Is "AS IS" clause legally binding?

[Suzy163]

What is the name of your state? South Carolina

Before selling our house in December, 1998, we had some water damaged flooring repaired. The buyer signed the contract with this statement in it:
"The Buyer has fully examined and inspected the property described and agrees to purchase the property "as is." Our termite inspector's report does not show any wood damage at the time of his inspection which was just a few days before closing. The buyer was on the property (we thought he was inspecting it) on many occasions before the closing.

The buyer is now claiming there is water damage to some of the boards underneath the house and wants us to pay for it to be repaired.

Are we legally responsible for this?

 

[HomeGuru]

What is the name of your state? South Carolina

Before selling our house in December, 1998, we had some water damaged flooring repaired. The buyer signed the contract with this statement in it:
"The Buyer has fully examined and inspected the property described and agrees to purchase the property "as is." Our termite inspector's report does not show any wood damage at the time of his inspection which was just a few days before closing. The buyer was on the property (we thought he was inspecting it) on many occasions before the closing.

The buyer is now claiming there is water damage to some of the boards underneath the house and wants us to pay for it to be repaired.

Are we legally responsible for this?
**A: what did you state on your disclosure statement with respect to water damaged flooring and damaged flooring under the house?

 

[Suzy163]

We didn't have a disclosure statement. All we had to sign was and "Agreement to Buy and/or Sell."

We did have a real estate agent who did all the paper work and we had an attorney at the closing.

 

[HomeGuru]

We didn't have a disclosure statement.

**A: why not? Do me a favor and call your real estate agent or your local Board of Realtors and ask them if there is a State seller disclosure law. Then if there is, post the law to your thread.
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All we had to sign was and "Agreement to Buy and/or Sell."


We did have a real estate agent who did all the paper work and we had an attorney at the closing.

**A: and none of these people explained to you what an "as-is" sale is?

 

[MyBoysMom]

Here in California, "AS IS" statements can be nullified by loan contingencies, appraisal contingencies, pest inspections, etc etc. If the contract was signed as is, but there was a loan contingency in place and one of the lender's conditions was such and such repair (as recommended by the appraiser) to substantiate the value, then the "AS IS" is over ridden by the loan and/or appraisal contingency.

I think AS IS is always relative...I once purchased a car through one of those repo auctions, and the terms of the sale were "as is". There were serveral things wrong with the car, and I learned that "AS IS" meant "AS IS" unless it violates basic safety standards called for by law. I was able to get the seller to fix everything that was wrong with that car because the contingency overrode the "AS IS" clause.

 

[HomeGuru]

Here in California, "AS IS" statements can be nullified by loan contingencies, appraisal contingencies, pest inspections, etc etc. If the contract was signed as is, but there was a loan contingency in place and one of the lender's conditions was such and such repair (as recommended by the appraiser) to substantiate the value, then the "AS IS" is over ridden by the loan and/or appraisal contingency.

**A: not exactly. Understand that the contract is between the Buyer and Seller and any condition by a third party (ie. lender, appraiser etc.) dos not nullify the contract. The lender, appraiser etc. are not parties to the contract. True the contingency with respect to the condition or repair of an item may allow the Seller to repair a certain item but that action does not nullify the "as-is" condition in the contract.
The writer is also from South Carolina not California.
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I think AS IS is always relative...I once purchased a car through one of those repo auctions, and the terms of the sale were "as is". There were serveral things wrong with the car, and I learned that "AS IS" meant "AS IS" unless it violates basic safety standards called for by law. I was able to get the seller to fix everything that was wrong with that car because the contingency overrode the "AS IS" clause.

**A: the "as-is" scenario is not the same for real property and personal property. There are differing requirements for the 2 property types so do not compare a home to a car.

 

[MyBoysMom]

Home Guru - I understand that the original posting was from South Carolina, that is why I qualified my post by starting it with "Here in California"

I understand and agree with your point that a third party is not a party to the contract, but I respectfully submit to you that my point was misunderstood. My point was that if the contract is "As Is", but a loan contingency is in place, a repair condition called for by the lender that is not corrected would prevent the buyer from obtaining financing. In that situatation, the loan contingency would override the AS IS clause which would then nullify the contract (because of the loan contingency, not the AS IS clause). Of course a lender is not going to force a repair for something minor such as a kitchen cabinet for example, in which case the AS IS clause would be in effect. I am only speaking about safety and welfare repairs. The exception to this is on repo homes where no repairs are made by the seller (HUD for example) because HUD gurantees to insure the property. In that situation, no appraisal is required, and lenders who are approved to loan on HUD PD properties do not require lender repairs, which is why rarely can I place a conventional loan on a HUD repo.

As for my comment about purchasing a car, I was only trying to illustrate my point. I was in no way trying to say that purchasing a car and a home are the same. I am very much aware that the regulations are different for each purchase. I hope you will excuse me for using this example.

 

[BrokerRE]

I agree with the car example.

Unfortunately, As-is doesn't give you the ability to pull one over on a buyer.

If you knew about a defect, and failed to disclose it, As Is won't protect you at all.

However, what's the deal with the buyer coming back after 4 years? Is this even related to the problem you had?

 

[Suzy163]

When we moved out of the house I described in my original post, we had the the contractor (who built the home we now live in) to raise the living room flooring in the house we were going to sell. The living room was a sunken room. The contractor found some minor water damage and we told him to repair anything and everything that needed reparing. The buyers were aware of this. We never, never tried or even thought of trying to keep any secrets about the house. Had we known of any other repairs that needed to be made, we would have made them.

The buyer has continually called the termite inspector, our contractor, and us wanting everyone to meet. He has talked to each one separately many times; however, he would never told any of us exactly what he wants. It's almost impossible for all of us to meet at one time. Our contractor has already told him that he repaired EVERYTHING four years ago! Yesterday, the buyer met with my husband and me and when we asked exactly what he wanted from us he told us he wanted to get our contractor to make the repairs (he needs our help to get this contractor) and wants us to "help" him pay for it. We told him we would not pay anything. We didn't tell him but our contractor does not want to do anything for him. This buyer is known for whinning and complaining. In that meeting, he told us he now believes the termite inspector made a false report and wants him to pay.

We have decided that we will have to be ordered by a judge before we pay anything concerning this matter.

I appreciate each of your comments. Thanks.

 

[HomeGuru]

Home Guru - I understand that the original posting was from South Carolina, that is why I qualified my post by starting it with "Here in California"

I understand and agree with your point that a third party is not a party to the contract, but I respectfully submit to you that my point was misunderstood.

**A: your point was misunderstood because you provided erroneous information. You stated that "as-is statements can be nullified by loan contingencies....." and "then the as-is is over ridden by the loan and appraisal contingencies..."
And you have somewhat corrected yourself below.
Note that the topic of the thread was "Is As-Is clause legally binding?" In this case, the blanket statement would not be enforceable because components sold as is must be addressed and disclosed pursuant to property condition disclosure law. A Seller cannot fail to disclose specific material facts then hide behind a blanket as-is clause.
For an as-is clause to be effective, the seller must disclose what is being sold as-is.
EX: the following items are in need of repair.
1. the roof leaks over the master bedroom.
2. the door to the laundry room has a hole in it.
3. the carpet is damaged by the dining room.
The items listed above are being sold as-is and the Seller will not be repairing the items.
In this thread, the writer did not disclose the specific item, therefore the as-is clause would not be legally binding on the Buyer.
Further, if your first advice was correct, then the entire as-is statement would be nullified. The correct information would be that if the lender required only item #1 to be repaired, the as-is clause would still be in effect. If the Seller refused to repair the roof, then you are correct in that the mortgage financing contingency would make the contract null and void. Thus as you clarified, it is the contract that would be null and void and not the as-is contingency.
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My point was that if the contract is "As Is", but a loan contingency is in place, a repair condition called for by the lender that is not corrected would prevent the buyer from obtaining financing. In that situatation, the loan contingency would override the AS IS clause which would then nullify the contract (because of the loan contingency, not the AS IS clause). Of course a lender is not going to force a repair for something minor such as a kitchen cabinet for example, in which case the AS IS clause would be in effect. I am only speaking about safety and welfare repairs. The exception to this is on repo homes where no repairs are made by the seller (HUD for example) because HUD gurantees to insure the property. In that situation, no appraisal is required, and lenders who are approved to loan on HUD PD properties do not require lender repairs, which is why rarely can I place a conventional loan on a HUD repo.
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As for my comment about purchasing a car, I was only trying to illustrate my point. I was in no way trying to say that purchasing a car and a home are the same. I am very much aware that the regulations are different for each purchase. I hope you will excuse me for using this example.

**A: thank you for your clarifications.

 

[HomeGuru]

When we moved out of the house I described in my original post, we had the the contractor (who built the home we now live in) to raise the living room flooring in the house we were going to sell. The living room was a sunken room. The contractor found some minor water damage and we told him to repair anything and everything that needed reparing.

**A: was all this disclosed in writing to the Buyer? And did anyone check the contractors work to make sure that all the wood damage was repaired?
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The buyers were aware of this.

**A: how were they aware when you did not disclose this information to them in writing pursuant to the seller disclosure law. Did you read my post about the disclosure law and if your real estate agent and attorney advised you what an as-is sale is?
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We never, never tried or even thought of trying to keep any secrets about the house. Had we known of any other repairs that needed to be made, we would have made them.

**A: that is good but disclosure must be made in writing.
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The buyer has continually called the termite inspector, our contractor, and us wanting everyone to meet. He has talked to each one separately many times; however, he would never told any of us exactly what he wants. It's almost impossible for all of us to meet at one time. Our contractor has already told him that he repaired EVERYTHING four years ago! Yesterday, the buyer met with my husband and me and when we asked exactly what he wanted from us he told us he wanted to get our contractor to make the repairs (he needs our help to get this contractor) and wants us to "help" him pay for it. We told him we would not pay anything. We didn't tell him but our contractor does not want to do anything for him. This buyer is known for whinning and complaining. In that meeting, he told us he now believes the termite inspector made a false report and wants him to pay.

We have decided that we will have to be ordered by a judge before we pay anything concerning this matter.

I appreciate each of your comments. Thanks.

**A: it would be hard for a Buyer to go after the Seller after 4 years has passed unless the Buyer can prove that the Seller engaged in misrepresentation and the defects are not new since closing and existed at the time of Buyer's purchase.
For example, at the time of closing, the conditions could have existed because there is a possibility that the contractor missed repairing some areas and the termite inspector also missed the damage during the termite inspection.

 

[MyBoysMom]

I wholeheartedly agree that a seller cannot hide behind an AS IS clause if he failed to properly disclose.

I do have a question though: What liability does the seller have four years after close of escrow?

For the sake of argument, let's say the buyer discovered the seller pulled permits to repair the leak and/or raise the floor, therefore the seller knew about the problem and didn't disclose, or maybe he didn't disclose because he believed the problem had been corrected. If in the four years that have commenced since the close of escrow there have been no problems and there are no problems now, would the seller still be liable? Is there a statute of limitations on something like this?

 

[HomeGuru]

I wholeheartedly agree that a seller cannot hide behind an AS IS clause if he failed to properly disclose.

I do have a question though: What liability does the seller have four years after close of escrow?

For the sake of argument, let's say the buyer discovered the seller pulled permits to repair the leak and/or raise the floor, therefore the seller knew about the problem and didn't disclose, or maybe he didn't disclose because he believed the problem had been corrected. If in the four years that have commenced since the close of escrow there have been no problems and there are no problems now, would the seller still be liable? Is there a statute of limitations on something like this?

**A: yes the Seller would still be liable provided the Buyer filed a claim within the proper time period pursuant to the SOL.