Disclosures in regard to defects and stigmas
Property disclosures are a little tricky and a little misunderstood. For example, does the seller have to disclose a murder that happened on the property or next door? Does the seller have to disclose a scratch on the hardwood that is hidden under the rug? How about mould behind the walls?
To answer these questions, you have to understand the different between patent and latent defects. You also have to know about psychological stigmas and the duties of the seller and the real estate agents involved.
Do you disclose patent defects and/or latent defects?
Patent defects are visible defects, flaws or shortcomings existing on the property. If you can, during a casual viewing of the home, notice that the windows, furnace or roof is a little old then that is a patent defect. Also, if you can uncover a defect during a typical home inspection then that is a patent defect.
Patent defects do not need to be disclosed.
Latent defects are hidden defects. You will likely not be able to uncover any latent defects during a casual viewing of a home. Your home inspector may not be able to find evidence of latent defects during a typical home inspection. Latent defects may include things like buried fuel tanks, water or smoke damage, mould, foundation problems.
Latent defects must be disclosed.
However there are two things about latent defects that must also be true if he buyer is hoping to successfully sue the home seller after closing.
- The latent defect must make the home uninhabitable and/or dangerous.
- The buyer will have to prove that the seller must have known about the defect.
Do you have to disclose possible psychological stigmas?
Contrary to popular belief, psychological stigmas do not have to be disclosed. If there has been a murder or suicide on the property, if a pedophile lives across the street or if the home is next to a nudist colony, or some other such business/amenity…the seller does not have to disclose the fact. It is up to the buyer and the buyer’s agent to know or uncover such things.
There is a clause that many agents use in offers. It asks, “to the best of the seller’s knowledge has there ever been a murder or suicide on the property. Has the property ever been used as a grow op? Are there any buried fuel tanks…”, a long list of phycological stigmas and possible latent defects.
There is also a Seller Property Information Statement form that Buyer’s or Seller’s agents sometimes request the seller to sign.
Although psychological stigmas and suspected latent defects do not have to be disclosed, real estate agents on both sides of the transaction are obligated to tell the truth. Anything we know or believe to be true should be disclosed.
As is where is. (The no disclose)
In cases where the children are selling the home under power of attorney for a parent, or a bank is selling under power of sale, you will often see the term “as is, where is”, which means no warranty is given about the property. That makes sense. If the sellers have no actual knowledge of a property, how can they disclose anything about it.