What "As Is" Is – And Isn't

We sell houses in “as-is” condition all the time, don’t we?

But what does “as-is” mean?

Most of the time, it means that the seller doesn’t wish to make any repairs that might come up either through the home inspection or at walk-through. If the buyer agrees, then we have an “as-is” contract.

However, many sellers think that it means they don’t have to disclose anything pertaining to the condition of the property.  In Maryland, this couldn’t be further from the truth. Effective October 1, 2005, sellers are required to disclose any latent material defects. Now, these defects are ones of which the seller has actual knowledge and which a buyer would not reasonably be expected to discover, and which would pose a direct threat to the health or safety of the buyer.

We talked about this at length in our office, trying to come up with examples. The best we could do went as follows:

Say the seller has the fireplace cleaned and the chimney sweep tells the seller that they’d better not have any more fires until they have the flue repaired – that the house could catch fire because of cracks.  The seller decides to forego fires and doesn’t have the flue repaired.  This would be a latent defect and a material fact that should be disclosed to the buyer prior to entering into a contract.

Another example: The seller has the furnace inspected and finds out that there is a cracked heat exchanger – a definite carbon monoxide hazard. If it isn’t repaired, the seller must disclose this to the buyer prior to entering into a contract.

We even have a form called the Residential Disclosure/Disclaimer Statement. The sellers have the choice of filling out either the Disclosure or the Disclaimer, but whichever one the seller chooses, he must still disclose the existence of latent material defects.

If you’re unsure if you have a latent defect, I’d be happy to discuss it with you, but the easy test is this – would you want to know about this before you wrote an offer? If the answer is “yes”, then you should probably disclose it. Even if being fair to the buyer doesn’t matter to you, you have a better chance of staying out of lawsuits if you disclose.

(C) 2006 Susan Pruden.


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