Real Estate Q & A: No Liability for Sellers Unless They Have Knowledge of Defects

Adam D. Martinez, Esq. | Chairman of Real Estate Litigation Department

Question: I am a Canadian resident and own several real estate investments in Arizona. One of my investments is a large home in Ahwatukee located at the base of the South Mountain. It is a beautiful home, but it is was built many years ago in an older area, and it needs several repairs. Just as I was ready to renovate the home and make significant upgrades, another investor contacted me with an all-cash offer to purchase the home as-is. He indicated that he would prefer to do the upgrades because he had a specific plan and he could do it for less. I agreed, and we closed escrow in two weeks.

Less than a month later, the buyer called me and wanted me to take the home back and return his money. He is claiming that I did not tell him of the extent of the repairs needed. However, I told him everything I was aware of, and I have never lived in the home. Do I have any liability? Doesn’t the “as-is” purchase protect me?

Answer: Contrary to popular belief, selling a property “as-is” does not provide complete protection to a seller. The general rule in Arizona is that in any real estate transaction, even an “as-is” transaction, a seller must disclose to a buyer any known hidden defects that would materially affect the buyer’s decision to purchase the home or pay purchase price agreed to. In other words, if you are aware of material defects with the home that cannot be seen from a visual inspection, such as a leaking pipe in the wall, then you are required to disclose such defects to the buyer. Here, however, you indicated that you disclosed to the buyer all of the problems that you knew about. Therefore, you have fulfilled your obligations and will not be liable for other unknown problems that the buyer discovers through his renovation process.

Adam Martinez is the Chairman of the Real Estate Litigation Department at Rose Law Group pc. and can be reached at amartinez@roselawgroup.com.

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