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Property Condition Disclosure

Sellers are required by law to tell buyers about any problems with the home that they know about if the problem is not something the buyer could see for themselves when looking at the property.

Buyers will not be expected to see a problem for themselves if the seller has taken steps to cover the problem up. Sellers are usually asked by the buyer or the buyer’s real estate agent to complete a form called a property condition disclosure statement. This form has questions about things like whether there has been flooding, issues with the foundation, or plumbing or electrical issues. Sellers are not required to fill out these forms but if one is completed it may become part of the purchase agreement.

It is important for buyers to understand that while this form can provide useful information there are limits to its usefulness. Many parts of the form only ask if the seller knows about a problem. Sellers may not be aware of many problems especially about things they would not necessarily understand such as whether local bylaws and building codes have been followed.

However, it is important for sellers to understand that buyers can hold them to their answers. Sellers will want to carefully answer the questions to the best of their ability. They may want to provide more information than the "check box" style answers allow for. Sellers must answer the questions truthfully. False or misleading statements could later be used against the seller.

If a dispute arises over the condition of the property and the matter ends up in court, the court will try to determine whether the seller answered the questions truthfully or whether the seller deliberately mislead the buyer about the condition of the house. If the seller did not answer truthfully to best of their knowledge the court can order them to pay damages to the buyer.

The main purpose for these disclosure statements is to let the buyer know about problems the seller knows about so that the buyer can make an informed decision about the purchase.

However, courts have found that answers to the standard questions on this form are not the same as a seller giving a warranty about the condition of the house. The courts have also said that by completing this form the seller is not guaranteeing that there are no problems other than those asked about.

If a buyer becomes aware of a problem or potential problem, they can choose to walk away from the deal before it becomes final. Buyers can also ask for more information or have the house inspected by a trained professional. A buyer could decide to make a lower offer on the property because of the problem or they may just decide to make the purchase as planned, in spite of the problem.

The bottom line with regard to home purchases, as with other purchases, is "buyer beware" or "caveat emptor". Consider having an independent inspection. Make all necessary inquiries. If, however, there have been active steps by the seller to conceal problems which would otherwise be obvious or if the seller misleads a buyer about known issues, they may be liable for damages to the buyer.

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