As you probably have read or heard in the news, we currently are in a seller’s residential real estate market. There is often a bidding frenzy over a home as soon as it is listed, and buyers frequently waive provisions in the standard real estate form contract hoping that their bid will be accepted. The case of Hall v. Rogers shows why buyers may want to think twice before getting caught up in this frenzy. 01-19-00408-CV, 2021 WL 2653736, at *2 (Tex. App.—Houston [1st Dist.] June 29, 2021, no pet. h.).
Procedural history. The Buyers sued the Sellers for failing to disclose known defects in the house the Buyers purchased from the Sellers. The residential real estate contract signed by the parties stated that the Buyers accepted the property “in its present condition.” As a result, at the close of the evidence at the jury trial, the trial court judge entered a directed verdict in favor of the Sellers that the Buyers take nothing. The Buyers appealed and, as explained below, the Court of Appeals affirmed this decision.
Background. A few months after the Buyers purchased the home in question, they discovered multiple sink holes under the deck of the home. Subsequently, the Buyers learned that the Sellers had removed a collapsed retaining wall and replaced it with underground piers. The Sellers did not disclose this in any of the contract documents. More specifically, the Sellers answered no to the question in the Sellers Disclosure Notice as to whether they were aware of any drainage problems, water issues, or structural repairs regarding the property. They also answered no as to whether they were aware of any items, equipment or systems in need of repair.
The Buyers sued for breach of contract, fraud and deceptive trade violations based upon the Sellers’ failure to disclose material facts regarding the condition of the property. The primary defense of the Sellers was that the Buyers’ agreement to “accept the property in its present condition” was an agreement to accept the property “as is.” This barred the Buyers’ claims against the Sellers. The Sellers contended that this was true even though they did not disclose anything about removal of the retaining wall.
Findings by Court of Appeals. In addressing the applicable law, the Court of Appeals stated:
When buyers contract to buy something “as is,” they agree to make their own appraisal of the bargain and to accept the risk that they may be wrong. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995); Van Duren v. Chife, 569 S.W.3d 176, 185 (Tex. App.—Houston [1st Dist.] 2018, no pet.). The sellers give no express or implied assurances as to the value or condition of the thing sold. Prudential, 896 S.W.2d at 161. An enforceable as-is clause thus negates the elements of causation and reliance on claims relating to the sale. Id.; see Williams v. Dardenne, 345 S.W.3d 118, 124 (Tex. App.—Houston [1st Dist.] 2011, pet. denied).
Hall v. Rogers, supra, *5.
The Court of Appeals discussed that there are exceptions the enforceability of an “as is” clause when a seller makes false representations or conceals material information about the value or condition of the property. Here the Sellers testified at trial that the retaining wall had been completely removed from the property several years before the sale. The Sellers installed beams underground to manage the slope of the property. This was done for aesthetic purposes rather than at the recommendation of an engineer. The Court found that this did not show that the Sellers made misrepresentations or conceal material information about the condition of the property.
The Court also found that the Buyers failed to present evidence to the contrary. The evidence presented by the Buyers included that of a civil engineer who testified that the property had a steep grade, his inspection of the property indicated that that a fill material had been added under the deck because of soil erosion. There was also evidence presented that the homebuilder’s engineer recommended installation of the retaining wall during the construction of the home. However, the court found that this did not show that the Sellers were ever aware of the conditions, i.e. soil erosion, leading to the sink holes. Therefore all of the Buyers claims were barred by the “as is” provisions in the contract.
Conclusion. This case shows the difficulty of overcoming an “as is” clause in a real estate purchase contract. Anyone who has ever bought a home can understand how easy it is to get caught up in the emotion of owning a new home. That is why it is important to consult with a competent real estate agent or attorney before signing a real estate purchase agreement.