What Are Home Sellers Required to Disclose to Buyers?

Posted by EdmontonRealEstate.ca Team on Monday, September 30th, 2019 at 9:28am.

What Do Home Sellers Need to Tell the BuyerFrom the damp patch in the basement to the asbestos in the insulation, sellers may wonder what exactly they're required to disclose to the buyers. The general rule of thumb is to tell buyers everything. It not only limits liability, but it can also boost a Sherwood Park buyer's trust in the property they want—which may encourage them to offer a little more or to bend on their contingencies. However, for those who want a more technical explanation of their exact responsibilities, find out more about how the specifics should affect the answers that sellers give and the information they need to provide on their own.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Known Vs. Unknown

This is typically the biggest factor for the seller when it comes to disclosure: are they aware of the problem at the time their home is sold? If they can reasonably deny knowledge of a defect, then they are usually absolved from having to tell the buyer. So, if asbestos was largely eliminated from home building materials in 1980, the seller could reasonably argue that they didn't realize their home contained asbestos if the home was built in 1986. This would typically be enough to absolve the seller, as they're unlikely to have the exact list of ingredients used in the structure of their home.

As sellers might imagine, this concept can become tricky for sellers who want to stay on the right side of the law. To make things a little less complicated, defects break down into two general types of flaws:

  • Patent: A patent defect is one that is relatively obvious. If the buyer or real estate agent doesn't happen to notice these defects, then the home inspector surely will.
  • Latent: A latent defect is one that a home inspector could not reasonably find without causing some degree of destruction to the home.

The Buyer's Safety

A latent defect isn't just a minor cosmetic flaw in the configuration of the home's structure. It needs to be a flaw that endangers the new resident's safety. So, let's say the seller heard an unexplained skittering in the walls due to rodents, and these rodents have been steadily gnawing the internal wiring of the home. During the home inspection, the lighting and electrical system is deemed acceptable, but it's only a matter of time before the rodents pose a hazard to the home. If the seller takes no action to correct the problem, they would be in violation of the disclosure law because they did hear evidence of the rats and never disclosed this to the buyer.

Does Water Damage Count As a Latent Defect?

For the most part, the answer is yes, but this is a difficult one to prove. Water damage and its direct consequences (e.g., mildew, mold, etc.) can reasonably be considered as dangerous to a person's health. If the mold is clearly visible in any area of the home, then this patent defect will be apparent to the buyer. If the mold is slowing growing in the walls though, it may not be reasonable for anyone to have noticed it. A buyer would have to prove that the seller knew of the existence of the mold prior to the close of the sale, which would be difficult to do.

What Are Real Estate Agents Required to Disclose?

Real estate agents are essentially held by a code of ethics to the buyers, which may affect their decisions. In certain areas of Canada, real estate agents are required to fill out a specific form about the property that takes a deep dive into its apparent and potential defects. Even in towns that don't require it, real estate agents may use this form to cover their bases. These questions are often so specific that no one knows the answers. The idea is to give buyers a sense of just how much is unknown before they start making offers on the property.

Getting Through It

Some sellers are open books when it comes to their home. They'll give buyers accurate information whether it's required or not, and they'll answer honestly if they don't know anything. If a defect in the home is on the borderline of the definition of latent (e.g., a small crack in the foundation wouldn't endanger the safety of the residents), they'll still give the buyers the information anyway. Some sellers will even go so far as to pay for their own inspection as a way of going the extra mile.

Being as honest as possible is typically recommended to sellers, especially considering that real estate agents are likely to tell the buyer certain information anyway. Those who choose to be as withholding as possible may get a better offer for a faulty home, but they also risk a potential lawsuit. And even if the buyer can't prove that the seller was aware of the defects, they can still drag the seller through a litigation procedure that's more of a hassle than it's worth.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

By Justin Havre

 

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