What are material latent defects and how do they effect your home purchase?

Material latent defects are a physical defect that is not discernible through a reasonable inspection, and makes a property dangerous or potentially dangerous to the occupants. A good example of a material latent defect is mold issues which have been covered up prior to putting a home on the market.

These are defects that may not be discoverable during a reasonable inspection of the property, even by a professional home inspector. Material latent defects may also include defects that would be very expensive to repair or when a seller did not acquire permits prior to developing a basement.

These are things your professional will not know unless you tell them. If defects are discovered by a buyer during an inspection, or by their own real estate professional or lawyer when they review permits, real property reports, or title, it could put the transaction in jeopardy.

Examples of material latent defects

• a seller finished the basement of their house and in the process covered a large crack in the basement wall that affects the structure
• a seller finished the basement of their house, or built an addition or a garage, without the appropriate permits
• a seller knows that whenever it rains, water enters the house
• the home was a former marijuana grow-op and the property has not been remediated. The growing conditions for a large marijuana grow operation create an ideal environment for potentially dangerous mould and mould spores and these may linger and continue to make the property unfit to live in if it has not been remediated
• the home was a former production operation for fentanyl or other opioids. Particles of these substances can remain in homes and surfaces and can be extremely dangerous if touched or inhaled

Sellers cannot hide defects or mislead buyers about the condition of the property or other attributes. Sellers must disclose all known material latent defects.

Your real estate professional must also disclose to buyers any material latent defects they know about. Real estate professionals cannot help hide or disguise material latent defects.

What is the importance of RMS?

Residential Measurement Standard Principles

REALTORS® must use the RMS when measuring and advertising properties. Measurements must be calculated to within 2% of the RMS size. RMS measurements are only included where the structure is heated and insulated. For detached properties, exterior measurements are used. For apartment style condos, interior perimeter walls are used at floor level.There are specific guidelines for measuring sloped ceilings, walkout basements, bay windows, sunrooms, dormers and cantilevers.

What happens if the RMS is incorrect

If the RMS is incorrect, you or REALTOR® can be held liable for the discrepancy and a buyer has a legal right to sue you for fraudulent misrepresentation. Most REALTORS® hire out a licensed RMS Company to ensure the size of your home is advertised accurately.

How to Accurately Use the Residential Measurement Standard

Alberta REALTOR® must use the Residential Measurement Standard (RMS) when measuring residential properties. This measurement standard helps consumers easily and accurately compare different types of residential properties.

The RMS offers a consistent means of representing the property above grade space. Among other things, the RMS sets out what parts of a property can be included in its measured-area. For example, if a room has a dormer with a ceiling height of only 4 feet, is it included as floor space? What about finished basements that are entirely below grade? 

When stating the area of a residential property, your REALTOR® must follow the RMS principles:

• Alberta REALTORS® must use the RMS.
• Identify if the measurement system is metric or imperial, and apply it consistently. Measurements must be calculated to within 2% of the RMS size.
• For detached properties, measure the property using the exterior wall at the foundation.
• For properties with common walls, such as half-duplexes, townhouses, and apartments, measure the interior perimeter walls (paint-to-paint) at floor level.
• Include floor levels that are entirely above grade. Below grade levels must not be included in the RMS area. If you have a split level, this may include two or three levels depending on where the grade sits.
• Include all additions to the main structure above grade areas within the structure if they are heated and insulated.
• The property must have a minimum floor-to-ceiling height of 7 feet. If the ceiling is sloped, the area with a floor-to-ceiling- height of at least 5 feet is included in the RMS area, provided there is a ceiling height of 7 feet somewhere in the room. This can eliminate bay window sitting areas.
• Exclude open areas that have no floor, such as vaulted areas.

Your REALTOR® also has a responsibility to ensure you understand the RMS and its implications, and is required to discuss it with you. This discussion will help you make informed decisions about the size and suitability of properties.

For more information about the RMS, you can read the Consumer Guide to the Residential Measurement Standard in Alberta.

Do houses in Edmonton have radon and how concerned should you be?

What is Radon?

Radon is an odourless, tasteless, colourless radioactive gas that is the by-product of uranium decay. Uranium occurs naturally in soil and rock formations, and creates uranium deposits, some Canadain provinces such as Alberta and Saskatchewan, have higher radon levels.

Radon seeps through the earth and into basements, where it can become trapped because of the efficient way our homes are sealed from the outside elements. Prolonged exposure to radon can lead to health problems, including lung cancer. In fact, after smoking, radon gas is the leading cause of lung cancer.

The Alberta Building Code 2014 included new requirements to protect homes from radon. The requirements came into effect in late 2015, and include, among other things, that new homes require a properly located radon rough-in or passive pipe in the basement, which can make it easier (and cheaper) to install a radon mitigation device in the future if it’s needed.

Does your Edmonton house have Radon?

It is important to know that homes anywhere in Canada can have dangerous radon levels. However, some of the homes in the prairie provinces have the highest average level of radon.

Radon Gas Map, Canada. Source: Radon Environmental Management Corporation. 2011

How to test for radon

There are a few companies in Edmonton which will test for radon. This is becoming a more common contingency for home buyers. Long-term testing: tests of at least 90 days during the heating period (fall, winter, and spring) or during the height of summer when you may have air conditioning running provide reliable for determining radon levels.

Short-term testing: in Canada, some entities market and recommend short-term testing. Health Canada states short-term tests are not acceptable to assess radon levels as radon levels can vary significantly over time. Do not be misled, short-term tests do not provide buyers and sellers with an accurate indication of the likelihood of adverse radon levels.

What is an upside down mortgage?

An upside-down mortgage is simply a mortgage in which is more money is owing than what the property is worth. An upside down mortgage can happen to anyone. With real estate markets in big cities like Toronto and Vancouver where house values are decreasing, many homeowners will find themselves in this position today.

If you find yourself in this situation and can afford your monthly mortgage payments, the best thing to do is stay put and keep paying down your mortgage until you have built some equity.

Can You Sell Your Home With an Upside Down Mortgage?

You may want to or need to your home in a downward market, knowing next year, your home will be worth less. The answer is yes you can, but will need to take into consideration the ability to pay the debt you acquired between closing costs, mortgage penalties and mortgage payouts. If you are able to find the funds, sometimes it's just best to take the loss and move on to avoid going further into an upside down mortgage.

If you are struggling to make payments and your mortgage is upside down, talk with your bank. Your financial institution can allow you to sell your home and provide you with a personal loan to cover the shortfall, saving your credit.

The simplest solution for homeowners with upside-down mortgages is to continue making payments, if possible, and wait for home prices to rise again before selling their homes.

Are there any other options?

Sometime you will see an owner selling half of a house (yes it is possible). This is usually due to a civil enforcement and a lack of equity in the property. If you choose to keep your home and are will to sell half to a stranger, this may also be an option for you.