The Term “As Is” as Applied to Real Estate Closing Transactions

Most purchase or sale transactions are accompanied by the clause/disclaimer: “As is.”

From the sale of a vehicle to the purchase of a collector’s item, this term has a commonplace presence. To a certain extent, “as is” is indicative as to what it means… “what you see, is what you get.”

Notwithstanding, where the purchase or sale of real property, which includes homes, condominium units, vacant land, apartments, town houses, etc., is concerned, this term is almost always riddled with confusion and subject to multiple interpretations as far as the realtor, buyer, seller and sometimes attorneys are concerned.

Understanding how the term “as is” applies in a real estate closing transaction can eliminate any room for interpretation and assure that all parties involved have their understandings in complete alignment.

For the most part, where a closing transaction is concerned, the term “as is” pertains strictly to the cosmetic, structural and esthetical condition of the premises. Whatever items are “clearly evident to the eye” would fall into this category.

Outdoor examples would include the condition of the driveway, roof, bricks, walkways, railings, steps, aluminum siding, shrubbery, decks, garage, pool or swing set.

Indoor examples would include the condition of the walls, ceiling, floors, doors, windows, cabinets, counter tops, lighting fixtures, bathrooms, basement or railings.

The same would apply to any and all appliances accompanying the purchase or sale, including the refrigerator, freezer, dryer, oven, microwave, chandeliers, drapes, etc.

Absent clear indication to the contrary, in the form of a written provision or rider incorporated into the contract of sale, a seller is not obligated or expected to modify or change the existing condition of these structures. The purchaser must proceed to closing with actual knowledge that the “state of existence” of these structures will be “as is” at the time of closing, or “as was” when they first viewed the home, and cannot raise any objection to see closing to conclusion if these items are not repaired or remedied by the seller.

However, it should be noted that any systems, such as plumbing, heating, ventilation, air conditioning, mechanical, sprinkler, automatic garage or alarms, accompanying the sale are to be delivered in operational and functioning condition. There is a standard paragraph in almost every “template contract” that mandates this to be the case. This lends itself to the fact that unless specified to the contrary, again, via either a separate provision or rider that reflects “seller makes no representation as to the operating condition of” the specific system at closing then all systems must be operational at time of closing.

In the event the contract fails to disclose that this is not the case, the seller can be contractually responsible to correct or remedy any system to assure that they are operational and functional, irrespective of the “as is” portion of the contract that deals with the structural, esthetical and cosmetic aspect of the dwelling. Absent such a contractual designation, the “as is” statement would not insulate the seller against their contractual obligation to render the systems operational. That does not mean that any system needs to be “brand new,” only that same be operational.

The same ideology applies to “open permits,” “violations” and “fence line variations” or encroachments. Unless there is a separate contractual provision or rider reflecting: “Seller makes no representation as to the legality or code conformity of the deck, pool, extension, dormer, etc., and is under no obligation to close out any open permits or cure any violations.” This means any “open permits,” “violations” or “fence line variations” must be cured or contended with by the seller. As with the systems of the home, “as is” would not excuse performance on the part of the seller to close out any open permits, cure any violations, or correct and contend with any encroachments.

Even if the “home listing,” “verbal assurances” or “representations” by any party dictates “as is,” pursuant to the statute of frauds, where real property and land sales are concerned, the contract of sale will be the ultimate governing document as far as the obligations and understandings of the buyer and seller and how “as is” applies to the sale or purchase.

No seller is looking to invest or spend money on an asset they are seeking to part with or to abate the purchase price and render a “credit” to the Purchaser, reducing the monies they are to “net” from the sale, as a result of an item they discover they must engage, as this condition or item, contrary to their initial belief, did not fall within the “as is” category.

No purchaser should lack definitive understanding as to what items and conditions or the like “as is” pertains to as far as their home purchase is concerned.

In summation, as far as a real estate closing transaction, the term “as is” is not an all-encompassing “umbrella term” that excuses the seller from engaging specific items as far as the condition of the home is concerned. The contract of sale must be carefully drafted to assure that the term “as is,” as applied to title issues, appliances, cosmetic, esthetical, structural conditions and systems, is clearly identified and understood by all parties.

 

 

DISCLAIMER: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TO BE RELIED UPON AS LEGAL ADVICE. NO ATTORNEY CLIENT RELATIONSHIP IS CREATED BY THIS PUBLICATION. AN INDEPENDENT LEGAL OPINION SHOULD BE OBTAINED BY THE READER.