Selling residential property “as is” may not shield you from liability

This article was written by Natalie Cheung, a summer associate at Kohrman Jackson & Krantz P.L.L.--

When a buyer purchases residential real estate in an “as is” transaction, it is extremely difficult for that buyer to turn around and sue a seller or seller’s agent for defects arising after purchase. However, what many people don’t realize is that sellers are not completely in the clear. Sellers cannot just sit back and rely on the “as is” clause to relieve them of all disclosure obligations. In fact, Ohio law requires residential property sellers to fill out a home disclosure form (Ohio Revised Code § 5302.30). This form is not a warranty of any kind by the seller or its agent to the buyer; it is simply a representation of the physical condition of the property. Sellers are required to disclose information regarding the condition of the property’s water supply, sewer system, roof, foundation, walls, floors, and any other known material defects. The form does not distinguish between obvious flaws or defects, but instead requires sellers to divulge all material problems within their knowledge. If defects exist after purchase that were not disclosed on the form, caveat emptor (“let the buyer beware”) applies and the seller is not responsible so long as the defect was not within the seller’s knowledge at the time of sale and a buyer could easily have discovered the problem upon reasonable inspection.

The “as is” clause is tempting to rely on as a safeguard from liability since it bars a buyer’s claim of fraudulent nondisclosure (i.e., a failure to disclose) against the seller; but it does not protect a seller from buyer claims that the seller intentionally misrepresented information to the buyer or actively concealed from the buyer material information about a known defect. In other words, although the inclusion of an ‘as-is’ clause in a residential purchase agreement relieves a seller from the duty to reveal anything beyond what is required in the home disclosure form, a seller cannot make knowingly false statements to a buyer or intentionally hide known defects in order to mislead a buyer. Ohio courts have consistently held that “the buyer’s duty to inspect the premises to discover defects terminates when representations are made with respect to a material fact in response to a buyer’s direct inquiry.” [See Brewer v. Brothers (1992), 82 Ohio App. 3d 148, 152.]

Although the conventional wisdom is “buyers beware,” sellers should also be very careful of their actions. When a buyer ask questions, any misrepresentation in response to the buyer’s questions could very well expose the seller to liability for fraud if defects later arise on the property that would have been disclosed had the seller answered the buyer’s questions truthfully and completely.


rental and real estate said...

Sellers should consider listing as close to market value leaving only a margin for negotiation. Buyers should make an initial offer that reflects their motivation level and isn't so low that it makes them sellers feel uncomfortable or insulted.

jimm said...

The division of real estate says
that prior inspection reports are
material facts, and must be part of
property disclosures, even if their
content is in doubt.