October
2006
The “As Is” Sale … or is it?0
It is what it is so it’s “as isâ€â€¦ or is it?
Many home sellers do not want to do the work to fix up their property so they want to sell it “as isâ€. Many sellers also think that they have put the buyer on notice that they are not warranting anything and whatever the buyer discovers about the property before or after the sale is not their problem. This is a wrong assumption so please do not make this mistake.
The purchase agreement published by the California Association of Realtors states the following:
“The property is sold in it PRESENT physical conditionâ€
When representing buyers, I have heard many seller’s agents argue that this is an “as is†clause. In addition, seller’s who want to sell their home “as is†are often advised by their agents to insert language in the contract that the home is sold “as isâ€.
So what does this mean?
No much really. From a marketing standpoint, what “as is†means is that the house may have lots of problems. Buyers demand that the price reflect this red flag.
So the first thing an “as is†sale means to the seller is the price that the house commands in the marketplace will probably be less than the average price per square foot. Hmm…
The ‘as is†clause does not relieve the seller of any legal responsibility for disclosing material defects know to him or her.
Some sellers think that as soon as the contract is signed, they don’t have to fix anything that the buyer requests. Well for the most part that is correct whether it’s an “as is†sale or not.
But the buyers still have full rights of inspection and can ask the seller to repair whatever they want. The seller is not obligated to fix anything and the buyer is not obligated to buy the house if they do not like what their home inspector discovers.
The consequence for a home seller who fails to disclose significant known home defects can be a lawsuit by the buyer after the sale. The home buyer’s difficulty, however, is proving the seller knew of the defect.
So if the “as is†clause does not relieve the seller of any obligation to disclose material defects and the buyer can still cancel the sale if they do not like what they find, what does this clause do for the seller?
Well, it almost guarantees that the seller will have to lower their price to get the property sold. In most cases the seller will do better fixing as much as they can to bring the property to selling standard, or at least close. It is a good business decision for the seller to over disclose, not only to be fair but to cover themselves legally after the sale.