Day 10 Inspection Notice and the As-Is Disclosure
Buyer Rivera signed a purchase agreement for a 1970s single-family home at 545,000 USD. Earnest money is 15,000 USD, held by the listing brokerage. The contract has a 10-day inspection contingency, a 21-day financing contingency, and a 21-day appraisal contingency. The seller's disclosure says 'no known water intrusion.' On day 9, the inspector finds an active leak in the basement wall, mold, and evidence of a prior repair without a permit; a contractor estimates 28,000 USD. Rivera wants to terminate and recover the earnest money. The seller says the home is 'as-is' and refuses. The listing agent notes that Rivera's notice was emailed at 6:05 p.m. on day 10, while the contract requires 'written notice by 5:00 p.m. on the tenth day.' Rivera's agent had earlier told Rivera, 'We can waive the inspection verbally to make the offer stronger.' No written waiver was signed. Rivera's financing is approved, and the appraisal came in at 545,000 USD.
1. Was Rivera's termination notice timely? Analyze the day counting, the method of notice, and the consequence for the earnest money.
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The notice is probably late. The contract sets a specific deadline: written notice by 5:00 p.m. on the tenth day. The email arrived at 6:05 p.m. on day 10, more than an hour after the deadline. If the tenth day was a business day, the 5:00 p.m. cutoff controls. If the tenth day fell on a weekend or legal holiday, the contract may extend the deadline to the next business day, but that must be checked before relying on it. The method also matters: unless the contract authorizes email notice and defines when it is received, an email may not be effective written notice at all. A portal upload or hand delivery may be required.
If the notice was late, Rivera did not validly exercise the inspection contingency. The contingency is treated as waived, and a termination based only on the inspection would be outside the contract. The seller would then have a strong argument to keep the 15,000 USD earnest money. Rivera should not assume the money is returnable until the other contingencies are checked. The financing and appraisal contingencies remain open until day 21, and Rivera may still have a timely exit if those conditions fail or if the contract allows termination for a different reason.
2. Does the 'as-is' clause defeat Rivera's claim given the seller's disclosure and the evidence of a prior repair? Explain the limits of as-is.
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No, not automatically. 'As-is' means the buyer accepts the property in its present condition and may not demand repairs for defects that are disclosed or reasonably discoverable. It does not give the seller a license to make a false statement or to conceal a known material defect. The disclosure says 'no known water intrusion,' but the inspection found an active leak and evidence of a prior repair without a permit. If the seller knew about that repair or the leak, the disclosure may be inaccurate. A prior repair without a permit is a fact a seller would likely remember, so it is evidence of knowledge, not just a new defect found by the buyer.
Rivera's strongest argument is not 'the house is old and leaky'; it is 'the seller stated no known water intrusion while knowing of a prior repair and an active leak.' That supports a claim for misrepresentation or failure to disclose, and possibly rescission, damages, or repair costs. The as-is clause may limit claims for defects the inspection should have revealed, but it does not waive fraud or affirmative disclosure duties. Rivera should preserve the inspection report, photos, contractor estimate, and the disclosure form. The seller's refusal to repair does not by itself prove misrepresentation, but it does not defeat the claim either.
3. What should Rivera's agent do now, and what broker-level risks arise from the earlier 'verbal waiver' advice?
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The agent should immediately put everything in writing: send the seller and listing broker a notice reserving all rights, attach the inspection report and contractor estimate, and request a written extension of the inspection contingency plus a repair credit or price reduction. Do not tell Rivera to simply walk away. Review the financing and appraisal dates; if those contingencies are still open, preserve them. If Rivera wants to terminate, negotiate a mutual release with return of the 15,000 USD, or use a valid remaining contingency. The listing brokerage must not release the earnest money without a signed release from both parties or a court order.
The earlier advice that the inspection could be waived verbally was wrong and creates broker risk. Contingencies are waived in writing or by missing a deadline, not by a casual conversation. If Rivera relied on that statement and lost the right to terminate, the agent and broker face a negligence and misrepresentation claim. The broker should document the advice, correct it in writing to Rivera, review the file, notify the errors-and-omissions carrier if a claim is threatened, and retrain the office on contingency deadlines and written waivers. The agent should not draft legal conclusions for Rivera; recommend independent counsel if the seller refuses to release the deposit.