Real Estate Disclosures and Sales "As Is"
The recent Second District decision in Bauer v. Giannis has opened some eyes among Illinois real estate attorneys. The facts are as follows (this synopsis comes from Steven B. Bashaw's "Real Estate Law Flash Points" for November 2005, available online here -- the Bauer case is point #4):
In executing the Residential Real Property Disclosure Act Report at the time of the contract with Bauer, the sellers misrepresented that they were not aware of flooding or recurring leakage problems and concealed the fact that the property had flooded the year before and sustained $425,000 damage due to flooding. The home was on the market at the time of the flooding, and taken off for repairs by a civil engineer, including constructing a berm and a comprehensive grading plant. When a contract was prepared between the parties, and after a number of inspections (at least six) by the Bauers (during which time the Bauers testified Giannis never advised them about the flooding or repairs, but Giannis testified otherwise), an "As Is" Rider was added to the contract by their attorneys.
The Court found that, because the sellers did not make the appropriate disclosure on the Residential Real Property Disclosure Act Report, the "As Is" rider was not a defense against a fraud action by the buyers.
The moral of the story for sellers? Disclose disclose disclose.
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