disclose with bannerBy Marty Douglas

Yikes! Or in newspeak – OMG! This disclosure thing is getting to be quite sticky isn’t it? Remember when it was a bit of a fad? Combine the Property Disclosure Statement with that other former novelty, the home inspection, and you have a potential time bomb with every house built pre-1990.

Imagine this:  you have a buyer making an offer, subject to inspection, and the home is a pleasant older two-storey 1,000-square-feet per level built to the code of the day. What’s lurking? Besides the neighbourhood pedophile? (That would be a “stigmatized” property, an entirely different swamp to drain.)

Again, what’s lurking? Plumbing that may shatter at the joints. Gas hot-water tanks not adequately vented. Inadequate electrical service. Lead-based paint. Mould and moisture. Former grow-ops. Buried oil tanks. In B.C. at least, unregistered builders. Archaeological sites. Endangered species. And the big one – asbestos – not only in the vermiculite attic insulation but in the mud that seals the drywall joints. Or in the laundry room tile. Or the ceiling tile. Or the mortar between the bricks.

What the hell – the list will take your mind off the jet fuel pipeline easement on your back property boundary. At least the right-of-way was listed on the title.

Part of the problem is the growth in knowledge of what can do us harm, the failure of the disclosure forms to keep up with the technology of today, the political aspirations of all levels of government to protect us from things that, when the disclosure form was invented, we hadn’t considered. It’s sort of like coffee and red wine. One week they are good for you, the next it’s “get your affairs in order!”

Case in point: Poly B pipe for plumbing. It’s in the building code and has been since the 1970s. Of course, so were asbestos and the leaky condo building envelope. The southern U.S. experienced too many water escape insurance claims, especially in high heat areas, in mobile homes and in homes with ceiling installations, serviced by water with high chlorine content, frequently as a result of improper installation. There is little evidence of similar problems in Canada. However, when the U.S. sneezes, sometimes we catch cold. Half the insurance companies offering homeowners insurance in my community want to know if there’s Poly B plumbing on the site. Ever tried to get financing without insurance?

If you Google Poly B you’ll find the debate is ongoing in Canada and some consumers are opting for plumbing inspections and where warranted, replacement – at least of the fittings.

Another disclosure challenge: native land claims and heritage sites are an ongoing issue on the west coast. Land located near a flat beach or estuary is a potential minefield for the unwary. Excavations in the course of construction or renovation have discovered human remains, garbage dumps, artefacts or other evidence of our First Nations history. The subsequent cost and time delays to the owner of the land are significant and the curative bureaucratic process can be formidable.

Along comes the listing agent, deemed to have local knowledge and required to make inquiries at the local government offices. At our regional district offices – B.C.’s rural government – rests The Book. Its content is revealed only to those who ask specific questions. Hooded robes are donned. Maxwell Smart’s cone of silence descends. You can look but not touch. Therein you may find your listing, colour coded for native land claims, historical sites, heron and eagle nesting trees in the vicinity, salmon bearing streams and Jimmy Hoffa’s remains. Okay, maybe not JH but other remains for sure.

Then the selling salesperson should re-check the sources and paper it all over in the offer.

The lesson – or as they say in almost every one of our continuing education courses, the takeaways? (To those of British extraction, “takeaway” does not refer to a curry or fish and chips.) The lesson for sellers might be to have an inspection done before entertaining an offer. Fix everything. Burn the report. (Just kidding – CSI folks can do remarkable things with ashes. Better swallow it.) For buyers, a professional inspection with a detail of your concerns to the inspector – and still, beware!

Alexander Pope students (the older folks in the back row) will recall his Essay on Criticism in 1709:  “A little learning is a dangerous thing, drink deep or taste not the Pierian Spring.” In other words, learn it all or don’t bother. Accept your ignorance. After all, better to be ignorant than stupid. Consider no inspection at all. I asked my favourite mortgage broker how deeply lenders investigated the presence of asbestos in the home. “What does the disclosure say? If it says ‘no’ then no problem, we don’t look any further.”

Marty dragonboat timing 2011Remember Corporal Schultz in Hogan’s Heroes? “I know nothing!” He could have made a great Realtor, with no successful E&O claims.

Be careful out there.

Contact Marty Douglas by email at [email protected] . Follow or connect with Marty on Twitter, LinkedIn and Facebook. He is a managing broker for Re/Max Ocean Pacific Realty in Comox and Courtenay, B.C. He is a past chair of the Real Estate Errors and Omissions Insurance Corporation of B.C., the Real Estate Council of B.C., the B.C. Real Estate Association and the Vancouver Island Real Estate Board.

 

8 COMMENTS

  1. Great topic Marty. So I couldn’t resist.

    I started in this business in 1980 in Ontario. As far as we were all concerned then, we worked for the guy who paid the commission which 99.9% of the time was the vendor. Today we call IT the Seller.

    I can remember thinking back then that I was spending more time with ” my Buyer” (back then we called IT the customer) showing homes and had basically no relationship at all with the vendor who’s home I was selling and who was paying my commission. It didn’t feel right but that was just the way it was done and no one wanted to talk about working for the buyer. I know cuz i tried.

    Disclosure was something that we did if we bought a home for ourselves and that was it. That’s never changed.

    One day in the 90’s someone woke up and realized that several things we were doing in practice was in reality, contravention of the ACT. Whoops! Damn reality!

    It was also about that time that some hot shot AGENT (the universe was calling) creatively thought it might be a good idea to use a local “handyman” or part time builder bro-in-law to check out a house that may have some questionable structural capacities or the like. This of course was done to alleviate the concerns of the inexperienced or novice buyer. The so-called inspection was a quick look-see visit without any paperwork and they decided they could charge about $150 cash and get it from the customer – er the buyer.

    The practice caught on like wildfire and almost overnight every Tom, Dick and Harry with little or no experience in construction decided it was an easy way to fast money.

    Plumbers, electricians and even construction labourers all seemed to climb on the band wagon and suddenly became local home inspectors. Sounds like Financial Advisers eh?

    It took years for the home inspection industry to get organised (if it is even yet) but now some of Tom, Dick and Harry’s kids and their friends who have never driven a nail or hung a door are now the “EXPERT” home inspectors. Oh yeah, the Flim Flam hucksters home inspectors are out there now as well.

    So with all of this concern going on it had to happen eventually. The public awareness gene was about to be activated BIG TIME. To embarrass the government of the day, the media began by broadcasting fears about non-starters like UREA FORMALDEHYDE (a debacle thanks to our fed government) and who can forget ALUMINUM WIRING

    All of this after 10’s of thousands of Canadian homes were equipped with either or both stigmas. In a typically knee jerk over reaction by the government and then the public, instantly in either situation it was like the black plague of death descended if you owned one.

    Suddenly consumer reporting agencies were in vogue and the real estate industry was the perfect target for the civil servant bureaucracy to build careers upon.

    Searching out new horizons of deadly discovery lurking in the broad resale market is/was easy pickings so along came asbestos, knob & tube, mold, dry rot, dampness step cracks, farm fumes, … and the list continues.

    For what it is worth, I agree with Marty. The buyers before 1990 bought all kinds of homes with most if not all of those issues and accepted the Caveat emptor philosophy which was the rule of the land. First used in 1523 for 470 years it meant – ‘Let The Buyer Beware’.

    Not in Canada you say?

    Every provincial real estate governing authority is a consumer protection agencies and the resultant of all of the foregoing and all are funded by guess who?

    Look at who is at the top of these provincial bodies and see what practical experience these persons have in the real world. Forget the politicians, they are basically helpless in a world dominated by career bureaucrats who’s credentials move them from one incompetence to the next.

    Disclosure you say? Let’s start at the top

  2. When it comes to purchasing a new home in B.C. the buyer is protected by warranty up to 10 years. So no problem. When buying a used home or a used car for that matter, you must understand you are not buying a ‘Swiss watch’ that still is perfect with age. Years ago it was much simpler under the principle ‘buyer beware!’. We bought older homes expecting them to be less then perfect. We accepted there would be faults, wear and tear and problems. We fixed them not unlike fixing a used car you just bought. You just expect to have to spend money on the old car after purchase. My lawyer says ‘only a fool would fill out a Disclosure Statement as this document is the perfect basis for a court action with an admittance in writing and signed.’
    The PDS is another example of our industry leaders unnecessarily jeopardizing our welfare.

  3. The root of the disclosure problem is, in Ontario at least, that the regulations about disclosure, under which we real estate people must operate, do not match provincial law, under which the buyers’ and sellers’ must operate, part of the continued attack on ‘buyer beware’ by the province’s regulatory bodies. As usual, RECO (‘it’ who must be obeyed) has put we real estate people in a high-risk position, like a goat staked out in tiger country. RECO ethics require that we place our clients’ interests above everything except the law, not everything except the regulations. I say it is time we goats rose up and fought back against the tsunami of pointless and contradictory regulations.

  4. I think Ross and Brian are bang on, but don’t assume that proper disclosure doesn’t exist. I’ve disclosed many issues to buyers and allowed them the freedom to make their own choices. Fact is, the Calgary region that flooded will come back as will their property values…why? Because the demand to live in those amazing neighbourhoods is high. Even with the risk of flooding. Remember, this was an extreme event and it will take a couple more of these, in short order, to keep people away. The mere suggestion that CREB is encouraging Calgarians to make dumb decisions is an insult not only to the local board, but also to citizens of Calgary.

    I know Ross and Brian would rather just be heard than say anything intelligent, but I think in this situation you both should just back off and enjoy your retirement from the industry.

    • So HWR, are you saying then that “…it will take a couple more of these…” (floods, on flood plains) before the gamblers finally wise up? There is more than a risk of flooding again; it’s a virtual guarantee. The only unknown is when.

      If my words directed at the CREB in this particular instance are insulting, that is because they are meant to be. My insults, however, are not directed toward ‘all’ Calgarians…just toward the gamblers, the wishful non-thinkers, the dreamers…those who ‘do’ think that the unthinkable will not happen to ‘them’, but to someone ‘else’…at another time…in other words…other dummies.

      I leave the judgement of the intelligence quotient, or the lack thereof, contained within my posts herein, to ‘all’ readers. Individual pronouncements of a lack of same bother me not. I don’t intend on pleasing; I intend on continuing to create food for thought, even if it is undigestable for some.

      I’m pleased however that you think that Ross and I are bang on with our initial assessments of this issue. I am also pleased that you can hardly wait for my next post. I guess you’re not that dumb after all. I dare say that you would not buy property on a known flood plain unless your were planning on developing a dry-dock marina with provisions for the occasional wet boat-launching party.

      I really am enjoying my retirement from the industry, thanks, but, I must confess…I don’t know how to back off. It’s kinda neat being plugged into the game via REMonline…pissing people off who need pissing off every once-in-a-while.

  5. Certainly BC has far more issues than Ontario and although all the points touched on by Marty do not apply country wide, each region has it’s own issues that are just as important for disclosure, which Marty clearly implies.

    In my opinion what Marty really is bringing attention too, is the reality that selling in 2013 is not like 1970, 1980, 1990, 2000 or even 2010, yet current forms, educational and licensing standards are not improving the professionalism of the industry.

    With the average REALTOR (that is active dues paying member of CREA in 2013) in Canada listing just one home every 3 months, the question arises just how long is the current model of 103,000 members sustainable, with increasing demands for delivering higher and higher levels of competency?

    In all honesty with the MLS infrastructure is so well executed across Canada, 10,000 Agents could easily handle the 2 deals a week, those 450,000 yearly sales demand, and those 2 deals would allow for no multiple agency to be needed to be practiced.

    Even only doing 1 deal a week the profession only requires 20,000 practitioners in 2013. I guess there is a reason the 80/20 rules exists.

  6. Disclose: Bring to light; uncover; make known. (Webster’s)

    To disclose is to ‘do’ something. A disclosure is something ‘already done’.

    In B.C. the subject form is called a Disclosure form, signifying that whatever is noted therein was already known to be, and has thus been disclosed. What was not already known cannot be expected to be disclosed; one cannot disclose an unknown. To uncover “what-may-be” would require the destruction of the property to investigate for hidden defects. Of course, having done that would render the entire property a patently obvious patent defect of epic proportions. So then, a reasonable approach must prevail.

    Reasonable: Rational; amenable to sound sense; not exceeding the bounds of common sense; sensible (Webster’s)

    When purchasing a resale, one is not purchasing a new property; one is purchasing a ‘used’ property. How well or unwell has it been used? Has it been tampered with? Has it been maintained? etc., etc. Hire two home inspectors, and let each inspector know that another is also conducting an inspection…at a different time; keep them on their toes as the result. Write into the offer a clause stating that the seller will pay for one of the inspections…at the buyer’s choice of said inspectors and for which one the seller pays for. Be reasonable; don’t expect a silk purse to emerge from a pig’s ear. Want a perfect property?..buy a new one! (That’s a laugh; ask me about my four year experience as a conciliator/inspector with the Ontario New Home Warranty Program…now TARION corp.).

    There is no such thing as perfection people! Just read the weasel-wording qualifiers in Disclosure/SPIS (Ontario) forms; the words “imperfectly well thought out” come to mind rather quickly.

    Tell your buyers to do their own due diligence when they become emotionally attracted to a property and thereafter express a desire to make an offer. Tell them to be prepared to live with any unforseen consequences (short of fraud-driven consequences) upon taking ownership of said property. Tell them to be reasonable people and to not expect perfection; there is no such thing. “Perfection” is a human construct to ostensibly be aspired to with the attendant reasonable realization that it cannot be attained…because it does not exist.

    Sellers: Do not fill out disclosure/SPIS forms, thereby trying to make your properties appear to be something that they are likely not.

    Listing Realtors: Do not open Pandora’s Box to litigation by perfection-expecting buyers; advise against filling these “forms of insanity” out.

    Buyers: Beware and be reasonable.

    Buyer Representation Realtors: Be smart, be honest, be above it all and be in your buyer’s corner, first and foremost. Ignore claims of “Everything’s just hunkey-dorey” in Disclosure/SPIS Forms. Assume the worst, be skeptical. Advise your buyer to hire the home inspector that most local Realtors hate…THE DEAL-KILLER. Five-hundred bucks spent up-front on a stringent home inspection that reveals undisclosed unknowns of a negative nature is a really, really, super-duper well-spent insurance premium against future heartache and financial distress.

    View the Disclosure/SPIS forms with a jaundiced eye, for what they really are…worthless papers with signatures and qualifying escape clauses designed to facilitate the quick and easy movement of product. They should be re badged THE SELL! SELL! SELL!/BUY! ME! BUY ME! BUY ME! RAG.

Leave a Reply