Do You Know What a Property Disclosure Statement Is?

familylendingFirst Time Home Owner, General Interest, Investment Property, Real Estate Advice

It’s standard practice for home sellers to freshen up their property prior to listing it on the market. A fresh coat of paint, new floors, or new light fixtures increase the value and marketability of a home. But sometimes these seemingly honest updates are done with the intentions of covering something up.

That’s why it’s crucial for homebuyers to always request a property disclosure statement. Seller’s are obligated to disclose any known defects to a potential buyer by way of this two page document. From zoning and water rights to plumbing, roofing, and structural damage, a property disclosure statement is designed to protect the buyer against a future of regret.

Property Disclosure Documents are Not Mandatory

It’s important to note that property disclosure documents are not a mandatory part of the selling process. As you can image, this can make for some tense negotiations. Although it claims not to be a legal contract, a property disclosure statement can be used in a court of law. Many agents acting for sellers caution their clients not to provide a disclosure as the legal ramifications of misrepresented information can be great. Realtors are often concerned that home owners are unable to correctly answer questions that could create liability issues following the sale.

On the other hand, agents working with buyers typically push their clients to request a property disclosure in order to protect them from hidden issues with the home. For example, say you purchase a home with a beautifully renovated kitchen. After living in the home for a few years, you decide to make some updates that impact the kitchen. While applying for permits you learn that the homeowner before you completed their renovations without the proper plumbing or electrical  permits. The current homeowner is now forced to gut the kitchen in order to bring it up to code. He or she can also seek legal action against the seller of the home because information about the missing permits was not properly disclosed.

What Should Be Included in a Disclosure?

Any work or upgrades, like the kitchen renovation above, should be included in a disclosure, whether it was done with or without permits. As a buyer, it’s important that you cross check any permits with the city’s building permit report to ensure that everything is in proper order. If a renovation was completed without permits, buyers should investigate this work independently to ensure that is done properly.

Other common disclosures include:

  • Past problems with termites or other pests
  • The existence of pets
  • Neighbourhood disputes, including property line disputes
  • Defects or malfunctions with major systems or appliances (furnaces, air conditioning, etc)
  • If there are any liens on the property, or if the seller is involved in any bankruptcy proceedings

Property Disclosure Statements Aren’t Aways Available

A property disclosure statement is not available in instances in which the property is not being sold by the primary resident. If the house has been rented to tenants, the owner cannot confirm or deny the daily maintenance of the property. Property disclosure statements are also not instituted on estate properties or if the seller is using a power of attorney and cannot personally comment on the property’s condition.

In some cases, a full disclosure can actually help a seller as it shows a buyer that they are willing to be thorough and upfront during the proceedings. This honest approach can go a long way toward giving buyers peace of mind, which is often the most important aspect of a sale.

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