The Property Condition Disclosure Statement (PCDS) discloses what sellers know about their property, mostly through a questions and answers format. The buyers then view the disclosure and becomes better equipped to determine if the home is worthy of further interest.
The disclosure covers major items prudent buyers should be concerned with, such as history of fire, insects or rodent problems, water seepage issues, toxic substances such as asbestos or formaldehyde, structural issues such as basement foundation cracks, construction permit history, plumbing and electrical issues, attached equipment issues (i.e. furnace, dishwasher) and much more.
PCDS and Saskatoon Real Estate
Most listed properties will include a PCDS, however in Saskatchewan and Saskatoon realestate, it is not a mandatory requirement. When this occurs extra scrutiny is recommended as it is possible that the seller may be intentionally hiding something.
However, we must keep in mind that when selling a revenue property a seller may not have lived at the property and will be unable to answer the questions fully - if at all - which is why under these circumstances a Property Condition Disclosure Statement is not provided.
Latent Defects and the PCDS
When selling, sellers must disclose "latent" defects on the PCDS.
A latent defect is one that is not discoverable by mere observation upon a reasonable inspection of a property. If the sellers are aware of such a defect, then they are obligated to disclose it to the buyers. If the sellers are not aware of it, then there is no obligation to disclose.
Therefore, take care not to fully rely on the PCDS, but rather use the PCDS as a guide for more investigation.
For example, sellers that do not know there is asbestos in their particular type of attic insulation will respond to the question as to the best of their knowledge with a “No, there is no asbestos in our home that I am aware of.”
Your home inspector on the other hand will actually inspect the attic with a trained eye and will inform you of any suspicious material. This is more common with older homes and certainly not a given, but if there is suspicion of asbestos the inspector will recommend that a sample be taken and sent to a test lab.
PCDS and Contracts
A Property Condition Disclosure Statement can be incorporated in and form part of the Contract of Purchase and Sale, and in most cases this is the practice as this action has been known to provide buyers with better legal protection in the event of a seller intentionally not disclosing important information.
Even if it has not been incorporated in and form part of the Contract of Purchase and Sale, a PCDS can still provide protection to the buyers.
Now, there is a very important point for all those involved in a transaction where a PCDS is included. There is an obligation on the seller to report under the PCDS until the date of closing the sale. Closing the sale means the purchase funds have been released to the seller and the property title has been transferred to the new owner. In other words the sale has been completed.
A Saskatoon Real Estate Story
Recently while working with buyers, a home inspector found evidence of moisture under the basement floor and other moisture related red flags, yet the sellers stated in their PCDS that they knew of no moisture problems.
Not being able to actually see the interior foundation walls due to the basement being finished, the inspector could not accurately say what the cause was and the buyer could not accurately project the cost to remedy the problem. While the buyer was pondering to buy or not to buy, to hire or not to hire an engineer for further analysis, and what type of price adjustment would be a safe bet, the seller decided to do his own inspection. In doing so he discovered that water was entering where the old foundation and new – additional - foundation met.
However at this point the sellers sat back and waited for the buyers to come to a conclusion based on partial information.
Although the situation required a complicated and costly repair the seller felt he could hold back the information and wait for the buyer to come to his own conclusions. The seller believed this was his right as he had already completed his disclosure and answered it truthfully.
Due to a number of red flags the seller was asked to specify in writing (meaning with witnessed signature) that he had or had not acquired further knowledge about the condition of his basement water issue, since his disclosure. It was then that the truth came out.
So, the seller had to be reminded that it clearly states on the PCDS “Any important changes to this information made known to the SELLERS will be disclosed by the SELLERS to the BUYERS prior to closing.”
As a result, the buyer dodged an unsuitable property with all of the stress and financial hardship it included, and the seller dodged a lawsuit.
It can help a fair deal come together, or provide ammunition for a court case.
When utilizing the PCDS both buyer and seller agree in writing to comply with its clauses and phrases. Be sure to read it over carefully, discuss it with your Realtor and fully understand the potential ramifications ahead of time.
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