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Expert Advice: Homebuyer beware

Do you have a financial question that's keeping you up at night? Ever wished you could get a second, or third, opinion on what to do with your money? Here's your chance: Bankrate.ca hosts a monthly feature whereby you submit [canadianeditor@bankrate.com] a question, and we ask two industry experts to weigh in. The topics are up to you -- you ask the questions, and we'll get the answers.

Here's this month's question: "We are purchasing our first resale home. We've had a home inspection and everything looks good, but I'm worried. Who is responsible -- us or the vendor -- if undisclosed problems, such as structural issues, a leaky roof or even mould, are discovered when we move in or shortly thereafter?"

The idea strikes terror in every homebuyer: You move into your dream home only to discover it's more of a nightmare. You thought you did your due diligence with a home inspection, but on move-in day you find mould in the closets, a sheen of water on the basement floor, or a faulty furnace. Three days later it rains and the roof that supposedly had a decade left in it is leaking so badly it's left a huge water stain on your newly painted ceiling. What's a new homeowner to do?

David Feld, barrister and solicitor, Feld Kalia, Toronto
"Caveat emptor," says Feld, who, as a real estate lawyer, hears this kind of question all the time. "That means buyer beware. All buyers have a duty to inspect the property before purchase."

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In other words, unless there has been willful deception on behalf of the vendor, or the home is not in the condition laid out in the contract, post-purchase surprises tend to fall under the responsibility of the buyer.

In legal terms there are two types of defects: patent and latent. "Patent defects could be discovered with superficial inspection by an ordinary purchaser," says Feld, whereas latent defects are issues that purchasers could not expect to discover with a reasonably thorough inspection.

Vendors have a duty to disclose latent defects that they are aware of, but they are not obligated to draw attention to patent defects. If the vendor knows they have a foundation leak or a mould problem they should disclose; however, in the interest of selling their house, they are not obligated to point out every cracked tile or door that doesn't close properly.

The court will not find in favour of the purchaser with patent defects, but even latent defects can be difficult to challenge. That's because in most cases it's not easy to prove the seller knew about the problem. The only way a buyer will win is if the seller "actively concealed" the problem and misrepresented the condition of the property. For instance, instead of fixing a basement post flood, they simply installed new carpet and painted over the damage.

It's always a difficult (and potentially costly) fight post-closing. That's why Feld provides clients with a last-minute checklist and encourages them to schedule their final visit a day or two before the sale closes.

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-- Posted January 25, 2012
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