The Gifts That Keep On Giving: Disguised Waivers of Post-Closing Claims

A3968606_H01_13[1] [1219594]

Like a beautiful bow completes the look of your holiday gift package, many agents and their brokerages like to wrap the purchase process up with a signed walk-through acceptance form to memorialize the results of the final, pre-closing review of the property, and acknowledge its then-existing condition.

A benign version of such a form might offer the option of either:

  1. Acknowledging the inspection was completed, and the results were either satisfactory, or subject to certain enumerated matters to be addressed as the parties may agree; or
  2. Acknowledging the buyer waived the right to a walk-through (and holding the agents and brokerages harmless as a result of such decision).

However, just like flu viruses mutate and become more dangerous each passing year, recently this seemingly innocuous form has – as proffered by some agents and brokerages – begun to take on another purpose: to serve as a blanket waiver of post-closing claims against the seller and the seller’s broker.

The current FAR/BAR-4 contract forms provide as follows regarding the final walk-through inspection:

“On the day prior to the Closing Date, or on Closing Date prior to time of Closing, as specified by Buyer,  Buyer or Buyer’s representative may perform a walk-through (and follow-up walk-through, if necessary) inspection of the Property solely to confirm that all items of Personal Property are on the Property and to verify that Seller has maintained the Property as required by the Maintenance Requirement, and has made repairs and replacements required by [the] Contract, and has met all other contractual obligations.”

Section 14 of the contract advises a buyer to verify property condition and “facts and representations made pursuant to [the] Contract.”   The broker is in turn indemnified and held harmless from claims arising from – among other things – misstatements, inaccuracies, and the parties’ failure to perform contractual obligations.

The contract goes on to state, in BOLD CAPITAL LETTERS:

“Buyer agrees to rely solely on Seller, professional inspectors, and governmental agencies for verification of Property condition, square footage, and facts that materially affect Property value and not on the representations (oral, written, or otherwise), of Broker.”

While the contract clearly enumerates the documentation required of both sellers and buyers in completion of the closing process, nowhere is a written walk-through acceptance listed as one of those necessary documents.  In other words, the parties are under no obligation to sign such a form, much less one that waives any claims as against the seller, the listing agent and/or their brokerage.  An agent’s attempt to delay or hinder the closing based on a party’s refusal to sign such a form would be of no legal consequence.

From the agent’s perspective, imagine the fallout if he or she unwittingly had their client sign the “mutant” disclaimer form casually presented during or after a final walk-through, only to have the buyer discover a latent or undisclosed defect after closing requiring substantial cost to remediate? Hopefully in that case everyone’s malpractice coverage is up to date when the buyer comes calling with the signed waiver form in hand, wondering why their agent allowed, and even encouraged them, to relinquish their rights to future claims prior to closing.

In a nutshell, since there is no defined standard for the form and content of the so-called walk-through acceptance, the devil is in the details when it comes time to consider what is being tendered and the meaning of its terms. 

The smart agent will always avoid committing UPL (the unlicensed practice of law), not to mention malpractice, and consult a real estate attorney to understand what is being asked of them and their client when presented with one of these mutant “acceptance” forms that attempts to have the buyer waive all claims against the seller and their agent and brokerage after closing.

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