Is agent obligated to disclose issues with "as-is" properties?

Question

Question for New York agents:

I know that an agent is required to disclose known issues with properties to a buyer for conventional sales. Does that same rule apply to "as-is" foreclosure properties?

Three weeks ago I found a foreclosure 2F in Schenectady NY that was in really good shape, needed updating and cosmetics but was overall a great deal. There were multiple offers, we offered list price, cash offer, with an inspection contingency. Before we could even get the inspector in, the temperature hit 15 below zero one night after we made the offer, and although the property was winterized I found at least 3 places in the basement where the pipes split that night.

We called the agent to say the pipes had burst since making our offer and we would either need to renegotiate or need more time to assess the damage since our contingency period was up in 2 days. She basically told me that nothing had changed, the property is being sold as-is and the pipes were already like that and that there would be no negotiating or extension, take it or leave it. We told her fine, rescind our offer, which was disappointing because I don't think the pipe issue was catastrophic, but I certainly wasn't going to keep our original offer on the table.

So my first issue with this agent is she basically inferred that we were either lying about the pipes bursting in order to negotiate or that we just hadn't noticed it before, which was fairly offensive to me since one of them burst while I was actually standing in the basement and I watched the water spray out of the pipe with my own eyes. More importantly, I didn't think to mention it at the time but if there was legitimately an issue she knew about regarding the pipes, isn't she legally obligated to disclose that?

Furthermore, my guess is that they'll go back to the next best offer that looked at the property prior to the pipes bursting a few weeks ago, accept their offer, and try to screw that poor sucker over if they don't go and reinspect. Are they obligated to tell THAT guy the pipes burst since he made his offer?

George Hermann · Answer

You have three things going on here.

First, is the agent obligated to disclose issues they know about to the buyer if the buyer inquires - Yes.

Second, as is in the offer means the seller will not fix anything on this property. What you see is what you get.

Third, when you sign the actual contract and it says the property is being sold as is it means that at closing the property will be delivered in the same condition as when you signed the contract. So if it took three weeks between signing the contract and closing and the pipes were in good working order when you signed the contract and then broke, the seller must fix them.

Wayne Brooks · Answer

To be clear, at least in Most jurisdictions....disclosure requirements are not related to a property being sold "as is" which I'm guessing is over 95% of all sales, or whether it is "to be repaired". Disclosures relate to usually non obvious issues, known to the seller, or agent. State specific laws deal with disclosure requirements both for agent and owner.

Jiana Bickham · Answer

Good info here for a newbie like me.

Fred Heller · Answer

"As is" means the seller won't make any repairs. It does not relieve the seller from the obligation to disclose known issues. The operative word here is "known."

In the case of a bank, other entity, or person who never lived in the property, the seller's disclosure is pretty simple. You just answer "don't know" to all the questions.

In your situation, the agent probably didn't know that the pipes were prone to bursting. But that doesn't change the "as is" character of the sale. The seller doesn't want to make any repairs. You've discovered an issue during the option period. You can either accept the responsibility to rectify it or walk away from the deal.

Ryan Vienneau · Answer

To be clear, I have no intent in going after the agent or anything like that, I was just really surprised that she offered up that tidbit of info, it seemed to me like that was just her way to angrily react to us saying the condition had changed, and she just spit out the first words that came to her mind, which was probably not the smartest thing to say.

The part that's most aggravating is that she told us that since the property was winterized, we would have to pay their subcontractor to dewinterize and then rewinterize the property ($1000 total for both units) to conduct our inspections, but we obviously would not have been able to dewinterize pipes she knew were broken. To save herself a lot of trouble, she might have thought to mention when we scheduled the dewinterizing, "Oh by the way, almost forgot, the pipes are broken so you may not want to do that...".

As a consolation, I did call their winterizing contractor back to cancel once the deal fell through and explained what happened, and he laughed and said it didn't surprise him at all, he quoted them to fix one tiny leak in a pipe in the fall so that he could adequately air blow the lines out for winterizing, but they refused to pay him to fix it, which led to water being left in the pipes and busting several more. What a waste!

Jeff B. · Answer

Also included in the Commercial Sales package, and printed on the C.A.R. form, not-optional.

Greg H. · Answer

Does California have an exemption from disclosure for REO, HUD etc ? Texas does have a Seller's disclosure form which requires the seller to disclose defects however REO, Hud, Banks and estates are exempt

A Broker/Agent is required to disclose known defects however in most areas "known" is usually not clearly defined. Another agent calling and saying "pipes are broken" probably does not meet the standard for disclosure in most areas. However, a written report from an inspector would meet the standard

David Friedman · Answer

In California, even if the sale is "as-is" any known material facts must be disclosed by the seller and everyone's respective agents. According to the Bureau of Real Estate, an "as-is" sale still requires a Transfer Disclosure Statement (TDS) on all properties considered residential (1-4 units).

Is agent obligated to disclose issues with "as-is" properties?

Is agent obligated to disclose issues with "as-is" properties?

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