Buying "as-is" means as-is; or does it?

by Dan Krell
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The home seller, unless exempt, is obligated to provide a property disclosure or disclaimer to the home buyer. Sometimes a home seller will disclose the home’s condition by answering all the questions on the form; other times the home seller will provide disclaimer statement that you are buying the home “as-is.”

There really isn’t one answer why a home seller would provide a property disclaimer, although there are many situations where providing a property disclaimer is appropriate.

The disclaimer statement practically states that the home seller makes no representations or warranties as to the property condition. Additionally, you, as the purchaser, agree to accept the property “as is” with all defects, including latent defects- except as otherwise stated in the real estate contract of sale. The statement says it all, you basically take the home “as-is.”

This is all well and good, except that the contract has a condition of property/equipment, maintenance and condition clause (depending on the contract your Realtor is using) as well as a termite inspection clause. The condition of property/equipment, maintenance and condition clause states that the home will be delivered in essentially the same condition as at time of contract acceptance and that mechanical items (such as HVAC, electric, etc.) will be in good working order at time of settlement.

The termite inspection clause essentially says that seller is responsible for remediating any termite or wood destroying insect infestation and damage. However, the Maryland Association of Realtors Residential Contract gives the home seller the option to void the contract if the cost of treatment and repair exceeds 2% of the sale price and the home buyer does not want to pay the excess.

Additionally, a home seller is required to disclose all known latent defects. A latent defect is described as being a defect that a home buyer would not know of even through a careful inspection, and could pose a threat to their health or safety (as described in the Maryland Residential Property Disclosure and Disclaimer Statement).

In addition to the property disclaimer, there is an “as-is” clause in the Addendum of Clauses. This “as-is” clause states that all clauses pertaining to the property condition and termites are considered deleted from the contract. This “as-is” clause still requires the home seller to deliver the property free and clear of debris and trash.

A true story about “as-is” and latent defects: A family purchases a home with a pool in “as-is” condition. The home buyers attempt to open the pool for the summer, however the pool company they contact explains that the pool cannot be opened unless it is repaired. The pool had major cracks and leaked when filled. When contacted, the home seller stated that he had no knowledge about the defect. The home seller could no longer deny knowledge of the defect and eventually came clean when he was confronted by a long list of witnesses (including the pool company) who would testify that he knew of the pool problems. In the end the home seller paid for the pool repair.

Because “as-is” can have different meanings in a real estate contract, it is always a good idea to consult an attorney on your obligations when entering into an “as-is” transaction.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of March 3, 2008. Copyright © 2008 Dan Krell.

 

Keep an Eye on Your Pipes

by Dan Krell  © 2007

Whether you own an old home or a new home, maintenance is the key to keep your home in top condition. Obviously older homes require a different level of maintenance compared to a new home. However, no matter how old your home may be, you want to keep an eye on your pipes.

If your home was built in the early part of last century, your pipes could be lead or galvanized steel. Lead pipes have the tendency to leach lead in your drinking water. Since lead has been identified as a hazardous material, it is not an ideal for indoor water delivery. Because of the inherent dangers, most lead pipes have already been replaced; however if you still have lead pipes in your home, you should consider having the pipes replaced. You can access a wealth of information about lead at the EPA website: www.EPA.gov/lead.

Another type of pipe used in older homes is galvanized steel pipes. Steel pipes that were used at the time had a tendency to rust, so the thought was that by galvanizing the steel pipes rust on the outside of the pipes would be inhibited. The problem that developed was that galvanized steel pipes rust from the inside out. The rust builds up on the inside and consequently reduces water pressure. Additionally, these pipes have had a history of leaking and bursting. As a result, some insurance companies will not underwrite a home with galvanized plumbing.

Many homes built in the 1980’s and early 1990’s had plumbing with polybutylene pipes. Polybutylene was supposed to be the pipe of the future, as it was inexpensive and easy to install. Polybutylene pipes have had a checkered past as they have a history of leaking and bursting. The problem stemmed a class action suite against Shell, the manufacturer of the polybutylene resin used in these pipes. Although polybutylene pipes are no longer being installed, many homes continue to use these pipes as the internal water delivery system. If you have polybutylene pipes, you can get more information about the class action suite, replacing the pipes and other information at www.pbpipe.com.

Presently, the most common source of water delivery in the home is through copper and PVC pipes. Although considered reliable and safe, copper and PVC pipes have had their problems as well. Copper pipes can develop pinhole leaks; locally, WSSC has been researching this problem for a solution (www.wssc.dst.md.us/copperpipe/pinholescroll.cfm). Additionally, lead solder used to connect the pipes can leach lead into the water; new lead free solder is now being used to eliminate this problem. Alternatively, PVC pipe is cheap, easy to install, and durable; however, there is some controversy that surrounds PVC as it is associated with a carcinogen, dioxin, which is released when PVC is produced and if it is incinerated.

No matter what type of pipe is in your home, general maintenance can minimize potential problems. You should know the location of the main water shut-off valves; periodically inspect pipes for leakage; make sure all plumbing fixtures are firmly secured; outdoor faucets should be shut off from the interior and drained; and be sure pipes in areas such as crawl spaces are protected from freezing. For more specific safety and maintenance information regarding your pipes, you can contact the Plumbing-Heating-Cooling Contractors Association (www.phccweb.org).

This column is not intended to provide nor should it be relied upon for legal and financial advice. Copyright © 2007 Dan Krell.

Disclose disclose disclose

It is not unreasonable for home buyers to seek assurances about the homes they purchase. One method for obtaining a sense of confidence about the home is having a home inspection. Sometimes it is not as much as wanting to know what needs to be fixed as much as wanting to know what they were getting into, as one of my clients casually stated. However, home inspectors are not perfect and there are numerous conditions in the home that could go undetected.  The home seller golden rule is disclose-disclose-disclose.

In the past, it used to be buyer beware. Unscrupulous home sellers racked up complaints. Consumer advocates pushed some legislatures to enact a property disclosure law. Property disclosure laws have been enacted in about thirty states. Here in Maryland, the law has been was around since 1994.

It had been incorrectly thought by home sellers (and some real estate agents), that if the disclaimer is given, the homeowner did not have to provide any information at all about the home- including relevant material facts and latent defects. In fact, some home sellers would wrongly choose the disclaimer statement to not reveal material facts or latent defects.

The disclosure addenda are constantly changing. A significant change at the time of this writing to the required Maryland disclosure still requires the homeowner to provide either the disclosure statement or disclaimer.  Except the added burden of disclosing known latent defects is also required, even if you disclaim.

If you are selling your home or thinking of selling your home in the future, you should discuss with your Realtor the Maryland disclosure/disclaimer statement and recent changes to the disclosure laws. If you have any doubt about your obligations as a home seller or do not understand the disclosure law, you should consider consulting an attorney.

The golden rule of disclosure is to disclose. An issue that is disclosed to a home buyer before they enter into a contract with you is a piece of information that the home buyer will keep in mind as they purchase the home. However, undisclosed issues can come back to bite you, even after the sale.

by Dan Krell © 2005