What You Need to Disclose When Selling a House
Saturday Jun 02nd, 2018
Happy, Summer Sunday! It's been a little while since I touched base, as it's been quite busy. Today, I want to talk about Patent vs. Latent defects and what should be disclosed as a seller.
Let's start with a Hypothetical Situation:
You’ve been dealing with a leak (in the spring months from the snow meltdown in the ground) in your finished basement for
the last several years. You’ve tried to fix it through minor repairs but water is still getting through. You’ve finally had enough and decide to make this someone else’s problem.
You get the mess from the latest leak all cleaned up. The days turn warmer and the ground dries up considerably. The basement looks fresh after your renos and you decide it’s time to call in a trusted real estate representative to list your house. Once the house sells, you have a sigh of relief, because the leaking basement issue is no longer yours. Victory.
Not so fast…
The buyer lives in the house for almost a year before discovering the leak. She also notices the repairs that were done to conceal the issue. Now the buyer has grounds for a law suit against you, because this is considered a latent defect of the home and as a seller you are obligated to disclose any latent defects to potential buyers.
First, let’s make sense of the difference between a Patent and Latent defect.
A patent defect is one that is visible to the naked eye. For e.g., a hole in the wall, hidden behind a bedroom door. Although, the buyer may not have noticed this, there is nothing they can do after they have purchased and closed on the home. The seller is not obligated to mention any minor defects, unless they pose significant risk.
A latent defect is one that is not visible to the naked eye. For eg. A damaged roof, on-going leak into the basement, plumbing or wiring issues, etc.
If a seller is aware of a material latent defect then it is their responsibility to disclose this to all buyers, in order to avoid a potential lawsuit. By material, the defect would have to cause significant risk to health or make the home inhabitable. The key in the previous sentence is it must be a ‘Material’ defect. A grey area is latent defects that may not be deemed material, for e.g. insufficient insulation which would raise heating costs; aluminum wiring which is still acceptable but would be a considerable repair if needed to be fixed or upgraded.
With all this said, it could be difficult to prove that the seller knew about the latent defects in a court of law. Thus, it is very important, as a buyer, to do as much due diligence before finalizing an offer. Otherwise, as the purchaser you could be looking at significant costs, time and energy with little chance of success. As a seller, it would be prudent to disclose any latent defects to avoid the time, money and energy in defending yourself.
In conclusion, be prudent when buying or selling a a home because in the end, the lawyers are the only ones who win in these situations. Most of these cases can drag on for years and the outcome can vary depending on the evidence provided and the Judge’s perspective.
Kalon Real Estate
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