Clear Title Advertising Meets the As-Is Packet
At a foreclosure-adjacent real estate auction, seller Pelican Holdings advertises a 22-acre tract as 'clear and merchantable title, 10% down, owner financing available.' The bidder's packet includes a title commitment showing a 40-foot pipeline servitude and a $9,800 2022 ad valorem tax lien, plus terms saying 'property sold as-is, where-is, subject to all servitudes and liens; buyer waives all objections.' Maggie bids $240,000, signs the bidder's contract, and deposits $24,000. Her lender later refuses financing because the appraisal conditions closing on clear title and the tax lien. Maggie demands return of deposit, claiming the ad and packet conflict. Pelican says the as-is clause controls and the deposit is liquidated damages. The auctioneer's contract says he is not responsible for title. Maggie also recorded a lis pendens. Closing was set for 30 days but the auctioneer has not provided a settlement statement.
1. Analyze the conflict between the advertising and the as-is/waiver terms. Is Maggie likely entitled to rescind or to a return of deposit?
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The ad's 'clear and merchantable title' is a specific affirmative representation about title. An as-is clause generally disclaims quality and condition, not the seller's obligation to convey the title described, and a boilerplate waiver does not automatically defeat a claim that the seller misrepresented title. The tax lien is a monetary encumbrance that can be cleared from proceeds; the pipeline servitude is an encumbrance that must be disclosed and may affect marketability. Because the packet disclosed both, Maggie may have had inquiry notice, but the ad contradicted the packet, creating ambiguity. The auctioneer, as seller's agent, cannot rely on a disclaimer to cure his own misleading ad. Deposit. A liquidated-damages deposit is enforceable only if reasonable and the seller is ready, willing, and able to perform. If Pelican cannot convey the advertised title, Maggie can rescind and recover the $24,000; if the defect is curable, she may demand cure and a closing extension. The lis pendens preserves her claim.
2. What should the auctioneer have done regarding title disclosure and financing, and how should the deposit be handled while the dispute is pending?
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Before bidding, the auctioneer should have obtained the title commitment, announced the tax lien and servitude, described the title as 'insurable subject to' those items, and removed 'clear and merchantable' unless a title company would insure over them. He should have given a written financing disclosure: who provides it, rate, term, points, and whether the buyer must close even if financing fails. Owner financing should be in the packet, not just the ad. Deposit handling. The $24,000 belongs in a trust account. It should not be released to Pelican while Maggie disputes title and records a lis pendens. Release only on written mutual instructions, a cure and closing, or court order. The auctioneer should issue the missing settlement statement showing deposit, price, credits, liens to be paid, and net. He should also disclose his agency in writing and avoid giving legal or title advice. A title cure-paying the $9,800 lien and obtaining a servitude subordination or disclosure-may save the sale.