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Due Diligence


Caveat Emptor

Real estate transactions are governed by local, state, and federal laws. One of the phrases that dates back to old English law is the Latin phrase, caveat emptor, which means, “let the buyer beware.” The phrase is related to the verb “cavēre”, meaning “to be on guard.” Absent any contract language or terms that contradict this idea, the phrase implies that the buyer should proceed with caution; they are purchasing the property in its current condition, with any flaws that may exist and without any warranties. Buyer due diligence is imperative in any real estate transaction, but it is critical in an auction sale.

Disclosure Requirements

Caveat emptor implies that the seller is not responsible for any additional discourse of adverse conditions that may exist. Due to local legislative action, sellers in your jurisdiction may be responsible for disclosing certain material defects. Depending on the laws that exist in your area, it may be the responsibly of the buyer to provide disclose issues, particularly items in a that may risk an occupant’s health and safety in residential real estate transaction. In some states, sellers cannot waive disclosure with a disclaimer statement. In those instances, a seller’s failure to disclose information may be grounds for fraud. Even though misrepresentation by non-disclosure is a serious offense, like any illegal act, the law only provides recourse for a victim. As a buyer, you will want to best-protect your interest. For that reason, it is recommended that buyers perform their exercise due diligence as much as possible, as nobody will care work to protect your interests more than yourself.

As-Is, Where-Is

As-Is is a term used in warranty law to disclaim the seller’s liability. Essentially, the use of this phrase implies that the buyer is accepting the property in its current state, whether faults to the property are present and apparent or not. This language clarifies that there are no explicit or implied warranties to the properties condition, and it is used to help protect the seller.

The inclusion of an “as-is” clause in a does not necessarily insulate the seller from their common law duty to disclose defects or the required information, as required by local, state, or federal law. Furthermore, “as-is” language does not protect the seller from failure to disclosure, misrepresentation or fraud. Failure to disclose, whether intentional or negligent, is the result of not revealing known concealed defects that are not apparent from a visual inspection of the property.

As previously mentioned, many states have started to require that sellers disclose certain material defects or items related to the condition of a property, even if the property is being sold in as-is condition. In Maryland, for example, a seller cannot shelter behind caveat emptor. In the sale of a residential property in Maryland, sellers need to either complete a multi-page document disclosing the condition of various items, or sign a disclaimer statement. That disclosure statement, although stating that the property is being sold in as-is condition, requires sellers to acknowledge if they are aware of any latent defects – a defect that may be hazardous to someone’s health or safety.

Even if you are buying a property in as-is condition, you should consider hiring a professional to conduct an inspection of the property prior to purchase. There are often many situations where a defect may be visible from a home inspection; whereas, the seller may not have any personal knowledge of the defect.

Take Action – Perform Due Diligence

Performing due diligence means to investigate the facts about the property. Buyers look at performing due diligence as, “doing their homework,” before making an offer or submitting a bid, and then continuing with that same due diligence prior to settlement. The performance of due diligence can seem like an exhaustive, and with experience, the task may only become longer. Although the process may feel daunting, it is an essential step that buyers must take to protect their investment and reduce liability.

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