The Rules of Disclosure for Home Sellers

Home sellers may have very different ideas about what they need to share with potential buyers. Some may want to give the buyers all the information they could ever want to know, while others would prefer to keep the conversations to the bare minimum. It's why local legislators decided to impose a few guidelines to protect the buyers and promote honesty among the sellers. Those getting ready to put their home on the market and market it to sell should keep the following in mind.

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

Types of Disclosure Documents

A disclosure document is one that lists the defects of the home straight from the sellers' mouth, and they're usually required in all home sales. Different provinces may call this form by different names, but they all serve the same function. The form will likely be used as a legal document in the final Sale and Purchase Agreement for the home. Lawyers see a disclosure statement as a way for buyers to understand the history of the home and how past problems could come back to haunt them in the future.

The questions on the form will depend on where the home is located. For example, if it's in a rural area where septic systems are used, the form will ask specific questions about how the system operates and how the owners maintained it. Most forms will also go over the structural aspects of the home and any zoning restrictions that may apply. If homeowners aren't allowed to build beyond a certain point on the property, they need to know before completing the purchase.

What are the Rules About Disclosures?

Despite the official disclosure form, home sellers do have a surprising amount of leeway about what they can tell the buyers. They don't have to give details about flooding, fire, or foundation damage as long as the damage doesn't risk the health or safety of anyone in the home. They also don't have to disclose anything that's visible to the naked eye. If a crack in the foundation can be seen on a tour of the home, then this is not something sellers need to discuss unless the buyer broaches the topic.

As home sellers may imagine, these rules are vague enough that countless lawsuits are filed every year from buyers who feel swindled. For example, let's say a home had a leaky roof that caused residents to be exposed to toxic mould. The seller could reasonably argue that they didn't realize the conditions were severe enough for a mould infestation, but the buyer could reasonably argue that the property wasn't livable from the moment they purchased it. Sellers who want to avoid their fate being decided by a judge should think twice about keeping secrets.

Common Seller Disclosures

There are two types of disclosures: physical defects, which are things like cracks and stains that can be seen, and latent defects, which cannot be seen. Examples of latent defects include a leaky window or poorly added electricity and may likely not be discovered until after the new homeowner has moved in.

Some of the most common disclosures include:

• Plumbing leaks
• Roofing issues
• Legal issues (boundary line disputes, code violations, etc.)
• Structural integrity
• Natural hazards

Sellers should look into the rules for their area, because different provinces have different rules for what does and does not need to be disclosed.

Avoiding Lawsuits From Buyers

There are a few ways that sellers can mitigate their chances of being caught up in a legal scandal. First, be up front. Experts advise sellers to be as up front as possible, no matter what the official rules are.

To reduce the chances that a seller is caught off-guard by an issue, consider getting a home inspection. A seller who gets their own inspection shows they have nothing to hide, and it gives them the chance to fix any problems found in the inspection. The last strategy is to provide records. Proof of any renovations or repairs can help a buyer feel more confident in their purchase.

Sellers should also note that buyers aren't allowed to sue for issues that appeared after they bought the home or ones that the seller informed them of before closing.

Disclosing information can be difficult for some sellers, especially if their home is in less-than-perfect condition. However, being honest is the way to keep sellers out of hot water if the home is later revealed to have a fatal flaw.

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