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What's the “buyer beware” principle when it comes to buying a home?

March 3, 2022
3 mins
young man inspects home

Purchasing a home can be one of the most rewarding transactions you’ll ever make. The last thing you want to think about is what could go wrong. However, it’s not impossible to encounter unexpected defects within the home, so considering all outcomes with an investment this large is always a good idea.

The legal principle, caveat emptor or “let the buyer beware” holds true with resale homebuying to warn you of the onus you have in making sure the property you’re purchasing is in good condition.

The Ontario Court of Appeal first clarified this doctrine in a case where a landslide occurred and damaged a home right after closing. Because the court did not see proof the seller could have predicted the event, the buyer’s claim of a defect was dismissed. So, before you take out a mortgage on a previously owned home, it’s best to be aware of all the responsibility you’re taking on in the process.

Is the buyer responsible for defects in the home?

Unfortunately, the buyer is responsible for buying the property as it stands. The “buyer beware” rule exists to warn homebuyers that the seller is not responsible for finding defects within the home.

However, if it can be proven that the seller was negligent in their representation of the home, and they knew about a defect but intentionally withheld it from the buyer, the buyer could have a case against them in court. This type of defect would also have to be latent, meaning it could not have been detected with a professional inspection of the property.

How can buyers beware when purchasing a resale home?

A home inspection is your first line of defence against physical defects and should not be forgone. Hiring a certified inspector from your province’s inspection authority can ensure all detectable defects can be factored into your decision to purchase. Home inspectors in Canada are not required to estimate the remaining lifespan of any system or component in the home, nor are they expected to service a system if it needs fixing. So, it helps for you to know what defects and common signs of wear and tear to look for in each area of the home.

The Canada Mortgage and Housing Corporation (CMHC) recommends checking the following for defects:

  • Basements (wall cracks, electrical wiring, etc.)
  • Living areas (bulging ceilings, lack of ventilation, etc.)
  • Attics and roofs (low insulation levels, curled shingles, etc.)
  • Exterior walls (rotting wood, cracked or loose brick, etc.)
  • Condensation (on windows, wet drywall, etc.)
  • Termites and pests (sawdust, toothmarks on pipes, etc.)
  • Security (weak locks, smoke alarm placement, etc.)

But because you can’t predict whether your basement will experience spontaneous flooding from rainfall after you move in, it’s best to document all your communication with the seller and your real estate agent. One way to get the seller’s knowledge of their home in writing is with an official declaration.

In Ontario, for instance, the Ontario Real Estate Association (OREA) offers Seller Property Information Statement (SPIS) forms that ask the seller to record any defects or recent renovations. Based on what’s provided by the seller (if they agree to fill one out), you can probe any further questions you may have in writing to ensure a thorough investigation of your future property. That way if you do need to prove a latent defect you think the seller knew about, you may be able to.

If you’ve undergone the home inspection process with a certified inspector and feel confident in your purchase, finding the right mortgage rate for you is the next step. Fortunately, RATESDOTCA allows you to compare the best mortgage rates among Canada’s top mortgage lenders all in one place.

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Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.

Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.

Michelle Bates

Editor and Writer

Michelle Bates is an editor and writer in the personal finance space. She has seven years of content writing experience.

She has a Bachelor of Arts (Honours) degree from Queen's University in English Literature and Sociology along with a Publishing - Book, Magazine and Electronic graduate certificate from Centennial College. Michelle specializes in personal finance content, including mortgages, home, auto, and travel insurance, and credit cards. Her work has been covered by notable Canadian news sources like the Financial Post, the Globe and Mail, CTV News, and Narcity.

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