Real Estate Talk:
With or without warranty

The pros and cons of buying or selling with or without warranty

By Joseph Marovitch

Updated September 21, 2023

Imagine! You just purchased your dream home. You followed all the right steps, from using a qualified broker to having an inspection. All conditions are complete to your satisfaction, possession has taken place, and you are now enjoying your new home.

One day, not long after you have moved in, you are gardening on a beautiful warm sunny day when, all of a sudden, as you’re digging a hole to plant your tulips, you strike oil! Not the Beverly Hillbillies’ kind of “get rich oil” but rather the oil from a buried, leaky oil tank in your backyard that was used long ago as part of the heating system.

You bring in a city inspector, tests are performed, and you find you have an environmental contamination problem in your backyard. Who do you call, and who is responsible to clean up the mess and remove the tank? This is exactly what occurred to one of my clients.

The seller is supposed to sell the property without issues that can de-value or render it unliveable, unless they sold the house without warranty, as is, at the buyer’s risk.

If you purchased the property with warranty, the previous owner would be responsible. However, the previous owner could hold the owner before that owner responsible. In fact, all the previous owners are responsible until you find the owner who was aware of the issue or the last living owner.

To understand what warranty or without warranty means, first know that the home inspector is only responsible for the issues in and around the house that can be seen. The home inspector is not responsible for issues they cannot see, such as structural cracks, broken linings in the chimney, or buried old oil tanks.

The issues that can pose a problem but cannot be immediately detected are called hidden or latent defects. The seller is supposed to sell the home without issues that can devalue or render it unliveable unless they sold the house without warranty, as is, at the buyer’s risk.

The words sold without warranty, as is, at the buyer’s risk must be placed in the following areas:

• The brokerage contract
• The Centris listing
• The promise to purchase
• In the deed of sale

It should be noted that if the deed has no clause stating the home is sold without warranty, then the house is automatically sold with warranty.

There are reasons to sell without warranty and there are cons to selling without warranty.

Reasons for buying and selling without warranty:

• The vendor inherited the house but never lived in it, therefore, does not want to be responsible for hidden defects.
• The vendor is aware the house may have hidden defects and, again, does not want the buyer to hold them responsible for issues that may come up.
• The vendor is moving far away and does not want to be bothered.
• The buyer may intend to completely renovate the house and is not concerned with hidden defects.
• The buyer wants a lower purchase price and is prepared to take the risk of hidden defects in exchange.

In most cases, where the seller lived in the house and maintained the house in good condition, the house is sold with warranty.

Cons to selling without warranty:

• The vendor may end up with a lower selling price or take much longer to sell since selling without warranty raises many red flags warnings.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: The selling process

State of the market

Canada inflation today: 4 %
Bank of Canada rate today: 5%

As of today, September 20, the inflation rose from 3.5% to 4%. This is not great for anyone as it will lead to more interest rate hikes which will slow the economy, raise household debt, and place compounded strain on homeowner finances. Even though home prices rose a little in August, demand appeared to increase, however with rising inflation, we may very well see a curb downward in sales when the Bank of Canada raises rates again.

‘For those who are venture capitalists, there is an opportunity to purchase property at a discount if paying in cash.’

If a buyer was in the market prior to today, hopefully, they acquired a pre-approval before rates were raised. The hardest hit will be those who purchased during the pandemic and their mortgages are coming up for renewal. The situation is due to a compilation of factors including war, political turmoil, and an upsurge in COVID cases. For those who are venture capitalists, there is an opportunity to purchase property at a discount if paying in cash. Some homeowners need relief from relentless expenses and may very well sell at a lower price for a quick and clean sale.

Have a great week.

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Other articles by Joseph Marovitch