PETALUMA CALIFORNIA - PETALUMA Homes and Real Estate For Sale

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If you rolled your eyes in a wide arc when President Clinton's answer to a deposition question depended upon the definition of the word 'is', would you also be surprised to learn that people have trouble agreeing on the meaning of 'as is'? It's an old expression, used in many kinds of sales, but it can cause big problems in a real estate transaction if the parties are not fully informed of its meaning.

In most home purchases there is a general expectation of buyers that the home will be delivered with certain fundamental components in satisfactory condition: heating, plumbing, sewer, and electrical systems that function properly, a roof that keeps out the rain, built-in appliances in working order, windows with glass in them, bathtubs and showers that don't leak -- that sort of thing. Some standard forms for purchase contracts contain boilerplate provisions that address the condition of those basic components to satisfy the buyer's expectation.

It is, however, perfectly okay for property to be sold 'as is', in its present condition, and with no obligation on the part of the seller to make repairs. The terms should be spelled out clearly and should delete or supersede any warranties or covenants regarding condition of the property in the purchase contract. Sometimes this is especially appropriate. For instance, a house may be sold as a 'fixer-upper', priced to reflect the need for improvements and repairs. There are some types of sales where the seller is acting strictly in a fiduciary capacity, such as a trustee in a foreclosure or bankruptcy or the executor of an estate. In nearly all of these transactions the property will be sold 'as is'.

When 'as is' becomes a problem, it is usually because of a misunderstanding on the part of the seller. Some sellers think that getting those two little magic words into the contract will relieve them of having to say anything about defects in the property. Not so. Even in the 'as is' sale the seller has the same statutory obligation to disclose in writing any material fact about the property that is known to him. That means telling the buyer about anything that would influence the buyer's decision to buy or the price he's willing to pay. Even those fiduciaries mentioned earlier (in foreclosures, estates, court-ordered sales, etc.), while not required to complete any statutory disclosure form, may still have to disclose material facts of which they have personal knowledge.

So the seller who knows that his roof leaked last winter and forgets to report that fact to the buyer will not be able to hide behind the 'as is' clause. He will still be liable to the buyer for damages because of his failure to disclose the defect.

Buyers should be especially alert when agreeing to buy 'as is'. Even though the seller has disclosure obligations, it is very important to have the property inspected by professionals. The 'as is' language in the contract will not obligate the seller to make corrections, but a well-drafted inspection provision will allow the buyer to terminate the agreement if the buyer disapproves of any findings in the inspection reports.