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February 5, 2019

Working With “As Is” Properties

“Property to be sold in “As-Is” Condition.”  Ever see that phrase?  

But What does it Mean?

Of course!  It’s a common notion in the sale of an existing home that the home is sold in its present and “as-is” condition.  So, what does it mean when a listing agent or seller inserts that phrase “Property sold “As-Is” in a listing advertisement, MLS description, Seller Disclosure Statement or Purchase and Sale Contract?  Answer:  “We don’t know!!!”  The use of the phrase “As-Is,” particularly in a Purchase and Sale Contract is, at best, ambiguous.  Sellers and listing agents often believe it means something quite different from what buyers and buyer’s agents think.  

Some questions to consider:  Does “As-Is” mean the buyer is entitled to a home inspection?  Is the buyer entitled to the home inspection but the seller is stating that no repair requests will be considered?  If the seller or listing agent is aware of material defects in a property, are they still required to disclose those defects when the property is being sold “As-Is”?  Often, sellers believe that if they sell “As-Is,” they have no obligation to disclose any defects of which they are aware.  This is probably not the case in most states.  

Concealment of a defect by a seller could easily be the basis for a claim of fraud or fraudulent misrepresentation under many state laws, even those few without mandatory Seller Disclosure Laws.  Listing agents fall under the same state laws, but also have obligations under Article 2 of the Code of Ethics to “avoid exaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction.”  This is broader than the strict requirements of a lawsuit for fraud and certainly covers concealment of known defects regardless of whether a property is sold “As-Is.”  Sellers also sometimes believe that selling “As-Is” means a buyer literally takes the property as it appears and is not allowed to have inspections of the property.  This is often not the case depending on the contract form used in your area.  

Buyers, on the other hand, often think that they automatically have a right to an inspection and can automatically terminate the contract if they don’t like what the inspection reveals.  This may or may not be accurate and depends entirely on the contractual language agreed to between buyer and seller.  Does inserting the phrase “As-Is” in a purchase and sale agreement negate any provisions for a home inspection that is also in the agreement?  Probably not, but the use of the term “As-Is” alone creates ambiguity about what exactly the buyer's rights are in the home inspection process.

Exploring Solutions

What’s the solution to this confusion for seller’s agents?  

First: Counsel a seller against inserting a separate “As-Is” term in the purchase and sale agreement unless the exact meaning of this phrase is further clarified.  

Second: Be familiar with your contract form.  It may already be stated that the property is being sold in its “present and as-is” condition. Adding the phrase again simply creates confusion and ambiguity.  

Third: Consult with your broker to consider having your attorney to prepare a standard “As-Is” form that clarifies the rights of the buyer and seller when a seller wants to call a property an “As-Is” sale.  Last, and most important, you should seriously question whether it is wise to accept such a listing or continue to work with a seller who attempts to fail to disclose known defects under the premise of an “As-Is” sale.  At a minimum, you should consult with your broker or attorney for guidance about this type of transaction.  The best choice may be to walk away from the listing.

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