Sometimes, while perusing Québec real estate listings, one comes across the following mention: “Home sold without the legal warranty.” What does this actually entail?
And more importantly, does it represent a golden opportunity or a potential nightmare?
What Is the Legal Warranty?
The legal warranty automatically protects the buyer when they purchase a property. It consists of two parts:
- The warranty of ownership, which ensures that the seller is indeed the owner of the property and that no other person can claim ownership.
- The warranty of quality, which protects the buyer against hidden defects that render the building unfit for use or that significantly reduce its value.
In other words, if after the purchase you discover cracks in the foundation or a longstanding leak in the roof, you can’t normally take legal action against the seller.
What Happens If There’s a Problem?
But when a house is offered on the market without the legal warranty, the seller removes this protection.
You’re therefore accepting to purchase the property as is, with all its qualities and defects, known and unknown. If a problem arises at a later date, you must bear the cost unless you can prove that the seller deliberately concealed important information.
Does This Necessarily Mean the House Has Lots of Issues?
Being sold without the legal warranty isn’t always an indication that the house contains a major defect. Sellers may choose this option for a variety of reasons:
- A succession: The heirs are selling a property without exactly knowing its condition. As a precaution, they prefer not to offer any guarantees.
- An older house: The seller acknowledges the property is old but can’t promise that it’s problem-free.
- An elderly or ill seller: The seller wants to avoid facing liability for any defects discovered after the sale.
- A quick sale: The seller wishes to fast-track the transaction due to a divorce, short-notice relocation, or financial difficulties.
- Large-scale renovations: The house clearly requires work, and the seller has chosen to be transparent by selling it as is.
In any case, the seller is usually only being cautious and isn’t trying to deceive a potential buyer.
What Are the Advantages for the Buyer?
- A lower sales price: The buyer assumes more risk but often pays less.
- A faster and simplified transaction: This type of transaction involves fewer conditions and avoids endless negotiations about who is responsible for what.
- A renovation opportunity: Perfect for DIYers or investors who want a fully customized home.
To summarize, for someone who’s familiar with real estate and isn’t afraid to roll up their sleeves, this type of sale can represent a great opportunity.
What Are the Potential Risks?
The risks, however, are very real:
- You usually have no recourse if you do discover a hidden defect, except in cases of obvious fraud.
- You must pay for all repairs, even those that weren’t visible during the inspection.
- You must understand that the purchase carries significantly more financial risk, especially if the house is old or in very bad condition.
In this instance, the pre-purchase inspection is essential. A qualified building inspector can save you quite a few headaches and help you assess the scope of the work ahead.
Some Advice Before You Buy “As Is”
- Have the property inspected by a certified professional, even if the seller has excluded the legal warranty. This will give you a better idea of its overall condition.
- Analyze the available documents: certificate of location, renovation invoices, previous valuations, inspection reports.
- Estimate renovation costs before submitting a purchase offer.
- Negotiate the price based on the risk: the market value should reflect the fact the property is being sold without the warranty.
- Seek the assistance of a real estate broker or notary: they can guide you and identify any grey areas in the contract.
In Short: Good Idea or Bad Idea?
It all depends on the kind of buyer you are!
o If you’re looking for a turnkey home and hate surprises, this type of sale may not be right for you.
o But if you’re handy, patient, and realistic, a sale without the legal warranty can represent an excellent investment opportunity or the chance to undertake a large-scale renovation project at a reasonable price.
The moral of the story: buying a house without the legal warranty is a little like leaving the house without taking your umbrella. It will probably be fine… so long as you’ve checked the weather beforehand!
