Q: What does an “as is” sale mean?
A: “As is” are words in a sales contract intended to express that no guarantees whatsoever are given regarding the subject property and that it is being purchased as it was seen. “As is” is considered to be a disclaimer of warranties or representations and the buyer acknowledges this statement. This clause is not intended to shield a seller from possible legal charges brought by a buyer for failing to disclose known material defects in the property.
Even though an “as is” clause may be used and offers some protection to the seller from unknown defects of the property, the clause does not offer protection when the seller knowingly misrepresents the condition of the property.
The idea is that the buyer takes the visible condition of the property into account when making an offer and setting the purchase price. A buyer is expected to discover a defect upon a reasonable inspection. And the seller and the Realtor have an obligation to inform the buyer of known defects of the property, preferably in writing.
Sellers can protect themselves by being specific in the sales contract about known and recurring problems such as a cracked foundation, leaky roof, a room addition without a permit or a septic problem. In Tennessee, residential property owners are required to complete a Property Disclosure Form and comply with disclosure requirement under the Tennessee Property Condition Act. Certain properties are exempt from the act and most exemptions include the fact that the seller has not occupied the property. If the property is not exempt from the disclosure requirements, the seller must complete a Property Disclosure Form which states certain facts about the property’s condition.
Also, the Property Disclosure Act allows the seller to inform the buyer in writing that he does not intend to complete a Property Disclosure Form. The seller must obtain the buyer’s signature and acknowledgment on the appropriate disclaimer form. This is not a typical choice a buyer would prefer in trying to determine the condition of a property.
If the buyer likes the property and wants to proceed with caution on an offer with an “as is” property, the sales contract should contain an inspection contingency that gives the buyer a reasonable length of time to have the property inspected by a qualified professional and then allow the buyer to terminate the sales contract without liability if the condition of the property is not satisfactory to the buyer. This would be the best approach to honor the seller’s “as is” condition of sale and still offer the buyer the opportunity to make sure they can check out the condition of the property.
“As is” transaction tend to prevail in the sale of foreclosed properties, short sales, estate sales and auctions. “As is” sales contract should be entered into with caution and in the majority of cases should allow for the inspection contingency. As a buyer, you should always allow yourself ample opportunity to inspect the property.
Get answers to questions you might have about real estate from Randy Durham, who is president of the Chattanooga Association of Realtors and a broker with Keller Williams Realty. His column appears on Sundays. Send your questions to Business Editor John Vass Jr. at jvass@timesfreepress.com