Real Estate Curve

Everything To Know About Real Estate

Jan-20-2008

As Is Condition

Words in a contract intended to signify that no guarantees whatsoever are given regarding the subject property and that it is being purchased exactly as it is found. An “As Is” indicator is intended to be a disclaimer of warranties or representations. The recent trend in the courts to favor consumers tends to prevent sellers from using ” As Is ” wording in a contract to shield themselves from possible fraud charges brought by neglecting to disclose material defects in the property.

Even though an “As Is” clause may give some protection to the seller from unknown defects, the clause is inoperative when the seller actively misrepresents the condition of the property. It does not shield the seller who fails to repair a readily observable defect, basically saying “You take it as you see it.” The idea is that the buyer takes the visible condition into account when making an offer and setting the purchase price. Therefore, if a buyer should be expected to discover a defect upon a reasonable inspection, the buyer will be charged with notice; otherwise, the broker and/or seller have the affirmative duty to inform the buyer of the defect, preferably in writing.

Sellers can protect themselves by being specific in the contract, for example, about recurring plumbing problems, a cracked foundation, leaky roof, den built without a building permit, all in “As-Is” condition. If for example, the roof defect was not obvious and the buyer did not know of this material defect, but the seller did know, then a general “As-Is” clause is probably worthless.

Many contracts contain standard language that must be evaluated in light of an “As-Is” clause. For example, the seller may still be required to provide a termite report even though the property is sold “As- Is”. In such a case, the seller may want to affirmatively delete the standard termite clause. Also, “As Is” does not normally cover title encroachment matters unless specifically noted.

Even where an “As-Is” clause can protect a seller, many courts hold that a broker cannot use the “As-Is” clause to avoid liability for misrepresentation, because the broker is not a party to the contract in which the “As-Is” clause is contained.

In appraisals, “As Is” is an indication that the value estimate is made with the property in its current condition, which may not be the highest and best use or may include needed repairs.

Posted under Real Estate Terms

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