Residential Purchase Contract As-Is Addendums
Home buyer’s remorse used to mean having some misgivings about the house purchase price paid and the monthly mortgage payments. Today, it can mean a lawsuit against the home seller. Sometimes, those lawsuits can be for hundreds of thousands of dollars. In most cases, insurance does not cover the loss or even the defense. For that reason, more and more sellers are using As-Is Addendums.
Traditionally, we use As-Is Addendums in conservatorships and probate estates where the seller has little or limited knowledge about the real estate being sold. It is also used when real estate is being sold pursuant to a general power of attorney. An As-Is Addendum is exactly what it sounds like. The seller is making no representations about the condition of the real estate. The sale is “as is”. It is up to the buyer to do his or her due diligence.
Over the years, the Colorado real estate forms have incorporated detailed disclosure requirements. The wise seller will err on the side of saying they don’t know. However, saying you don’t know when you did know or forgot may not avoid a lawsuit. When a seller has lived in a house for many years, the odds of forgetting things like a leak, frozen pipe, faulty electrical circuit, or a foundation problem increase. Buyers are hiring lawyers to recover for what they believe are intentional omissions.
Nondisclosure lawsuits are very difficult to get thrown out before trial. They are fact driven. Any dispute about a material fact usually means the judge will not decide the case before trial. Plaintiff lawyers know this. The sheer cost of legal defense creates an incentive to settle the most bogus of claims. Expert fees alone can be tens of thousands of dollars. Legal fees in excess of a hundred thousand dollars are possible.
A properly drafted As-Is addendum shifts the duty to inspect to the buyer. Roof issues? Go get a roof inspection. Questions about mold? Get an environmental engineer’s opinion. Radon? Run some tests. Plumbing? Snake a camera down the mainline. All of this and more is made the buyer’s responsibility. Should the buyer not inspect and then file a lawsuit, attorneys fees are owed by the buyer.
An As-Is Addendum is not fool proof protection. Knowingly concealing a major home defect is fraud. An As-Is Addendum shifts the duty to discover to the buyer and the buyer’s inspectors. A standard home inspection may not provide an opinion on the heating system, existence of mold, condition of plumbing, the roof, and other significant expense items. However, most of these items can be inspected for an additional fee or insurance purchased to cover. It all comes down to price.
Regarding price, for every benefit there is a cost. The Seller may want to acknowledge these costs and provide credits or reimbursement to the buyer. The home cost may be slightly reduced to compensate for the additional expense. After all, the goal is not to hide a problem. The goal is to avoid a lawsuit. Sellers who have been caught up in real estate lawsuits understand the risk. A couple thousand dollars up front can avoid headaches, stress, and tens of thousands in expenses, later.
