Banks Beware: Despite “AS IS” clause, homebuyer wins due to Bank’s “misrepresentation”
January 6, 2016
As a continuing free service, Clair Law Offices, S.C. thought you might be interested in a recent Wisconsin Court of Appeals decision issued on December 23, 2015, involving financial institutions, foreclosures, and sales of real estate after obtaining a foreclosure judgment.
The Bank foreclosed on a home, acquired the home at confirmation hearing, and then hired a real estate agent to re-sell it. The real estate agent learned of severe water damage, and told the Bank. The Bank started to remediate to prevent mold; but the work was unsatisfactorily performed. A buyer offered to purchase the house, and the Bank accepted the Offer.
The Bank then asked the buyer to sign a purchase addendum, which included an “AS IS” provision, negated and dismissed any representations, warranties, covenants, and guarantees with respect to water damage and mold. However, the Bank said too much. The addendum also said the Bank had “little or no direct knowledge about the condition of the property.”
The buyer filed a lawsuit against the Bank for “fraudulent representations” under Wis. Stat. §100.18(1). The Court of Appeals pointed to the Bank’s statement, in the addendum, that it had “little or no direct knowledge regarding the condition of the property” – concluding the Bank had lots of information about the actual condition of the property.
“We see no support for the Bank’s argument that the “AS IS” provision, disclaimers, and waivers in the parties’ contract relieve it from Wis. Stat. §100.18(1) liability for its deceptive statement in the contract that it had little to no knowledge of the condition of the property.”
The Bank had knowledge of severe water damage to the property.
The Bank made efforts to remediate the property.
The Bank then, in an Addendum to the Offer to Purchase contract, represented that it acquired the property by foreclosure and it had “little or no direct knowledge about the condition of the property.”
Our office suggests that Banks have their foreclosure attorney or Bank attorney draft or review all real estate documents, even in OREO transactions. In addition, our office has always advised our Bank clients never to sign any Real Estate Condition Reports or make any statements, warranties, or representations concerning properties they are attempting to sell.
Be very careful not to make any affirmative representation about some aspect of the property – because under law – the buyer is entitled to rely upon that statement and expect full and fair disclosure of all materials facts relating to that aspect of the property.