Dear Monty: The house seller wants me to release him from all claims after closing. This action sounds risky. Is it risky?
Monty’s Answer: Sellers have different reasons for requesting such a release.
No. 1: Sometimes they know something they’re afraid you’ll discover and hold them accountable for.
No. 2: Or they may be trying to protect themselves if you discover something they were not aware of.
No. 3: Also, they may see a release as a final closure and an intelligent thing to do.
No. 4: Finally, paranoia.
Risk Assessment Considerations
No. 1: Do you have a signed seller condition report? Many states require a seller to furnish a condition report. If the state requires it and you didn’t receive it, a release is risky.
No. 2: How old is the seller’s condition report? If the seller’s condition report is less than 30 days old, the chances of something significant going wrong is minimal. This statement assumes the seller completed the report honestly.
No. 3: Did you (or the seller) have the home inspected? It matters not who ordered the inspection. What matters is the skill in finding defects. A release is hazardous without a home inspection.
No. 4: What is the age of the home? Brand new homes can have defects when they’re new and begin wearing out when they’re new. Typically, the components that fall into the “defect” category start needing replacement in 12 to 20 years. Climate and how the home is maintained can affect these components. For example, an asphalt shingle will wear faster in the Southwest sun than in a region with less sunshine. Or following the manufacturer’s filter changing instructions may extend the life of a furnace.
No. 5: Do you feel the home is well-maintained? Does it show pride of ownership? A seller that has demonstrated they take pride in their home is more likely not to “fudge” a condition report. They have no reason to do so.
No. 6: Does the seller currently live in the home? If a seller has never lived in the house or has not lived in it for some years, they may want a release because they don’t know the condition. Along this train of thought, having renters in a home may increase the chances of defects, mainly when older children and/or pets are present.
No. 7: How long has the seller owned the home? Suppose the seller has owned the home a short time, maybe less than two years. In that case, a release becomes significantly riskier, particularly if it’s a flipper or an iBuyer house.
No. 8: Has the seller replaced any major components in the past five years? Major components such as the siding, the roof, the furnace, exterior concrete flatwork, flooring, and windows are considered significant components. A history of proper home maintenance suggests a lower risk.
No. 9: Do you have a signed buyer agency agreement? A release is likely less risky with an exclusive buyer agency agreement.
Sometimes it’s perilous to sign a release, but other times it’s not. Knowing the answers to the questions above will add clarity. The request is uncommon. One last thought: If the seller’s request is not a contingency in the contract, you can likely just say no.