Buyer Beware: Selling Your Real Estate With An As-Is Clause

Are you trying to sell your home but don’t want to deal with later repair requests from a buyer about problems with the property? Or maybe you’re a buyer who is concerned about what happens if the seller purposefully conceals a defect in the property that you discover after you’ve signed a home purchase contract with an as-is clause. Either way, there are certain things both sellers and buyers should know about what an as-is clause actually represents.

Contrary to popular belief, an as-is clause in a home purchase contract could mean a number of different things. For a seller, it could mean what you’ve seen in the house is what you should expect to get. Alternatively, a seller could be trying to tell a buyer that he or she is refusing to make any representations on the condition of the house whatsoever.

As a buyer, the main concern tends to be worry about a seller’s purposeful concealment of a latent defect of the property. This concern is viable in many ways, because it could end up costing a buyer a lot of money to fix that problem. Most states, however, protect against this very situation by making void an as-is clause in a home sale contract if the discovered defect is both material and was known about on the seller’s part.

Another instance where an as-is clause might be found is in the event of a short sale. A short sale occurs when a homeowner can no longer afford to pay the bank’s mortgage on the owned property. In lieu of a foreclosure proceeding, the bank gives the homeowner the opportunity to try to sell the property at a price that is lower than what is still owed on the mortgage. If both the bank and seller approve the buyer’s offer, the house is generally sold as-is.

One important thing to note is that just because a house is sold with an as-is clause, this doesn’t mean a buyer can’t request a home inspection before signing the contract. In fact, any buyer who is concerned about the shape the house is in should insist upon the offer being contingent upon a home inspection. While the discovery of a defect will not require a seller to repair it absent other contractual agreements, it does give the buyer the opportunity to back out of the home sale if he or she determines the cost of fixing the home would be too high.