OREA Real Estate College

Defects and the Importance of Disclosure

You have just listed a house for a seller client. The house has some defects. Some are obvious and some are not so obvious. Which defects would you disclose to potential buyers?

• major leaks in the roof

• dampness in the basement

• aluminium wiring

• a fence line that is not on the property line

• there was a suicide on the property four years previously and there has been one ownership change since them

Answer: All of the above

The principle of disclosure applies to three major areas of property defects REALTORS® should disclose to potential buyers and/or their representatives: legal or title defects, physical defects (patent and latent), and psychological defects.

If you are unfamiliar with the above terms or uncertain about which defects must be disclosed according to law, consider enrolling in Defects and the Importance of Disclosure, an online continuing education course offered by the OREA Real Estate College. This six-section course will cover the following topics:

•  what defects to look for when representing buyer or seller clients

•  lawsuits and preventative measures

•  the different types of defects and which defects must be disclosed

•  psychological defects – what they are and why they matter

•  how to protect buyer and seller clients

Of particular importance, given recent media reports, are psychological defects, which relate to so-called ‘stigmatized’ property. These types of properties are shunned for reasons unrelated to the house’s physical condition or features. Examples include a suicide/murder/death on the property, or rumours the house is haunted.

Failure to provide full disclosure about these properties may lead to legal proceedings/lawsuits, and disciplinary action by RECO. If you know about a psychological defect, there is an obligation to inform buyers and/or their representatives. Therefore, as a general practice, tell potential buyers everything you know about the property. If you don’t know about any psychological defect, the prudent thing to do would be to ask.

Celebrating OREA’s 90th Birthday

The College is offering a free nine-credit bundle of CE online courses in celebration of OREA’s 90th birthday. This offer is available until December 31, 2012. Courses must be completed by December 31, 2013.

For more information, go to http://www.orea.com/cepromo?utm_source=homepage&utm_medium=button&utm_campaign=cepromo.


Have you been involved with a stigmatized property? How did you handle it?

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