Pam Whelan thought the profits from her remodeled Calgary home would help fund her retirement. When she purchased the house, she was told by the listing realtor that the $800,000 property had 2,500 square feet of living space on the main floor.
However, when she decided to sell it five years later, she discovered the space was a mere 2,094 square feet. She ended up selling the house for $25,000 less than she paid for it, despite making extensive upgrades to the home.
Luckily, nasty surprises of this sort are quite uncommon in the property world, according to Ottawa-based real estate agent Sean McCann.
"Those are huge anomalies — like in my 15 years I have one file where we actually, truly, had something structural that we're dealing with on the home," he told CBC News. "They're pretty rare, but they're also pretty monumental when they happen."
More common are smaller disappointments, such as finding out the house you purchased has an undisclosed leak in the basement or that the stove doesn't work. McCann says that out of the approximately 100 transactions he and his team deal with every year, about two or three homeowners encounter these $1,000-$2,000 problems.
Here are some things to do and look for when you're purchasing a new home, to ensure the resale value is in line with your expectations and you don't end up with any unpleasant surprises.
Get an inspection and/or survey
The difference between the two, according to Vancouver real estate lawyer Richard Bell, is that "the inspection is really [about] the building, the survey is identifying the property."
You can make your offer subject to a survey of the property, subject to an inspection, or both. At this stage, you can also get your new home's square footage independently measured.
McCann says you should always independently verify any information you've been given about the home by the sellers.
"Hire a qualified home inspector who's got local market knowledge to help fill in a lot of the blanks," he said.
However, Bell warns, this is easier said than done in competitive markets such as Vancouver and Toronto.
"The challenge always is, in these heated markets, sellers aren't going to be too co-operative when they have people lining up making offers without subjects," he said.
Bell says one option when buying a detached home in areas where sellers aren't too keen on inspection clauses is to make your offer subject to satisfactory review of title and registered plans. This allows you to pull a copy of the subdivision plan from the land title office, which will give you an indication about the last survey done on the property.
Get sellers' information in writing
The way you get this information, and how easy it will be for you to obtain, varies from province to province.
In British Columbia, Bell says, it's pretty standard for your realtor to obtain what's called a property condition disclosure statement from the sellers stating whether the home has encountered any water damage, infestations or other issues.
"If there's a misrepresentation, then the seller is liable for that misrepresentation," he said.
However, it's not unheard of for B.C. homeowners who've been renting their property out to include property condition disclosure statements that are basically blank, because they've never lived in the home.
The Ontario equivalent is something called a seller property information statement (SPIS). Unfortunately for buyers, these don't come standard.
"The topic of SPIS is quite contentious and we're not seeing a lot of sellers providing it because it has made its way into some court cases and things," McCann said.
If you can't get an SPIS, be aware that the seller still has an obligation to disclose any problems with the home they're aware of.
"Ask them if they're aware of any latent or patent defects that can adversely affect the value of the home," McCann said.
Get them to provide this in writing, either through an email trail or in the body of the offer. This will help hold the sellers accountable if they tell you something incorrect or fail to disclose a problem.
Above all, McCann encourages home buyers to be vigilant and remember that they're the ones in the driver's seat.
"Buyers are excited, there's a lot of emotion … they like what they're hearing; [they're told] the house is 2,500 square feet and the next thing they know they've bought 2,100 square feet," he said.
"Independent verification of information provided is a big deal."
Originally posted by: Jillian Bell, CBC News