DISCLOSURE
…….TO DISCLOSE OR NOT TO DISCLOSE?

As a Real Estate Agent I am often presented with scenarios in which certain items and/or situations need to be disclosed. Under my membership with the Calgary Real Estate Board, Canadian Real Estate Association and many other Canadian Laws & Legislation; I must disclose all Material Latent Defects. A Material Latent Defect is: “Defect that is hidden from knowledge as well as from sight and one that would not be discovered even by the exercise of ordinary and reasonable care” or simply “Flaws that are hidden but are apt to surface later.”

These are often sensitive topics especially to Sellers in which they feel this information may affect the re-sale value of their home. I want to shed light on this topic because there are many benefits to the parties involved in a transaction; other than it being the law and the most ethical way of doing business. It is also great education to learn so that you can avoid these potential situations in your future Real Estate endeavors.

Here is an example:

1) A client purchases a “fixer upper” and essentially guts the entire 1st floor. The extensive reno involved the moving of electrical, plumbing and also adding a new ceiling beam; as a load bearing wall was removed. The reno is now complete and now the Seller would like to list it. The Seller would like to advertise this 1970’s home as “Fully Renovated” which is perfectly fine. After due diligence it is found out that no Permits from the City of Calgary have been pulled and approved. Although the work might be done very professionally and by standards; it hasn’t been approved. The Seller is now conflicted in disclosing this vital information as he/she feels that it will scare potential Buyers.

Answer:

It may have an effect on Buyers however disclosing all relevant information is the law. This is the only way to conduct the transaction because the truth will come out anyways through one or many of these examples:
Home Inspector
Buyer’s Agent
Buyer Inquiries (Buyers are more educated now than ever before)
Insurance Agency (Inquiring on age of home, type of wiring etc.)
Many Buyers would respect this disclosure as they want to be told the truth. They will then decide to proceed on a purchase and decide if they would like further inspections done.

Benefits to the Seller

The Benefits to the Seller is that if the home is Sold and there is an Electrical Fire or Flood the Seller would generally be free of any Law Suit as this information was disclosed. The Seller would also save time on showings as they would only attract serious Buyers who are okay with this disclosure. You would also save a potential deal if the Buyers knew before hand as opposed to finding out later during the Conditional Period of a Contract. They would then not feel you were hiding any relevant information from them.

In Summary if you are completing a reno and not sure what needs to be done; please call the City of Calgary and ask. They have a number of checklists to guide you through the process and protect you a long the way. If you have already made changes to your home; please disclose this to the Seller, your REALTOR® and all parties involved. As my Father always told me; “Honesty is the best policy”.

If you would like to further discuss this or any other Real Estate topics; please don’t hesitate to contact me.

Kind Regards,

Ken Andrade