Do you think you can hide that roof leak by simply refinishing and painting the affected wall and ceiling?  Think again.  How about disguising the termite damage in the floor by covering it over with new carpet?  Not a chance.  What about failing to tell the buyer and your agent that sewage backflows into the bathroom after every heavy rain?  Don’t do it!  Will it make any difference if your buyer acquires your house on an “as is” basis?  In your dreams!  A common mistaken belief is that an “as is” provision in a contract for the sale of real estate relieves the seller and his or her broker from liability for defects in the property.  To the contrary, an “as is” clause merely means that the buyer accepts the property in the condition that is visible or observable by him or her.  Courts have consistently held that an “as is” clause, by itself, does not relieve a residential property seller or agent from liability for hidden material defects of which they knew or for which the seller or broker had a duty to inspect and discover.  Both the seller and seller’s agent have independent duties to disclose concealed material defects that are not observable by the buyer.  Thus, when the seller or the seller’s agent fails to disclose all known material facts regarding the condition of the property that are unknown to, or hidden from, the buyer, an “as is” provision is ineffective to relieve the seller from fraud liability arising from the nondisclosure. For example, in one case a contract provided that the “buyer agrees to waive termite clearance and to absolve seller of any warranty, accepting house as is.”  In fact, the house was termite ridden and decayed by dry rot, which the seller knew, but failed to tell the buyer.  The “as is” clause did not protect the seller from fraud.  In another case, the seller sold a home he knew was subject to a county order to correct violations of the municipal code.  He advertised and sold the property “as is,” as a “fixer upper” and disclaimed any warranties having to do with municipal regulations and conditions.  None of these problems were disclosed to the buyer prior to the sale.  Despite the “as is” clause, the seller later was found guilty of fraud. On the other hand, an “as is” provision may be effective in the face of a “patent” defect, that is, a condition of a property visible or observable to the buyer.  Thus, such a clause may be effective as to a dilapidated stairway, but not as to a missing structural member, a subterranean creek in the backyard, or an unexploded bomb buried in the basement — if such defects were known by the seller.  Even with a patent defect, however, there is still a risk of liability because what may be obviously visible or observable to one person may not be to another. The lesson here is that all defects materially affecting your home should always be disclosed to your agent and any prospective buyer.  Concealment of any of such defects will undoubtedly lead to legal claims or even a lawsuit against you all of which can be avoided by full disclosure.  If you have any questions about what disclosures should be made with respect to your property or any other questions about how best to market and sell your property, please call us.  As real estate professionals, we can assist you in determining what items should be disclosed and how best to market your property.

Tags: as is, damages, disclosures, homes, houses, la canada, law, legal, pasadena, Real Estate contracts

This entry was posted on Saturday, May 3rd, 2008 at 1:19 pm and is filed under Real Estate contracts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.