeem: Thank you very much.
Bethany: I found that conversation so interesting. It's weird to think that I could walk through a home thinking everything looks perfect without knowing that there's electrical work that needs doing, a loose toilet, as Leigh said, or the furnace filter needs replacing, all of which could cost me top dollar down the line. It's just crazy.
I can't see how waiving inspection would ever end well, but you know, obviously a lot of people do it. Some people have to do it, perhaps I don't know. But I think when I will be looking to buy a house, I'm definitely going to build that into my budget because I clearly have no idea what to look for.
Cadeem, knowing what you now know from that conversation with Leigh, is there anything you would do differently if you were to buy a home again?
Cadeem: I mean, definitely home inspection before, that's ideal. Like, as mentioned, we did it kind of shortly after, but you know, always better to do before. And it's funny that you kind of mentioned the furnace filter as being a big one, because when the home inspector looked at our furnace filter, you know, the mesh starts off white, it was black by time we took it out. We've been dealing with, I think, previous tenants or previous owners who didn't clean it much, you know, plus pets, and so forth. All of that.
And as you mentioned, that can actually mess up the basic aging of the furnace and cause it to be replaced earlier. So that small thing which we now have, you know, scheduled for replacing was just a result of paying, you know, a few $100 that could hopefully save us 1000s. So I guess, going in for us as well, another thing that the home inspector warned us off was some electrical work. And then basically getting that rewired sort of earlier on helped to save some potential issues down the road in terms of possible power outages.
That issue you mentioned with a fuse and this breaker, you know, having issues there was exactly what we were warned of, and just spending some money on that, you know, not ideal spending over $500. But then again, getting that fixed then instead of worrying about a fire later, definitely worth it for me,
Bethany: And just one final thing that he said that stood out to me is that it's a largely unregulated industry, the home inspection industry. So I find that interesting, because you know, someone going into it fresh, not knowing anything, you'd want to know that you're working with the right professional that could give you the right advice and you know, help you avoid some of these small errors, small things that could cost you big bucks in the long run.
That's definitely something you know, I'm going to think about when I go into that process and make sure that I'm working with someone who is you know, a respected professional in the space.
Cadeem: And in his case, he was part of a professional organization. And in the case of the one we used, that was via word of mouth, you know, from someone else who used his services and then also be able to refer to his website for certifications. And you know, those are the things you might not think of doing when you just kind of pop into Google Search home inspector.
But I guess because it's not regulated, there is more kind of onus on you to do more research in order to not basically get screwed over by someone who's not actually qualified to be giving that advice.
Bethany: And that actually goes back to what Dusko is saying as well about doing your due diligence. You know, buying a home is such a big investment, I think, a little bit of research, it really goes a long way and can really help in the long run.
And that was Half Banked. Be sure to tune in next week for the third part of our real estate series, where we'll dive into alternatives to buying a traditional home, including an interview with someone who's embraced family.
If you liked this episode, be sure to subscribe, rate and review us on Apple Spotify or wherever you're listening to this podcast. If you want to get in touch with us, you can email us at hello@halfbanked.com.
Cadeem: Special thanks to executive producer Samantha Eamon and producers Kevin Hamilton, Shane Murphy, James Madison and technical producers Mary Alcubierre and Muhammad Tabish. This episode was edited by Lee Podcasting. Until next time.