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What Is The Seller Trying To Hide?

April 5, 2016

‘As Is’ Sales in Real Estate

Most homes are sold ‘as is.” In fact, the form Residential Purchase Agreement used by most brokers has a pre-printed ‘as is’ clause stating that the property is sold ‘as is’ without any warranty and in its present physical condition. In a recent purchase, my client provided me a special lawyer-prepared document which the seller asked that he sign. This document reiterated that the property was being sold ‘as is.’ My client’s reaction was to ask: What is wrong with this property and am I losing all of my rights by agreeing to buy it ‘as is?

There is no clear-cut answer but a quick explanation of the law should put your mind at ease when buying a property ‘as is.’

WHAT IS WRONG WITH THIS PROPERTY?

As the Agreement notes, ‘as is’ means that the Seller is not making any warranties about the condition of the property. Selling ‘as is’ does not necessarily mean that anything is wrong with the property. The Buyer, however, should have a professional inspector look at the property and accompany the inspector as he examines the property. The inspector’s trained eye will catch items that you may not notice.

AM I LOSING ALL OF MY RIGHTS?

If it turns out that a problem arises with the property after the deal has been closed, what remedy does a Buyer have in an ‘as is’ sale? The ‘as is’ clause works in concert with other laws, most notably California Civil Code §1102. This section requires that the Seller provide the Buyer with a detailed Real Estate Transfer Disclosure Statement.

The Disclosure Statement addresses almost every conceivable defect with the property—from the presence of contaminants to lawsuits against the property. In general, the Seller is under a duty to disclose any and all facts materially affecting the value or desirability of the property which are known only to him and which he knows are not known to, or reasonably discoverable by, the Buyer. Even loud or obnoxious neighbors must be disclosed.

If the problem has been disclosed by the Seller, the Buyer has no cause to complain at a later date. He could have walked away from the deal or renegotiated. However, if the Seller knew about the problem but did not disclose it, the Buyer may have a claim against the Seller.

In a recent case, our client purchased a multi-million dollar home only to find that the winter rains brought extensive leaking. The professional inspection had noted that the roof should be maintained yearly and would have to be replaced in three years. However, it had not uncovered any leaking, and the Seller made no mention of roof leaks in the Disclosure Statement. However, the gardener and housekeeper, both of whom had worked for the Seller, remembered numerous roof leaks while the Seller lived in the house.

The Seller argued that (1) the house was being sold ‘as is’ and (2) the inspection put the Buyer on notice that the roof was in bad shape, thereby absolving her of any liability. In any event, she also claimed to have repaired the leaks and thought that they had been fixed.

While the inspector may have noted the limited life of the roof, the Seller was still required to disclose the leaking. The leaks were a material fact affecting the value and habitability of the home. In this case, neither the Buyer nor the inspector could have discovered the leaks in a visual inspection of the property. We were able to convince the seller that they had liability for this non-disclosure and he paid damages equal to a new roof and attorneys fees and costs.

So, rest assured, although you may be buying the house ‘as is,’ the Seller is not excused from disclosing material problems in the Disclosure Statement. And in the event the Seller fails to make these required disclosures, the Buyer has a legal remedy, despite the ‘as is’ provisions of the Agreement.