What Does “As-Is” Really Mean?
I’ve heard a number of opinions on what the term “As-Is” means pertaining to a real estate transaction, and I must say that many get it completely wrong – even real estate professionals.
I once reminded a potential Seller there is an abundance of disclosures and advisories they are required to complete and deliver to prospective buyers in a transaction. They said, “Oh, we’re not going to do those because we want an As-Is sale.” Nope. It doesn’t work that way. Not nearly that way.
In yet another situation the Seller said, “We’re just going to leave all the garden chemicals, motor oil and other stuff in the garage, and all that junk in the side and back yard because it’s a hassle for us to get rid of it.” When I mentioned that’s not likely possible they insisted they could if they found a Buyer that would make an As-Is offer. Again, not quite right.
The contract used in the majority of transactions in California (Residential Purchase Agreement and Joint Escrow Instructions) states it this way, though I’ll take out some of the legal language and paraphrase for clarity:
Unless Otherwise Agreed: (1) the Property shall be delivered “As-Is” in its PRESENT physical condition as of the date of Acceptance [“Acceptance” is when the contract is formalized]. (2) the Property is to be maintained in substantially the same condition as on the date of Acceptance. (3) all debris and personal property not included in the sale shall be removed by Close Of Escrow.
The contract is an As-Is contract and simply means the Seller of the Property does not have a legal or contractual obligation to make repairs or fix deficiencies of the property. One of the older contracts used in parts of the Bay Area was NOT an As-Is contract and did require Sellers to fix certain things prior to Close Of Escrow, including broken chimneys, broken or cracked glass in windows, termite infestations and damage caused by them, for example. That version of the contract was changed many years ago and is now As-Is as well. If someone bought a home, say, in the early 2000s, they may remember the Seller had an obligation to fix a number of items, and it may have been fairly costly. Those obligations are no longer required in the contracts generally used here.
That said, nothing in real estate law or the contract precludes a Buyer to ask the Seller to make repairs at the Seller’s expense as part of the negotiations in the sale of their property. The important distinction here is that it is a request by the Buyer, and not an obligation or contractual requirement of the Seller to comply. I recently advised a Seller that they did not have an obligation to have the home fumigated for around $2500 for an infestation of drywood termites, but that could be a negotiating point if we were lucky enough to have multiple offers (and we did). It didn’t come into play, but if one Buyer offered $10,000 more than any other one but requested the Seller to complete the fumigation, that would have been an easy decision for the Seller to agree for a “net profit” of $7500 more, right?
As-Is means no contractual obligation for the Seller to make repairs. Done. However, the law still requires Sellers of a home to have the water heater properly strapped and to have smoke and carbon monoxide detectors installed in the correct locations before a home is sold. These items are required by law and have nothing to do with a contract being As-Is or not.
