Material Defects: Understanding what you can't see in a listing
Updated: Sep 11, 2021
When a home is listed for sale, there are two different kinds of disclosures that a savvy Buyer needs to know. Material Latent Defects and Material Patent Defects in a home are critical to understand before your next purchase.
Defects? What do you mean by that?
Very seldom is a home perfect. Even in a brand new home there can be defects. A truly great Buyer's Agent will primarily identify those defects though researching the facts that are communicated about the home from the Seller's Agent. There are two types of defects that a home will have, material patent defects and material latent defects.
What is a Material Patent Defect?
A Material Patent Defect is a defect that can easily be seen and identified when we go to visit a home together. An example could be a big crack in the countertop on the island in the kitchen. Another might be a broken section of fencing in the garden. Basically, a Material Patent Defect is something that is not hidden from view. It doesn't mean that these types of defects are only small defects. A Material Patent Defect could also be a large and easily visible crack in the foundational wall in the basement. Certainly, that would be concerning but it isn't something that the Seller's Agent would have to specifically make you aware of since it is easily seen by all who enter that basement area. There are many ways we can handle Material Patent Defects, such as discuss with the Seller what they are willing to fix prior to you moving in, or we can support you to get estimates about what repairs are needed. Though well managed negotiations, we will support you to ensure any Material Patent Defect that is an issue, is addressed - or you could also move on to a property that better fits your needs. It's up to you and we are there to help you along that way.
What is a Material Latent Defect?
A Material Latent Defect is certainly a different type of issue. It is defined primarily as a physical defect that is not discernible through a reasonable inspection of the property and makes the property:
Dangerous or even potentially dangerous to the future occupants
Unfit to live in the home
Unfit for the Buyer's purposes (should that purpose be known to the Sellers and their REALTOR®)
It is typically a defect that would involve great expense to remedy, and often it is a defect that the local authority has given notice to the Seller to remedy. It is also defined as a lack of appropriate municipal building and other permits required respecting the real estate in question. To learn more about what the Material Latent Defects are as defined by the BC Financial Services Authority, just click here.
Disclosures about Material Latent Defects must be made in writing, so the Seller's Agent must ensure that they fulfill on their obligation to disclose. This disclosure is made by the Seller's Agent to the Buyer's Agent and it should be made prior to entering into any agreements to purchase the home. To learn more about the obligation REALTORS® are under to disclose Material Latent Defects, please visit the BCFSA article here.
What is a Stigma?
It is important to know that Stigmas are not Material Latent Defects. If the Buyer has concerns about a property that is outside of the obvious structural and mechanical aspects of a home, they may wish to avoid the property altogether. Events can happen in a home that would leave a home stigmatized, or deemed a "psychologically impacted property" but these impacts do not specifically impact the home's physical condition, appearance or function.
Examples of properties with a stigma may include:
A death having occurred at the property.
A former home occupant being a criminal
A property that has been robbed or vandalized
Neighbours reporting the home is haunted
A sex offender living in the neighbourhood
While these are important issues, they are influenced by a person's beliefs, cultural backgrounds, values, perceptions, gender and so many other individual circumstances. It is important for an agent to ensure they are aware of any stigmas that are important to their clients so that those questions can be answered, but this category of flaw with a home does not equal a defect.
Use and Enjoyment of a Home. Understanding Future Plans.
Simply understood, if a Buyer wanted to purchase a home to rent it out in the future, and the Buyer's Agent did not ensure the Buyer was aware that the listing they are purchasing as no rentals in the building, we have a problem. You can easily see how diligent research about a home impacts the Buyer's use and enjoyment of the home regarding how they plan to use and enjoy the home. It is critical that Buyers understand how to find a truly great Buyer's Agent who will do that research flawlessly each and every time.
When do Material Latent Defects not involve structural issues?
This is best understood in an example scenario. It could be that a Buyer wishes to buy a home with the expressed purpose of tearing down the present home and rebuilding. A property that is ideal is found and it is on street of homes lining a lovely riverbed. The property has a very wide frontage and smaller depth, about 17 meters or about 55 feet. The Buyer is really excited about purchasing the 1800 sq. ft. one level home and rebuilding a 4000 sq. ft. three level home instead. The current home sits 5 metres away from the riverbanks and the views throughout the home are incredible.
In this community, the local municipality has a streamside protection by-law in place for that street which ensures that any new buildings in the area respect a 15 metre or 49 feet setback from the riverbank for the new construction. There are a host of other concerns the Buyer should also be aware of if they are going to rebuild which would really skyrocket their price per square foot for the build.
So, if the Buyer was not aware of this issue during the process of purchasing the home, the would end up purchasing the home and unable to action on a rebuild that would be on a different footprint than the home currently has. This is because the municipality has a guideline that says the only way a home could exist on the land 5 meters from the river is if it is on the same foundation as it has now.
This is a perfect example of how a bylaw that affects an area where a perfectly good home with no visible or invisible defects are, could still have a Material Latent Defect in that a Buyer could really not build their dream home on the lot, no matter the price.
It's critical for Buyers to know the experience level of their Buyer's Agent, so that you are protected from what a lack of experience can bring to the process. A diligent Buyer's Agent will go above and beyond to research the home, it's location, community and anything else that will impact your future at your new home, long after your purchase closes.
Have a question about defects? Ask us!