By Brian Madigan LL.B.
Real estate professionals are obligated to conduct their own due diligence when acting for a buyer. That is part of their “professional responsibility”.
Here is an excerpt from the RECORD a publication of the Real Estate Council of Ontario (RECO), the governing body, dealing with buyers and material facts, made in its Fall 2011 issue:
“Working with a buyer
When working with a buyer, registrants often have checklists or ask questions of the buyer to determine their needs and what type of property will best suit them. This is the ideal time to discover the interests and sensitivities of the buyer and help determine what the buyer would consider a material fact about a specific property.”
This may be easier said than done. Remember that the investigation is a process and it is not just having a checklist completed at the outset. It may need to be updated and changed as each new property is viewed. So, that means making some notes as you go along.
The checklist at the beginning is likely to be quite theoretical, but if a property had all those attributes, the buyer just couldn’t afford it. Therefore, reality must set in.
There will be a series of trade-offs. If you have 20 properties that you have now viewed in your search, don’t throw out the listings, make notes upon them and keep them in your records. I know that this is troublesome, and not the easiest way of retaining them. If you don’t have hard copies, then make notes which you can find later on your computer.
Here, you are looking for the negatives and the positives about properties. You are maintaining a continuous diary of the interests of your client. You will have a record of what is “material” in their eyes.
A lot of issues can be resolved with price! So, will your client accept a property that fronts on a major road? No, but with a $50,000.00 reduction, maybe they would. How about a leaky basement? No one wants one, but what if the price were reduced by $30,000.00, would that work?
If your client eventually buys the house with a leaky basement, you need to have some evidence in your file, that they proceeded with the transaction possessed with full knowledge, and confirmed to you their “informed consent”.
Your initial checklist could come back to haunt you. Naturally, it would have said “no water damage”, “no leaky basements”, “no structural repairs”. That means that you have justify the purchase. If you have documented clear interest in other properties with leaky basements, perhaps even submitted offers, you will have some evidence in the file to document the buyer’s “informed consent”.
Brian Madigan LL.B., Broker