Can a seller demand an anti-sandbagging clause that blocks claims for things the buyer already knew?

Yes — a seller can propose an anti-sandbagging clause just as readily as a buyer can propose the opposite, and whether it ends up in the final agreement again comes down to negotiation and leverage rather than either side having an automatic entitlement. The seller's logic is straightforward: if the buyer already knew about a problem before closing and decided to close anyway, the seller's view is that the buyer effectively accepted that risk (perhaps reflected in a lower price already negotiated) and shouldn't get to claim for it again through an indemnity afterward.

Buyers generally resist this, since it can create a perverse incentive to stay quiet about something discovered during diligence rather than raise it, in order to preserve a stronger indemnity claim later that an anti-sandbagging clause would otherwise cut off. In practice, many deals land on a middle position — for instance, applying anti-sandbagging treatment only to issues that were actually and specifically disclosed in writing during the process, rather than to anything the buyer might arguably have known.

Because this term genuinely changes how much risk each side carries after closing, work through the actual wording with a Treadstone business lawyer rather than accepting boilerplate language from either side.