Expert: Todd C. Menard - 8/31/2009

Question
QUESTION: Is it a violation (legal or otherwise) for an agent to list a property and not have in the listing "AS IS" if the seller's do not intend to make any repairs that are needed?  Seems like a bait and switch to me.  

I put a contract on a house - had a home inspection, found some moisture issues (wet wood) in crawl space due to leaking tubs and an elevated patio that is sloped and draining into crawlspace.  Asked for these repairs and NOT other small repairs and sellers refused to make any repairs stating they are selling house at such a good price ($199k and assesses for $253k) so they shouldn't have to.  Do I have any recourse? What do you suggest I do?

Getting FHA Loan so thought appraiser would note problems and then they would be forced to take care of it or maybe be covered in the termite/moisture inspection.  Problem is there is a 1% cap on repairs.  Not sure what to do.  Thanks

ANSWER: Hello Katie - Whether there is a requirement to indicate "AS IS" or not would depend on the laws in your state. Basically the inspection period is your protection to investigate the property. Each contract states individually the terms and process of a buyers Due Diligence. If you discover a "pertinent" or material issue (that which would affect one's decision to purchase or the consideration paid) then you should have the unilateral (sole) right to cancel or ask the offer to the seller the opportunity to correct the items of disapproval. If the seller elects not to repair then you should still have the opportunity to cancel and receive a refund of your earnest. If the listing agent was required to indicate "AS IS" on the listing and failed to do so, there is a possibility of holding the brokerage to some level of responsibility. From an Seller Disclosure perspective, the seller must provide a disclosure to you about all that the seller knows about the homes condition, or should have known. Check with the disclosure laws in your state to see what the seller is obligated to disclose. Failure to disclose may give you a negotiating opportunity. From an FHA perspective, The property is suppose to "qualify" as well as the borrower. If the repair you are indicating should have been noticed by the appraiser then have your loan officer notify the appraiser of the properties deficiency. The appraiser require the repair to be made. Remember, the requirement may still fall under the discretion of the seller as you cannot demand the seller perform if they have no funds to do so... this may be an opportunity for further price negotiation though. But, this may also protect you if there is an appraisal contingency in your contract. An appraisal contingency indicates that the property must appraise... if the FHA appraiser indicates the repair must be made then if it is not done, the property wont' appraise. Usually, failure to appraise demands a return of your earnest money and a cancellation of the contract. Please remember I am not an attorney so this is not to be construed as legal advice, rather real estate advice any experienced REALTOR should be able to provide. If you feel there is a possibility that you could be damaged by not continuing with the transaction, and damaged if you do, I recommend legal advice immediately. I hope this has answered your question to your satisfaction. Please reply if I can provide any additional information. - Todd C. Menard

---------- FOLLOW-UP ----------

QUESTION: Thank you so much for your clear, concise reply.  I live in Virginia - where do I go to find out if the broker should have listed the property "As Is" if they intended not make any repairs?

Also where can I find my state's disclosure law?

Thank you again for your help.

Answer
Hello Katie - The Virginia Association of REALTORS is a great place to start. The issue for the REALTOR is the National Association of REALTORS Code of Ethics. Article 12 indicates that a REALTOR is to be truthful in all advertising as to prevent an unclear picture... here is a link to the NAR Web site you will find helpful= http://www.realtor.org/law_and_policy/code_of_ethics/coev_article_12 Of course, the issue with this type of complaint is that the burden of proof is on the complainant (you). But if you have proof... was there any staining inside the home on the ceilings that would be indicative of water damage or toilets not secure to the floor? Were the ceilings recently painted... maybe to hide this fact? If this is such an issue is it reasonable that the seller should or could have known without being competant as an inspector? These are a couple of the type of questions that help determine if there was reason to believe if there was a failure to disclose or if the advertising (MLS) painted an unclear picture. I entered "VIRGINIA DISCLOSURE LAW" into my google search engine and the result was Virginia Seller's Disclosure Law! Here is the URL... http://lawdigest.uslegal.com/real-property/seller's-disclosures/5685/ This should provide you with a foundation to determine if you should proceed. The Disclosure position is the more appropriate position to begin with. If you can determine the seller knew, or should have known, and failed to disclose then this can be the basis of your position. Once again, I hope this information has satisfied your question. - Todd C Menard