After weeks of wooing the sellers, you finally land their listing. Now, the fun part begins as you list the property on the MLS® System, advertise in local newspapers, and hold an open house. You have no doubt that the listing will attract numerous potential buyers, so all you have to do is negotiate the best deal for your clients, wait for the transaction to close, and collect the commission.
Well… not quite. What if pertinent facts about the house you posted on MLS® were incorrect? What if you provided wrong information about the property to potential buyers? In both cases, you used information provided to you by your clients. Could this misinformation, even if inadvertent, affect the successful completion of the transaction? Could you be the subject of a complaint filed against you with RECO? Could you be sued? Yes.
Accuracy when listing a property is paramount. You are responsible for discovering and verifying pertinent facts. This obligation is mandated in the Code of Ethics, specifically, Section 4 (Best interests), Section 21 (Material facts), and Section 38 (Error, misrepresentation, fraud, etc.)
How can you avert future problems in a residential real estate transaction?
1. Go to the source
Whenever possible, use original source documents, such as surveys, permits, financial statements, and tax statements. Make certain the information is current and complete.
When reviewing these documents, consider the following:
• when the survey was completed
• was there an expropriation since the survey was completed
• if the survey accurately reflects the existing structures on the property
• the date of the tax bill (current year or previous year)
• known tax increases or pending local improvements
If necessary, confirm information about the property with the municipal office or the Land Registry Office.
2. The whole picture
Look at the entire property, not just the main structure. Consider the following:
• if the property is connected to a municipal water and/or sewage services
• if the property is on a septic system
• if there a community well; if the well is dug or drilled
• issues relating to rights-of-way, easements, and encroachments
• boundary disputes
• if the property has a special designation, such as a heritage designation
Consider the environmental aspects as well. For example, flood plains, soil contamination, underground fuel tanks.
Pay particular attention to accuracy when describing lot size (front/depth) and lot irregularities. Inaccuracies could lead to boundary disputes.
3. Main structure
Advise clients to obtain a professional home inspection, which will uncover problems relating to physical structure and mechanical systems. Regardless of whether a professional home inspection is conducted, you should still check for general deterioration, water stains, moisture, mould, and sagging.
Watch for alterations or additions. If the house has been renovated, determine what was done, when, and if permits were required and obtained. Ask if other renovations have also been done.
If the seller wants certain factual information included (e.g., new shingles), ask for corroborating documents, such as receipts, warranties, or permits.
For the listing, obtain the necessary details about the house, such as:
• house style
• the number of principal rooms and their configurations (i.e., room size)
• heat source (e.g., electric, gas, ground source, oil)
• air conditioning
• wiring (knob-and-tube, aluminium)
• chattels included in the sale (especially brand name equipment)
• fixtures excluded
• rentals (if applicable)
You are obligated by law to disclose material latent defects and legal/title defects to potential buyers.
When in doubt regarding any uncertain issues, seek expert advice.
If you cannot obtain pertinent information about the property, which causes you concern, you may want to consider not pursuing the listing.
Stay tuned for future blog posts where we will review condominiums and commercial real estate.
*Reference: The Real Estate Transaction – General
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