If a seller agrees to hold money in escrow post-closing for damages since they’re staying there after closing and the buyer goes to open the in-ground pool but the heater doesn’t work, is the buyer entitled to the escrow money?

The sellers disclosure state pool and equipment worked. Seller has gas bills from last summer and witnesses who swam in it that said it worked. Buyer had a pool company come out to look at it that says it was rusted and unrepairable. They want to sell them a new heater. The buyer never inspected the pool or equipment, never asked sellers to open the pool to guarantee everything worked, and did not ask for s home warranty to cover pool or equipment. Purchase agreement says it was purchased as is. Sellers disclose says it’s not a warranty but to sellers best of their knowledge. It all worked with no problem last summer. Buyer is refusing to sign off on the escrow release. The purchase agreement says the money is to be held for damages to the property. Who is legally entitled to the escrow money if one party chooses to take the other to small claims court?

Asked on July 7, 2017 under Real Estate Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Based on what you write, the seller is entitled to the money: when property is sold "as is," the seller is only liable if he made a material misrepresentation (e.g. a lie) about a condition which was not reasonably perceptible by the buyer and upon which the buyer reasonably relied--"reasonably" being the key word herein. In this case:
1) The seller did not warranty anything but stated that to the best of his knowledge it worked--and could back that up, if necessary, in court with not just his own testimony but also other witness testimony showing that the pool was warm last time he used it. Therefore, there was no misrepresentation.
2) The buyer had a pool company look at it and warn him that they thought it rusted and irreparable: therefore, there was nothing hidden or not reasonably perceptible--buyer had knowldge of the equipment's age and that there could be issues with it. Therefore, his was a known issue, and buying the home with such knowledge is an agreement to take it with that known condition or issue.
3) In the face of the above and buyer's failure to himself inspect the equipment or ask for a demonstration, which he clearly could have done, there could be no reasonable reliance an the seller's statement that the pool worked to the best of his knowledge. 
In short, there was no fraud, and fraud is the only basis in a case like this (where there is no warranty or guaranty) for the buyer withholding the escrow.


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