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"As Is" or "in its PRESENT Physical Condition" What it Means and How to Cope! In this market, more sellers want to sell "As-Is" rather than having the contract contain a "seller warranty." In any market, relocation companies, lenders selling "R.E.O." property, and many institutional sellers will insist on a “As-Is" Addendum to the purchase contract. This issue confuses many sellers and buyers, possibly because the meaning and legal impact of "As-Is" has changed over the years. Therefore, I prepared the following information to keep the basic issue simple. What
"As-Is" Used To Mean Long ago, "As-Is" sales were based on the concept of Caveat Emptor -- Let the Buyer Beware. In other words, selling "As-Is" was allowed, and the phrase became a substitute for full disclosure. Originally home sellers used an "As-Is" sale to insulate themselves from the cost of making expensive repairs and they generally failed to disclose, to the buyer, the condition of the home. In effect, "Buyer Beware" and "As-Is" meant that the seller didn't have to make full disclosure of material facts, and the buyer was, in effect, being told: "Do your own homework, and if you buy a pig in a poke, it's your tough luck!" What
"As-Is" Means Today An “As-Is” sale, as it is most commonly referred to by today’s buyers and sellers, has been redefined as selling a property “in its PRESENT Physical Condition” in the most recent revision of the California Association of Realtors (C.A.R.) purchase contract. In it, buyers are encouraged to perform substantial due diligence! Sellers are legislatively mandated to make full disclosure of material facts. A few examples include: Sellers need to complete the Transfer Disclosure Statement (T.D.S.) and agents need to conduct a visual inspection of accessible areas. The buyers are provided with additional disclosures such as earthquake and environmental hazards, lead-based paint, the gamut of Zone Disclosure Reports and Natural Hazard Disclosures. Even in situations where the seller isn't required to complete the T.D.S. (such as probate), full disclosure of material facts is still required! Today, "in its PRESENT Physical Condition" can be summarized as: "Now that you have all of the pertinent information, take it or leave it." In other words, “As-Is" or “in its PRESENT Physical Condition" (as it is now known) is not a substitute for a Sellers legal requirement of full disclosure. When accompanied by full disclosure, the phrase "in its PRESENT Physical Condition" is designed to protect a seller from being forced into writing a check to make repairs to a home prior to, or during, the selling process. Additional confusion comes from other financial obligations that a seller may have in the rest of the C.A.R. purchase contract. Sellers who sell a home “in its PRESENT Physical Condition" may think they are under no obligation to ever spend even a dollar in order to sell the property to the buyer. They think “As-Is” or “in its PRESENT Physical Condition" is a total across-the-board exemption from any other financial exposure. This is simply not the case! Examples of Other Financial Exposure Maintenance
and Repair: The standard C.A.R.
purchase contract obligates the seller to keep the property in substantially the
same condition as when the Buyer and Seller entered into the sale contract. Structural Pest Control: Again, using the C.A.R. contract as an example, the seller might be responsible for pest control work, even if the sale is "As-Is" or “in its PRESENT Physical Condition". Other financial items: Governmental Transfer Fees, Title and Escrow Costs, Smoke Detector Installation and Water Heater Bracing, to name a few. In summary A Seller can sell a home "in its PRESENT Physical Condition" but is responsible to make legislatively mandated full disclosure of material facts and comply with other financial obligations contained in various sections of the C.A.R. contract. The Buyer must perform substantial due diligence to protect himself. Making a claim for damages against a Seller can be difficult because the burden of proof, in making claims against a Seller who knew of and failed to disclose important information, rests on the Buyer! If you have further questions please call Doug Hamilton at (714) 974-8535 so that he may provide further assistance!
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