What Does “As-Is” Mean in Real Estate Transactions?
Whether you’re searching for a home for your family or shopping for an investment property, you’re likely to come across some advertisements describing real estate for sale in “as is” condition. Buyers often interpret this phrase in a casual way, assuming “as is” means the property needs cosmetic or structural improvements. Often this is a correct assumption, since “as is” real estate is usually distressed properties, foreclosed homes, or structures upon which construction was never completed.
Even though that assumption is generally correct, the phrase “as is” is not just a nice way of saying “you’ll need to do some work on this one.” It’s actually a legal term in the real estate world, and it carries a very specific meaning. In fact, the state of California carefully clarifies the responsibilities of a real estate agent when using the term “as is” to describe a property:
As quoted by a California appeals court in the case of Easton v. Strassburger (1984) 152 Cal. App. 3d 90, “The primary purposes of the Cooper-Lingsch rule are to protect the buyer from the unethical broker and seller and to insure that the buyer is provided sufficient accurate information to make an informed decision whether to purchase. These purposes would be seriously undermined if the rule were not seen to include a duty to disclose reasonably discoverable defects. If a broker were required to disclose only known defects, but not also those that are reasonably discoverable, he would be shielded by his ignorance of that which he holds himself out to know. The rule thus narrowly construed would have results inimical to the policy upon which it is based. Such a construction would not only reward the unskilled broker for his own incompetence, but might provide the unscrupulous broker the unilateral ability to protect himself at the expense of the inexperienced and unwary who rely upon him. In any case, if given legal force, the theory that a seller’s broker cannot be held accountable for what he does not know but could discover without great difficulty would inevitably produce a disincentive for a seller’s broker to make a diligent inspection. Such a disincentive would be most unfortunate, since in residential sales transactions the seller’s broker is most frequently the best situated to obtain and provide the most reliable information on the property and is ordinarily counted on to do so.”
What you, as a buyer, need to know about “as is” properties:
- You are buying the property in the condition that is visible or observable to you, though simply stating “as is” does not excuse a seller from California’s strict disclosure rules and the requirement to disclose anything that might reasonably affect the value or desirability of the property.
- Just as important, the use of the phrase “as is” does not excuse the real estate agents from disclosing facts about the property’s condition; all of your questions must be answered honestly and truthfully to the best of their knowledge, as is true in all real estate transactions.
- The “as is” clause cannot be used to hide facts about the home which might prevent its sale.
- Consulting a real estate attorney prior to purchasing the property, to be sure your rights are protected, may help protect you from buyer’s remorse.
Buyers of “as is” properties sometimes find themselves in over their heads with the expense of renovations. If this happens to you, don’t assume you simply made a bad investment and there is nothing you can do. In some cases that may be true, but sometimes buyers are led to their “bad decision” by sellers or agents who did not disclose all known facts about the property. If you think this may be the case, consult with a real estate attorney about your rights related to non-disclosure of facts. . Better still, do not put yourself in that position – do a proper, thorough investigation of the property before you buy!