In recent years, the Canadian real estate market has continued to heat up. The resale housing market has repeatedly broken sales records, frequently seeing multiple competing offers for a single listed property. Amidst this ever-changing market, a new home inspection trend has emerged and is gradually gaining acceptance among more buyers, sellers, and real estate agents: the Pre-offer Inspection.

A Pre-offer Inspection occurs when a potential buyer, particularly interested in a property, arranges an inspection before submitting an offer (i.e., before signing a purchase agreement), in order to understand the property's condition. This enables the buyer to confidently waive the inspection condition in their offer, which makes the offer much more attractive, especially in a multiple offer scenario. This approach is also suitable in cases where the buyer and seller have already reached a preliminary intention, or where the seller does not accept any offer with an inspection condition.

Compared to the traditional Pre-purchase Inspection (conducted after an agreement is signed), the Pre-offer Inspection has many advantages. It benefits both parties and their representatives, and is being adopted more widely. I believe this will become a growing trend worth promoting in future real estate transactions.

For buyers, the inspection process provides an opportunity to thoroughly understand the property. After an inspection, buyers have ample time to calmly evaluate their purchase decision without the pressure of a signed agreement. They are free to decide whether to proceed. An offer based on an inspection report is more objective and rational, minimizing the chances of future regret. During negotiations, the buyer can share the professional findings obtained during the inspection (including both weakness/strengths and issues) with the seller, facilitating a mutually satisfactory agreement.

However, Pre-offer Inspections have one drawback for buyers: without a signed agreement, the seller is free to negotiate with and sell to another buyer. If that happens, the buyer may lose the inspection fee. Therefore, buyers should consider their specific situation carefully when deciding whether to pursue this option. This approach is especially suitable in a multiple offer situation, when both parties have reached a preliminary intention, or when the seller refuses to accept an inspection condition. In practice, some savvy buyers have found ways to address the cost concern, such as negotiating a fee deduction from the purchase price if an agreement can be reached.

For sellers, aside from the inconvenience of a 2-3 hour for inspection, there is no real downside. A buyer willing to pay for an inspection without a signed agreement demonstrates strong interest and sincerity. Smart sellers and their agents should support and encourage such a conduct, and prioritize negotiations with them. More importantly, a Pre-offer Inspection avoids the frustration and passive position of post-agreement renegotiations due to issues uncovered during a post-agreement inspection. No home is perfect, and any property will have some flaws or issues. If a buyer withdraws from the deal after the agreement, citing inspection problems, it could cause suspicion among other potential buyers and harm the property's reputation and marketability.

By contrast, if a Pre-offer Inspection is conducted and no deal is reached, it has no negative market impact since no agreement was made. Even if the inspection leads to a failed agreement, the seller can still gain valuable feedback from the seller to make improvements or adjust future sales strategies. Therefore, Pre-offer Inspections are beneficial and harmless to sellers.

Some may ask: Does it serve the same purpose if the seller orders a Pre-listing Inspection and provides a report? In reality, Pre-listing Inspections are uncommon. Many buyers don't trust or understand these reports. Without personally attending the inspection, it's hard to vividly grasp the property's true condition, and reports can be misinterpreted. Legally, the inspector and report are only responsible to the client (the seller, in this scenario) and not to third-party readers. Given the importance of purchasing a home, buyers naturally prefer to choose their own trusted inspector. Additionally, the current lack of strict regulation and disorder in the home inspection industry have contributed to buyers' mistrust in pre-listing reports.

I've performed many Pre-offer Inspections, and one in particular stands out. A client was interested in a large, old detached house in downtown Toronto. The property, owned by a church, had been vacant for a long time and was in poor condition - but the price was very low. Many people had viewed the house, but no one dared to make an offer. It had been on the market a long time, and the listing price had been reduced several times. The client was interested, but worried about potential major problems.

During negotiations, the client wanted to include an inspection condition, but the seller firmly refused, saying: "If you're serious, we can negotiate the price - but only once. You've seen the property's condition. If you want to buy it, make up your mind. Don't come back later asking for a discount over this or that issue."

In light of this, I suggested the client conduct a Pre-offer Inspection. That way, even if the deal didn't happen, the cost would just be one inspection fee - a small price compared to a home purchase. Both sides agreed.

On-site, I found the house indeed appeared dilapidated with widespread damage, cracking, and water stain, etc. I also found that it used a hydronic heating system, had only 60-amp electrical service, partially outdated Knob & Tube wiring, unsafe and irrational internal wiring everywhere, and almost no attic insulation. However, the structure proved sound, all damages were superficial, the house was dry with no signs of leak or mold. The roof and boiler were relatively new.

I walked the client through every issue, weakness, strength, estimated repair costs, and the necessity of repairs. We also discussed renovation feasibility. All these professional insights would have been impossible to obtain without the inspection. The client was very satisfied with the service. Using this information, they quickly reached a satisfactory agreement with the seller. Afterward, they renovated the house as advise - replacing and repairing wherever necessary. Now the house has been completely transformed with significantly increased value. This was their first home purchase in Canada, and thanks to the Pre-offer Inspection, they successfully secured their dream home.

From the experiences of these clients and the extensive feedback we've received, I believe that Pre-offer Inspections are an excellent choice. As both parties avoid the pressure and tension that may arise after signing an agreement, they can view inspection findings more calmly and objectively. This helps avoid wasting everyone's time/effort, and reduces disputes or unpleasantness, facilitating a smoother transaction.

It's crucial to emphasize that a Pre-offer Inspection must not be arranged unilaterally by the buyer - it requires the seller's explicit consent. Sellers should also make reasonable accommodations, such as not scheduling other showings during the inspection. We do not support a "secretive" or "quick" inspection without the seller's permission, as this seriously compromises inspection quality, jeopardizes the accuracy and thoroughness of the findings, and is unfair and irresponsible to the seller.

For inspectors, whatever types of inspection differ only in their timing and the party requesting them - the scope of work and the standards to follow must remain consistent. Inspectors must always carry out their duties, which are scientifically and independently providing the client with objective, fair, and accurate information about the property's current condition.

Times change. Markets change. Our lives are constantly evolving. Every new trend must stand the test of time and market. I hope that Pre-offer Inspections can bring greater peace of mind and benefits to all parties involved in real estate transactions.

This article was originally published in "Real Estate Weekly", Issue #120, April 27, 2007.