A client was awaiting closing on the sale of her historic home when one day, lo and behold, the rustic old wall along a perimeter of the property came crashing down.
Ay yi yi.
Just one more headache in the protracted process of selling a home with a long and storied history, but one with the kind of deferred maintenance that caused the owner’s (shrewd) Realtor to demand an As-Is Residential Contract for Sale and Purchase for all offers received.
According to that form: “Except for ordinary wear and tear and Casualty Loss, Seller shall maintain the Property, including, but not limited, lawn, shrubbery and pool, in the condition existing as of Effective Date (“AS IS Maintenance Requirement”).”
So what to do in a case like this where the wall was in an obvious state of disrepair at the outset, but just couldn’t hold itself together long enough for the closing to occur?
Put another way, given the contract’s AS IS Maintenance Requirement, how do you bring something like this back to its same decrepit state as of the Effective Date, or quantify the expense for doing so? By extension, does it then become the seller’s obligation to provide a new replacement for what fell apart in the interim, the cost of which can be substantial?
In this case, no contractor who visited the property was able (or willing) to give an estimate for anything other than a proper repair and replacement. What ended up transpiring was a negotiated credit that covered a portion of the estimated repair cost. What first took place was quite a bit of conversation about the blurry nature of the parties’ respective rights and obligations under the contract, and what anyone was legally required to do.
From a technical perspective, the contract probably cannot reasonably be expected to give explicit guidance on this subject matter. What this does, though, is land everyone smack dab in one of those gray areas that lawyers love (we make a good living in that space), and Realtors detest (“Just tell me what to do so we can get this closed!”).
What, then, is the smart listing agent to do when preparing to present a property with known (or anticipated) structural challenges? Here are a few thoughts to get you started:
- Take a good long look around for readily observable issues, such as active leaks, foundation cracks, shaky fences and walls, etc. The things any regular person might be reasonably expected to notice.
- Ask the seller to be thorough and candid in filling out their disclosure, and include any known and/or observable issues about which they have concern.
- Require all offers to be submitted using the As-Is Residential Contract for Sale and Purchase.
- Consider specifically addressing trouble spots in the contract, i.e., “Perimeter wall is specifically excepted from Seller’s AS-IS Maintenance Requirement and will be conveyed to Buyer in its as-is condition at the time of Closing, regardless of whether the condition has changed beyond the extent of ordinary wear and tear.”
This is not to suggest that the agent is taking the place of the home inspector, or the seller’s disclosure is meant to take the place of the buyer’s thorough review of the property. Where the agent wants to end up – to the extent this can be achieved through clear and concise contract drafting – is in a bright line situation where one and all agree that items of concern that could deteriorate substantially between the Effective Date and Closing are not something for which the seller is financially responsible (think active roof leak…).
As always, you are encouraged to seek the advice of an experienced real estate attorney should you run across issues such as these and need a helping hand when the time comes to respond to an offer. Bright lines are best established when there is time to think through the situation, rather than when deadlines are looming and pieces of history come crashing down around you.
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