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Feb 10, 2016

"As-is" clause in offer to purchase contract doesn't shield seller from misrepresentation claim

Catherine Fricano v. Bank of America NA No. 2015AP20 (WI App. Dec. 23, 2015)

The Wisconsin Court of Appeals upheld a jury verdict for damages against Bank of America NA in a claim filed by a home purchaser against the bank which had acquired the home in foreclosure.  Like most REO sales, the bank required the buyer to include an “as-is” clause in the purchase contract whereby the buyer acknowledged that the property was being acquired without any representation or warranty by the seller as to its condition.  When the buyer discovered after closing that there was a substantial mold problem and that the bank’s real estate agent knew about the mold problem, the buyer filed a fraudulent misrepresentation action under sec. 100.18, Stats.  The buyer alleged that the bank misrepresented the condition of the home and misrepresented its knowledge regarding the condition of the home.

Despite the fact that the buyer, her fiance’, and her real estate agent admitted that they all saw mold and noted a musty odor, and despite the fact that the buyer hired an inspector to determine the extent of the mold, and despite the fact that the buyer apparently retained a mold specialist consultant about mold removal, the buyer nonetheless claimed that the extent of the mold was unknown to the buyer and that the seller misrepresented its lack of knowledge about the problem.  The buyer alleged that this constituted a fraudulent misrepresentation.


A jury agreed and awarded damages to the buyer.  On appeal, among other arguments, Bank of America argued that the contractual “as is” clause barred the plaintiff’s claims.  The court of appeals affirmed the trial court’s determination that the “as-is” clause is not a complete bar when a claim is based on sec. 100.18, Stats.  Because the bank made affirmative untrue statements, (basically stating “we know nothing” when the bank did know something), the plaintiff was deceived in violation of sec. 100.18, Stats.

Note:  A sec. 100.18, Stats., misrepresentation claim permits the plaintiff to recover their damages and attorney fees.