As-Is House Purchase - Seller Misrepresented - Any Recourse?

Question

Hello All,

I am under contract to buy a duplex via a wholesale deal and have already given the earnest money deposit. The house is being sold as-is. I still intend to buy the house, but found out something rather annoying. The wholesaler and seller represented this duplex as having two separate water meters and two separate gas meters. I now come to find out that this is not the case, and it only has one gas meter and one water meter shared between both units.

My question is, since this is an as-is purchase, do I have any recourse in this situation? Basically, I'd like to ask the seller to give me a credit for the cost to submeter the gas and water lines during the sale. If he says no, is my only option to back out and lose the earnest money deposit ($6,000) or go forward with the purchase, knowing I'll have a $3,000 - $5,000 bill or more if I decide to do this later?

Thanks in advance for any guidance. If it matters, this sale is happening in Pennsylvania.

Russell Brazil · Answer

The Pennsylvania real estate disclosure form does not have any questions about water meters.

Additionally, there's really not any properties on the east coast that have seperate water meters on 4 or under units.

Wholesalers in general are not licensed professionals. Anyone buying from them should be wary of any way a property is represented.

Bill B. · Answer

The rental income podcast just had a guest on that offered a “cheaper” and “easier” way to split water/ga between units.  It involved installing meters inline that reported wirelessly to the internet and allowed you to bill each tenant.

Michael S. · Answer

@Tim Porsche - disclaimer - I know nothing about Pennsylvania real estate law.

That said, I don't see any recourse for you here on this issue, as they would likely argue that you had a chance to do your due diligence before writing the offer and/or could have written a due diligence period into the contract and chose not to.

There is only one time we did not close on a house we had under contract with a wholesaler - this was due to a title issue, and we received our EMD back because the seller/wholesaler ultimately could not uphold their end of the contract (inability to deliver the property).

Chris Seveney · Answer

@Tim Porsche

Did you make it contingent to an inspection? If you waived all contingencies then you probably would lose your deposit if you back out.

Tim Porsche · Answer

Here's the relevant parts. I guess I'm out of luck?A. Seller sells the Subject Property as-is with no warranty of property conditions. Assignormakes no representation to Assignee, or its agents, as to the condition of the SubjectProperty. Assignee acknowledges and agrees that it is purchasing the Subject Property onan “as-is” basis and based on its own inspection, investigation, and/or evaluation thereof.Assignee is not relying upon any representations of Assignor, Seller or Seller’s agent(s) toinvestigate and report on the condition of the property. Assignee agrees to release and holdharmless Assignor for any and all liability arising from the condition of the Subject Property.

B. Assignor, Seller and Seller’s agent(s) do not warrant that the property meets any currentCity, County, State or Federal building codes, nor the presence of any and all outstandingor pending violations against the property. Assignee assumes all responsibility to performany inspection, investigation, and evaluation thereof prior to the signing of this AssignmentAgreement.

C. Assignor makes no warranty, expressed or implied, regarding inspection reports or otherreports provided to Assignee by Assignor or third parties concerning the Subject Property.Assignee is advised to independently verify the accuracy of all information contained in anyreports regarding the Subject Property.

D. Assignee acknowledges it is conducting a transaction dealing directly with Assignor for thepurchase of the Subject Property. Assignee is not relying upon, or being represented byAssignor or any other Real Estate Brokerage in this transaction.

Tim Porsche · Answer

Thank you for the replies everyone! It is much appreciated. Thinking about this some more, I'll probably end up using something like the RUBS system on this one and not worry about the submetering for now.

Chris K. · Answer

@Tim Porsche

Pennsylvania has a fair share of required statutory disclosures. If they failed to provide them (and most wholesaler contracts fail), you may have a reasonable basis to demand a refund. Perhaps that can help you negotiate a partial refund.

That said, I would probably take this post down. I'm not your attorney. But it is generally a bad idea to discuss litigation strategy in a public forum using your real name. Most folks know about BiggerPockets at this point, and you are potentially giving the other side an Exhibit A on why you shouldn't win.

Disclaimer: While I’m a licensed attorney, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Bob Stevens · Answer

Sorry but this " error" is 1000% on you. How did you not notice this when your GC walked it? Also in my market owners pay the water bill.

Steve K. · Answer

It's unfortunate that what they told you ended up not being true. I'm not sure about Pennsylvania but in my state it's caveat emptor/ buyer needs to do their own due diligence. "All information deemed reliable but not guaranteed. Buyer/ buyer's agent to verify all information provided". The number of gas and water meters is easy to see during a showing or inspection, not something that was hidden from you even though they may have misrepresented the facts. So probably little recourse for you in this. However, it doesn't hurt to ask. I'd go ahead and point it out and ask for a credit and see what they say (most likely "No" but you never know if you don't ask). It's also a simple solution, there are new sub-metering systems available for a few hundred bucks. You can install a digital sub metering system without even cutting any pipes or getting the utilities involved. It shouldn't cost anywhere near $3-5k.

Nicholas L. · Answer

@Tim Porsche

what does your contract say?

As-Is House Purchase - Seller Misrepresented - Any Recourse?

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