Step 4. Material Facts: When It Comes to Buying a Home, You Don't Know What You Don't Know...
Sue Ostler Buyers Agent
LREA Accredited Buyers Agent. I help busy professionals source and secure homes & investments | Auction Bidding | Negotiations |
You Don't Know What You Don't Know
What Are Disclosures??
Material facts are problematic or historical issues that the property has that are not visible to the eye.?
What Are Property Owners Required To Disclose?
When selling a property, sales agents are bound by law to disclose 'material facts. Real estate law requires the owner to disclose information about material defects or issues. But what are they, and what has to be disclosed?
What is a material fact in property?
A material fact is information about the property, which may have changed their decision had it been known by the client.?Agents have a duty of care to their clients. Whether you ask or don't ask, agents represent defects within the property. The agent has a duty to tell the potential buyer if they know of a material fact, such as lack of insulation, excessive moisture in the walls or foundational issues like the piers need to be straightened and resettled. Your building report might reveal facts that were not disclosed by the agent. In the case of one writer I know, cough-cough, it was the discovery of a very scary and "secret attic."
The Real Estate Institute of NSW?provides examples, including whether building defect like asbestos or if it was the scene of a serious crime.
Say, for instance, a murder was committed within the home; it is the agent's duty to disclose this, but, however unfortunate it is, that is not always going to be the case. Thus, you have a chance of unearthing such things when you get a legal expert on the case. Some of the defects, like the latter, are subjective, and thanks to the culturally rich population of western countries, what affects one person may not affect another.?
?A material defect is "any fact that could have a reasonable and significant impact on the value of the property." It can also be a condition that poses an unreasonable risk to others. Besides disclosing material defects, the owners must also disclose:
There is also the possibility that the seller doesn't tell the agent everything, and an agent can't disclose something they don't know. In some states, the owner may be liable if they fail to disclose. The seller is also forbidden from concealing any material faults from the buyer. A?material defect?varies between states.
It gets interesting that property owners are only required to disclose information within their personal knowledge. This means buyers are not expected to engage a professional to discover problems that the property owner did not disclose. But?if a vendor hires an inspector who finds various defects that were not disclosed, then the seller is legally obligated to disclose those defects.?
Moreover, a seller is only liable for failing to disclose defects if the buyer did reasonable diligence whilst inspecting the property. For instance, if the buyer discovers material defects after the inspections, they cannot sue the seller. Likewise, buyers may only sue the seller if they know the defects before completing the sales transaction.?
Sellers, selling agents and brokers are equally responsible for disclosing defects, material or otherwise if they are known to them. Just so we're clear, all known material defects must be disclosed to the buyer.??
It is your prerogative as the buyer to seek clarification with the agent and ask questions about the home's history.?
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Examples of material facts include (but are not limited to):
Asbestos
Asbestos is a group of minerals that are easily fractured into tiny invisible particles airborne. They are small enough to breathe in. These particles may sit inside your lungs and cause internal damage if they are dislodged and airborne. Over the years, many people have suffered from asbestos exposure. The intake of the articles causes health effects. Asbestos is present in or insulation inside a property cladding/sheeting, fibro/cement pipes. Roofing may also be made out of asbestos.
If your Inspection report unearths a material fact, then it is up to you to manage that. Either you will look further into it or step away from the property. If your agent is acting morally and ethically and showing a reasonable effort to learn about any existing problems within the property. So long as you and the agent are on the same page and the agent disclosed important information before anyone entered into negotiations or signed any contracts. It is the agent's responsibility to find out the material facts when they list the property.
Given that you the buyer is investing time, emotions and truckloads of money as you inch closer to buying, the conditions of the sale are of utmost importance.
The listing agent is representing the property. They don't own it. They act as a conduit; they are the conductor of the sale. It is their responsibility to act in the best interest of the buyer.
A material fact, had it been known beforehand, may change the buyer or seller's decision. It's up to you to press the agent so that they disclose material facts early. Unknowingly or knowingly, the agent can be found liable. Agents must make a reasonable effort to find the material facts about a property. It is important to disclose these things at the right time. You can manage the facts by either accepting them or rejecting them.
New South Wales:?https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/working-as-a-property-agent/misrepresentation-guidelines
Step 5. Making an Offer
Can we help you with your property needs?
If you're looking to explore value in the market, please get in touch. We know the Sydney market well and understand it. If you'd like advice about the property market, whether you want to sell, buy or lease, we're here to help. Email: [email protected]