December 17, 2019
The “As Is” Clause in a Residential Sales Contract
You couldn’t afford home improvements before you put your house up for sale. Therefore, it just makes sense. Your work out a deal that includes an “as is” clause in the listing and residential sales contract. Does this protect you?
The short answer suggests that you need to speak with an experienced real estate attorney. All things considered, you need to understand the law. More than likely, you hope to move away from the property and not think of it ever again.
In the first place, Pennsylvania law requires you to disclose material defects. What in the world does that mean? The statutory requirements call for the completion of a property disclosure statement. The statement refers to seventeen separate areas that sellers must provide information about when offering their property for sale.
In some cases, the disclosure concerns material defects. For example, the seller needs to reveal problems with the roof and plumbing systems. The same holds true for damages created by termite or other insect infestation.
Can you just ignore disclosing material defects if you list the property with an “as is” clause? The statute doesn’t say you can – and nor does a case decided by the courts.
“As Is” Clause Didn’t Negate Disclosure of Material Defects
Last year, the court ruled on a case that dealt with claims related to Real Estate Disclosure Law (RESDL). In this particular matter, the buyer visited the property he intended to buy on three separate occasions. During those visits, he asked the seller if there was anything he needed to know about the residential home.
The buyer relied on assurances he received from the seller. He didn’t find it unusual that the seller didn’t provide a RESDL form. Additionally, the buyer didn’t find it necessary to bring in a property inspector.
Notably, the residential sales contract included a paragraph regarding the inspection of the property. The language of that agreement included the following:
Buyer certifies that he has personally inspected the premises…. Buyer agrees that the property is in satisfactory condition and repair. Buyer hereby acknowledges that he is purchasing the property “as is”…
Prior to the actual purchase of the home, the buyer lived in it for six months. During the lease period, he did not notice any problems. Subsequent to the purchase, the new homeowner discovered some major deficiencies.
Ultimately, the buyer decided to pursue a claim against the seller. After all, he expressly asked the seller about material defects and they were never disclosed.
In the end, the court ruled that “as is” property doesn’t negate the statutory requirement to provide the buyer with a RESDL form. Nevertheless, the seller contended that he didn’t know about the issues when the sale went through. Therefore, the problems would not have been revealed if the documentation was completed.
The bottom line is that even with “as is” properties, sellers need to provide the requisite information regarding material defects. Otherwise, they risk responsibility for damages.
Whether you’re buying or selling residential real estate, you need to understand the law. At Mazzoni Karam Petorak & Valvano, we can help make things easier for you. Give us a call to set up a meeting. We look forward to discussing your concerns.