Selling a House "as is"
By John R. Schneider
Mar 10, 2008, 19:25
Q. What does it mean when you sell a house “as is”? I want to sell my house, and I’m uncertain about what I have to disclose. The house is over 50 years old, and it needs a lot of repairs. I spoke to a real estate agent who said if I sell the house as is, I don’t have to worry about anything. Does this really get me off the hook for problems that might occur? If I disclose everything, I might have problems selling my home. Any advice? P.R., Danville
A. Many people are under the misimpression that when a house is sold “as is”, the seller is protected from being sued if they do not disclose something they knew about the property. Years ago before disclosure laws went into effect in California, you could sell a house “as is” because the perception of “let the buyer beware” governed how homes were sold. At that time, when you sold a house “as is”, you were basically saying to a buyer “What you see is what you get”. Generally, if problems were discovered after the sale, the buyer was assumed to be responsible for them. However, today this couldn’t be further from the truth.
In 1985 the State Supreme Court handed down a decision in a case called “The Eastman vs. Strassburger” case. In that case, the State Supreme Court ruled that a seller of a home in California has a legal obligation to a buyer, to disclose any material fact about the house that may affect its desirability. This means that under current California disclosure laws, selling a house “as is” does not protect a seller from liabilities of not disclosing information, and will not prevent someone from suing them. If you list your house “as is”, you still have to disclose everything you know about it.
An “as is” sale basically assumes that the visible condition of the house is apparent to the buyer, yet it does not relieve the seller from giving full and complete disclosure. For example, if a person were selling their house as is, and they did not disclose that they were aware that standing water collects under your house during periods of heavy rain, they could be liable for any damages that the buyer suffers by not having access to that information prior to purchasing the house. The law in California is very clear on this point.
Let’s look at the dynamics of the previous example. Let’s say that the seller knew about the standing water, but didn’t feel that it needed to be disclosed because the only thing they though it caused was a musty smell in the house during the winter. Since they were selling their house as is, they decided not to disclose this information to their buyers.
After the buyers move in, they realize that the standing water had caused the house to settle, and the foundation to crack. So they decide to hire a contractor to fix the problem. The contractor comes back and tells the buyers that the water has caused extensive damage to the vertical supports in the sub area, and that there is mold growth on the subfloor. He tells them it will cost $67,000.00 to fix. Who do you think is responsible for correcting this, and whom do you think the buyers are going to sue for damages? It will be the seller.
To protect yourself when selling as is, particularly in the current market, a person has to qualify what “as is” means with regards to the house and property. They have to tell the buyer everything they know about the house and lot. Selling a house “as is” could mean that you are selling a house with a roof that is 25 years old and leaking, an old furnace that does not adequately heat the house, an electrical system that is outdated and undersized for the house (lights dim whenever an appliance is turned on), a sewer line that has to be cleaned out three times a year, or a foundation that is cracked and settled.
The most common things sellers do not disclose to buyers are things that they don’t realize can present a significant concern. Having work done to the property either without permits or not to code often tops the list. Sellers often forget to disclose things that they have had to live with. Examples of this could be that if mom is doing the dishes, there is no hot water for a bath or shower, or, if the coffee maker is on at the same time the toaster is used, a fuse blows and the power shuts off. Although these two conditions sound insignificant, they could be indications of bigger problems with the house that could result in costly repairs to fix.
A person that fully discloses the condition of the property they are selling has no reason to fear either the house not selling, or of being sued. Buyers want upfront information about a property before they buy it, to help them decide if they want to proceed with the sale. What they don’t want is to find out about problems after they buy the house.
And the more complete a seller’s disclosure is, the more protected he or she will be from future liabilities.
My advice to sellers is to always disclose everything they know about a house, even if they think it is insignificant. If they are really concerned about the condition of the property and don’t know what to disclose, they should have a pre-sale inspection to get the necessary information before they decide to list the property.
John R. Schneider is a licensed general building contractor and an ICBO certified residential code specialist. He is president of All About Homes, a residential inspection company, and has been performing code and construction consultations since 1985. Readers may address their comments to John Schneider, 24326 Mission Blvd., Suite 7, Hayward, CA 94544, Fax number: 510-537-8666, or on the web at www.allabouthomes.com . Schneider will answer questions of general interest in the paper. He reserves the right to edit the letter for brevity and clarity. Readers are encouraged to contact a competent contractor or code consultant for specific information regarding questions they may have about their home.
Copyright 2005, John R. Schneider, all rights reserved.
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