In our county the purchase agreements state that the property is sold “As Is”.
1). What does this provision mean for both the buyers and the sellers?
On the buyers’ side, the “As Is” provision means that the buyer agrees to purchase the property in its present condition. In other words, the buyer accepts the property in the condition in which it is reasonably observable by him or her as of the date of acceptance of their offer.
On the sellers’ side, the “As Is” provision does not eliminate the sellers’ duty to disclose any material fact that would affect the value of the property and would impact the buyers' decision to either purchase the home or how much to offer to purchase the property. To put it simply, the seller is liable for any failure, whether negligent or intentional, to reveal known concealed defects not apparent from an inspection of the property by the buyers.
2). What is the purpose of the “As Is” clause in the purchase contract?
The purpose of the “As Is” clause in the residential purchase contract is to protect the buyers. Below is a recap of the most commons questions asked by buyers regarding the impact of the ”As Is“ provision on their rights when buying a property.
3). Does the “As is” clause eliminate any obligation on the part of the sellers to make any repairs whatsoever?
No. Under the terms of the purchase contract, the seller is still obligated to maintain the property in its condition as of the date of acceptance. If the property is damaged during the escrow, as long as the buyer was not at fault for causing the damage, the seller will likely be obligated to pay for the repairs prior to the transfer of ownership AKA close of escrow. As a reminder, escrow is officially “closed”, when the Grant Deed is recorded at the County Recorder's office and is officially of public record.
Nevertheless, since the “As Is” paragraph of the residential purchase contract begins with: “Unless otherwise agreed in writing…” a particular statement in the agreement could require the seller to make some repairs despite the As-Is clause. In that case, the request for repairs will usually be included in the buyer’s offer.
4). Is the seller required to make repairs for state or local retrofit requirements?
Yes, in most transactions there will be state and sometimes local point-of-sale retrofit requirements which may require repairs to be made to the property before the close of escrow despite the “As Is” clause.
For example, water heater bracing and smoke alarm installation laws will require repairs to be done by the seller prior to the close of escrow.
5). Does the “as is” clause relieve the seller of the obligation of having to make disclosures?
No. Most sellers are obligated to provide all disclosures required by law and contract regardless of the “As Is” clause. Among all the disclosures to be completed by the sellers, the Transfer Disclosure Statement (TDS) as well as the Seller Property Questionnaire (SPQ) play an essential role in the known material facts the sellers should pass on to the buyers.
5-1). The Transfer Disclosure Statement (TDS)
Simply stated, the Transfer Disclosure Statement gives the seller an opportunity to disclose information about the property that would be important for the potential buyers to know.
5-1*). Exemptions to the TDS
- Transfers requiring a public report pursuant to § 11018.1 of the Business and Professions Code and transfers pursuant to § 11010.4 of the Business and Professions Code where no public report is required;
- Transfers pursuant to court order (such as court-ordered probate sales, sales by a bankruptcy trustee, writ of execution, eminent domain, and transfer resulting from a decree for specific performance);
- Transfers by foreclosure (including a deed in lieu of foreclosure and a transfer by a beneficiary who has acquired the property by foreclosure or deed in lieu of foreclosure);
- Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust. NOTE: An exception to this exemption occurs when the property is held in a revocable trust and the trustee is a natural person who is also either the former owner of the property or was an occupant in possession of the property within the year preceding the transfer.
- Transfers from one co-owner to one or more other co-owners;
- Transfer made to a spouse or to a child, grandchild, parent, grandparent, or other direct ancestor or descendant;
- Transfers between spouses in connection with a dissolution of marriage or similar proceeding;
- Transfers by the State Controller pursuant to the Unclaimed Property Law;
- Transfers as a result of failure to pay property taxes;
- Transfers or exchanges to or from any government entity.
5-2). The Seller Property Questionnaire (SPQ)
This form is not a substitute for the Real Estate Transfer Disclosure Statement (TDS). It is used by the Seller to provide additional information when a TDS is completed or when no TDS is required.
6). Does the “As Is” clause mean that the buyer has waived their right to investigate the property?
No. The “As Is” clause only touches upon the condition of the property; it does not affect the buyer’s right to investigate and perform for instance home and pest inspections at his/her expenses.
Hope this helps.