Liability for Real Estate Sold “As Is” in Arizona

Selling real estate “as is” does not completely relieve the seller of all obligations to inform the buyer of possible defects in the property. Arizona law requires sellers to make certain disclosures, even for property sold “as is”.

Required Disclosures When Selling Real Estate

In most Arizona real estate sales, sellers have a duty to make certain disclosures. This is typically done through a seller property disclosure statement. The seller is usually required to disclosure facts that are material and known to the seller. Material facts are things that affect the value of the property or may be important to a buyer deciding whether to purchase the property.

This does not require the seller to know everything about the property, and sometimes owners of investment real estate do not know much about their properties. Sellers should not purport to know information they are uncertain about.  It is better to state that you do not know the answer to a question in a disclosure statement than to erroneously answer.  A false or uninformed answer may expose a seller to liability later on.

Even when selling property “as is”, some disclosures are still required.  This was discussed in S. Development Corp. v. Pima Capital Management Co., 201 Ariz. 10, 31 P.3rd 123 (2002).

When selling real estate “as is,” the seller may not be liable for patent defects, problems which are readily discoverable by normal inspection efforts. However, a seller will still be obligated to disclose known latent defects, problems that could not be discovered by regular inspection procedures.

An “as is” clause does not insulate a seller from tort claims, such as fraud or misrepresentation. As a result, a seller who fails to disclose a material fact may face a lawsuit for fraud, misrepresentation, or a failure to disclose. Monetary damages can be awarded, or the contract could be voided, leaving the seller back in possession of the defective property, and with a litigation history over it.

Ultimately, if the seller either knew of the defect, or if the defect was patent, and the buyer was prevented from inspecting the property, the seller can still be liable for a failure to disclose even if the property was sold “as is”. As a seller, it is much better to disclose anything that could be considered a material fact ahead of time than to potentially expose yourself to liability for fraud or misrepresentation.

Chernoff Law handles real estate litigation cases throughout Arizona. Contact us by calling 480-719-7307 to talk to an experienced real estate attorney.

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