As is doesn’t mean I don’t have to disclose problems in property

The Interplay between “as is,” repairs and disclosure is often confused. This is especially true when the market is again going crazy as it is in Northern California.

‘As is’ doesn’t mean “I don’t have to disclose problems’ in property

Ron Rossi Real Estate Attorney with Rossi, Hamerslough, Reischl & Chuck

Ron Rossi Real Estate Attorney with Rossi, Hamerslough, Reischl & Chuck

Areader recently wrote to me about the issue of selling a home “as is.”

“What about people like my mother who is elderly and has very little income? the letter writer asked. “She will have to sell her house in a few years and live with us. She does not have the money to make the many repairs the house needs and will have to sell it truly ‘as is’. What would be the best way to list her house to avoid future lawsuits?”

The interplay between “as is,” repairs and disclosure is often confused. This is especially true when the market is again going crazy as it is in Northern California.

There is nothing inherently wrong with selling a property “as is”. All it means is that buyer is responsible for making repairs and paying for them.

However, many people feel “as is” amounts to, “I don’t need to tell them anything, and I don’t need to make a disclosure about the problems with the home.” Nothing could be further from the truth.

It has been the law for years in many states that a seller must disclose to a buyer all known defects in the property. In other words, if there is a major roof leak, a retaining wall close to collapsing, a significant noise problem with a next door neighbor or what have you, these need to be disclosed in any and all situations.

In fact, many say that you must disclose more when you are selling the home “as is,” and the reason is simple. Let’s assume that the elderly lady has no knowledge of any problems with regard to her house, and she sells it “as is” to a buyer.

After the buyers move in, they discover more problems than they anticipated while remodeling or fixing up defects in the home. They accuse their broker and the seller and say, “You knew or must have known about these problems.” Now the elderly lady is faced with a lawsuit, as is her broker.

Therefore, I have always recommended when selling a home “as is” to make sure that full and complete disclosures are made that will avoid the problem of a buyer saying later on that you knew about the problems and didn’t tell us.

If you don’t sell a property “as is”, never sign a contract agreeing to open-ended repairs.

Many of the purchase contracts have very detailed repair provisions that are buried in the documents and sometimes hard to understand.

For instance, many preprinted contracts state the seller will pay for all needed termite repairs, dry rot, roof leaks, inoperable appliances, etc. Ask your real estate agent what you will need to repair if you sign the contract and what the cost will be.

It is important for sellers to review purchase contracts with their agent.

It is important for agents to counsel and advise sellers regarding the ramifications of an open-ended repair clause, either deleting those from the contract or limiting the amount the seller is willing to pay.

Finally, will the elderly woman get below market if she sells “as is”?

That may not be necessarily be true. Market value takes the condition of the property into play. In other words, if the repair costs are $20,000 and the buyer offers only $20,000 less than the similar home next door that is in great condition there is really little difference.

If only minimal repairs are needed, many competent agents will tell you that in order to get top price you should make those repairs. If a seller can make minimal repairs in order to get a substantially higher purchase price, he or she will come out ahead.

“As is” doesn’t equal “I don’t need to tell about defects.” There is no substitute for making full and complete disclosures.

And as a seller, before you sign a contract make sure you are not signing a blank check on repairs either, or the next check you sign will be to a lawyer.

Ron Rossi is a San Jose attorney. Write him in care of the San Jose Mercury News, 750 Ridder Park Drive, San Jose, California 95190