What Can Sellers Hide That Buyers Are Powerless To Stop?

By on December 28, 2013

When we are pampered with an efficient systematic way of transacting real estate, we sometimes get our eyes off the ball and expect all parties involved to act in the best of good faith. Then we forget that we live in the real world of cut-throating where everyone is trying to get an extra piece off one another in order to get ahead.

Never forget that every party in a property transaction is looking out for his own interest only. Nobody is obligated to make sure any other party has his interest taken care of as well. Yes, this includes the property agent you have hired with good money to work for you. But as a buyer, your biggest opponent in any transaction is obviously the seller or his agent.

You would think that for real estate transactions that go up to hundreds of thousands of dollars or millions of dollars, the authorities or the powers that may be, have rules in place that make it mandatory for a seller to disclose a complete list of information regarding the house he is selling. Well, there actually is. Just that like in any developed country with a host of rules and policies governing everything, there will always be smart people who are gaming the system. And it might surprise some people that the most deadly game in a seller’s arsenal is a simple word play.

In the name of fairness, the authorities cannot expect an average home owner to have the specific set of skills of a professional appraiser in identifying concerning issues on their homes. Just like you cannot assume you have the flu even when you have been sneezing the whole day, managing a runny nose, and your throat feels like a fireplace. You need to have a Doctor diagnose it as a flu to officially call it one. Just ask your Human Resource if this is true.

grey area aheadSo what is material information varies from one another. What is a clear leak in the wall to one can be something that is not noticeable to another. What can be an obvious pest infestation to a buyer can be something that the seller has no knowledge of. And the response you get from a seller when you say “I noticed that the air-conditioner is leaking like a waterfall” is a surprised “Really! I didn’t know”. Now of course the buyer has a huge bag of tricks as well to call upon.  But if a seller is responsible in enticing his house to fall apart, I feel he is responsible to inform the buyer who is expecting to buy over.

They created the mess and should own up to it instead of feigning ignorance like a naive innocent child. Because in effect, they are trying to stealthily transfer their garbage to an unknowing buyer. This is a huge financial transaction we are talking about. Not a packet of candy from the convenience store. If a seller does succeed in keeping the darkest secrets of his house form daylight and sells it, the buyer could be looking at the type of costs and charges that would put a dent in anyone’s pocket. At least if the seller is up front of problems with their properties, the buyer would know what he is getting into before buying it anyway. The truth is, sellers will attempt to get one over buyers when there is a chance. And vice-versa.

So if you are a buyer, you absolutely need to check everything yourself. You cannot rely on sellers mistakes to obtain information that matters to you. Firstly, keep these rules of engagement in mind. Do not relax on these or you could be cursing your luck later. Buying a home is not about luck.

  • A seller or his representative is not obligated to disclose any information that he is not aware of. Common sense tells us that nobody will be able to provide information that he does not have.
  • Descriptions of any factual information only applies to the moment when transaction is finalized. The seller is not obligated to provide any warranties that fixtures will continue to work for a specified time-frame after closing. So if the air-conditioner is working properly on your final walk-through, that is it. If it breaks down a week later, that is the buyer’s problem.
  • Disclosures are meant to inform you of adverse conditions. But what is “adverse” is subjective in definition from one individual to another. So even if you are someone who would suffer a cardiac arrest from excessive noise pollution, the seller is not under any obligation to warn you of the huge construction site a street away that creates orchestra music from banging metal for 5 and a half days a week. This is because a seller can decide to personally view that as not adverse.
  • And then there are the problems in a house that should be observable by visitors. These are items that sellers do not have to explicitly disclose since it is observable by visitors. The fair assumption is that you will discover it yourself. So if the wooden flooring is stained with colour, but on your viewing day a sofa seat coincidentally sits on top of the huge stain preventing you to see it, it becomes your problem if you only found out after closing. You are assumed to have agreed to the transaction fully knowing what you are up against.

Do you see the grey areas in these rules of engagement?

Disclosures can be very informative. But you cannot rely on it as a full summary of the aspects of a house that hold dear to you. You should get an independent assessment conducted so that you have done all you can to cover these curve balls.

Remember that you are going to take over the house and it will then be your own problem in rectifying defects. In this sense, you cannot rely on other parties to provide the information you need to make a buying decision. Especially when the information comes from your opponents themselves. Check the neighbourhood, check the house, on weekdays, on weekends, in the day, during the evening, and converse with neighbours. You want to know everything. No seller will disclose the truth, the whole truth and nothing but the truth because the truth can be subjective in real estate transactions.



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