(January 19, 2022)
Intro (pre-amble): up to 14:44 mark of podcast (Property Disclosure Statements | 10 random buyer profiles in Calgary & Vancouver real estate market | I think Prime Rate is going up on Jan 26 | Rate predictions for 2022)
PROPERTY DISCLOSURE STATEMENT (PDS): definition
A document that is completed by the seller before listing their property on the MLS. The PDS was developed by the BC Real Estate Association and allows the seller to disclose details about their home to prospective purchasers. Any latent (hidden/concealed) defect and/or patent (visible) defects should be disclosed in the document, particularly latent defects as prospective purchasers may not be aware of the potential defect just by viewing the property. The PDS is an ideal starting point when considering a purchase and is typically followed with a home inspection if the prospective buyer proceeds with an offer. The PDS is a critical document and should be taken seriously by the seller when filling it out as they could be held liable if a defect was knowingly concealed. The PDS should equally be taken seriously by the buyer, especially if a mortgage is being used for the purchase.
Property Disclosure Statements (as they are known in British Columbia) are increasingly becoming more critical especially with all the subject free offers in circulation across the country. They are often neglected or forgotten about as borrowers and brokers focus most of their attention on the more common mortgage conditions like income and down payment verification. Whatever you do, do not let disclosures on the PDS go unnoticed by either your mortgage broker or most importantly, your lender. If you have a period of financing conditions in your offer you should have plenty of time to review and deal with any problematic disclosures, but IF YOU ARE submitting a subject free offer, do the following:
- Make sure you have thoroughly reviewed your mortgage pre-approval with your mortgage broker and be sure to Indicate that you plan on submitting an offer with no subjects, otherwise your mortgage broker will expect to have financing conditions. Click Here to read my past blog on how to qualify for a bullet proof mortgage pre-approval.
- Once your mortgage pre-approval has been upgraded to a subject-free mortgage pre-approval, cautiously proceed with making offers. But BEFORE you actually submit a subject free offer, provide a MLS Sheet and PDS of the property to your mortgage broker for review. Remember, a mortgage pre-approval accounts for mostly everything regarding your personal financial credentials, but what it doesn’t account for is the actual property itself (as the property was still unknown and undetermined at the time of the pre-approval process). MAKE SURE that any problematic disclosures are identified and brought to the attention of your mortgage broker PRIOR to submitting your subject-free offer. This is a very critical step and could potentially prevent you from a worst case scenario of going subject free on a property that no lender in Canada will approve! It happens more often than you think and there is absolutely nothing that a co-signer can do about it, regardless of how strong they are.
Here are some problematic (or potentially deal breaking) property disclosures to look out for, heads up!
- properties that were formerly marijuana grow ops or any other history of drug manufacturing
- properties that are classified as mobile homes
- any existing or pending litigations on a property. Lenders will require that they be resolved prior to advancing funds
- properties that are in the process of being remediated will not be approved by lenders until the process has been fully completed
- water sources other than city/municipal. Lender will request details and determine whether or not the source is acceptable according to their qualifying parameters
- anything pertaining to leaks and/or membrane issues
- self managed strata for complexes over 10 units
- poorly funded strata (contingency fund)
- properties that are situated on a flood plain
- any mention of asbestos and/or vermiculite
- in ground oil tanks
- foundation issues
Other points to be aware of:
- PDS’s are required for all purchase transactions in BC and if seller or buyer do not provide one, lenders will become suspicious and/or curious if there are issues with the property. In most instances they will simply decline and collapse the application.
- in cases were owners have never occupied the property because they have been renting it out for investment purposes, they will typically present a scratched out blank PDS to signify that they are unaware of any defects as they have not been residing in it. In this event, lenders will typically require the buyer to purchase title insurance to protect against many (but not all) potential defects.
OTHER RELATED ARTICLES:
11th hour mortgage qualification collapses…how to avoid them
Purchasing a Property with No Financing Conditions…OMG!
Is your mortgage pre-approval legit?
Contact Marko, he’s a Mortgage Broker!
604-800-9593 direct Vancouver (Click Here to schedule a call with Marko!)
403-606-3751 direct Calgary (Click Here to schedule a call with Marko!)
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