Risk Management Tips for Water Seepage and Infiltration

The potential problems associated with water seepage and infiltration in basements are well known and can create risks for REALTORS®. The discovery of these issues by buyers after a purchase often results in demands for compensation, complaints to their real estate association, or even civil litigation. Thankfully, there are things that REALTORS® can do to limit the possibility of disputes arising after a transaction and to reduce the risk of being found responsible for damages if a dispute does arise.

TIP 1: ATTEND AND OBSERVE

Whether you act for the buyer or the seller, spend some time in the basement of the dwelling and around its exterior. Pay attention to the areas where one might typically expect there to be water seepage or infiltration. Search for signs of water damage such as effervescence, crystallization, mould, mildew, cracks in foundations walls, and any “damp” or “mouldy” smells.

TIP 2: DISCUSS AND DISCLOSE

If you observe any indicators of water seepage or infiltration, review your observations with your client. If you act for the potential buyer, encourage them to pursue further information from the seller, the seller’s REALTOR®, or a qualified professional.

If you act for the seller, the best thing you can do is urge the seller to fully inform a potential buyer of any water seepage or infiltration issues. If your observations or the seller’s information subsequently reveals issues that ought to be disclosed at the outset, whether as part of a listing document, a property disclosure statement, or otherwise, disclose these issues. If the issues are hidden from the view of a purchaser, disclose these issues. Advise the seller that you are required to do so. If the seller refuses to make these disclosures, consider whether you should continue to work with the client.

TIP 3: ASK AND RELAY

Do not speculate on nor assume information that has not in fact been provided by the seller.

Whether acting as a REALTOR® for the seller or on behalf of a potential buyer, ask specific questions. Ask specifically whether there has been any water in the basement. If there has been seepage or infiltration, ask about the source, the circumstances regarding the occurrence (e.g., significant rainfall), the date of occurrence, the location of the seepage or infiltration, and the remedial efforts taken. If remedial efforts have been taken, collect supporting documentation and ask whether those efforts resolved the issue.

Avoid putting the buyer’s questions or the seller’s answers in your own words. Where possible, copy and paste questions and answers in your communications to ensure that you do not unintentionally change their meaning and that they accurately reflect those made by the buyer and seller.

TIP 4: RECORD AND DOCUMENT

The most prevalent complaints from buyers are that they were not informed of a seepage or infiltration problem by either their REALTOR®, the seller, or the seller’s REALTOR®. These complaints often come down to the credibility of the various parties as to who said what, and to whom. Documentation can greatly increase the ability to defend a REALTOR® as notes made during the transaction may support a REALTOR®’s account beyond their own credibility.

Document your observations, the questions asked, and the answers given with notes saved to your file. Date your notes and confirm verbal discussions in email messages that follow. If the buyer is not concerned with water seepage or infiltration or is not interested in making inquiries, document this as well with file notes and confirm the buyer’s decisions with respective documents or communications.

As claims against a REALTOR® can be made several years after a transaction has closed, and as a busy professional will not remember the specifics of their discussions, file notes may be all there is to support the circumstances of a given transaction. Keeping such records sounds simple, but many professionals do not make such records. Taking a few extra minutes now may benefit you down the road; and may be crucial to limiting the risk of a potential liability in the future.