In general, this means that the property is being sold in its current condition, and the seller is not responsible for making any repairs or improvements before the sale. The buyer assumes all responsibility for any existing problems or defects. This provision is typically found on page 5 of 16 in the contract. However, it’s important to note that if the buyer later discovers an issue with the property that was not disclosed or readily observable, then that issue is not covered by the “as-is” provision of the sale. So, while “as-is” means the buyer accepts the current condition of the property, it does not cover issues that were not disclosed or observable during the buying process.
The impact and significance of the “as-is” provision for the seller:
- With the “as-is” sale provision, the seller avoids the trouble of entering into negotiations or re-negotiations with the buyer after the contract or transaction is completed, as well as the responsibility for repairing the current condition of the property.
- Sale “as-is” is based on the understanding the current condition of the property. Therefore, the seller needs to disclose in detail before the buyer makes a decision to purchase or make a bid, any details that may affect the buyer’s willingness to purchase and the price of the property, including the condition of the property, repairs and renovations, neighbor disputes, property disputes, insurance claims in the past 5 years, natural disasters, pets, smoking indoors, and whether the property has been rented. The more detailed the seller’s disclosure, the wider the scope of protection for the seller under the “as-is” provision. For this reason, most sellers in the Bay Area will order professional inspections for the house, termites, roof, foundation, swimming pool, chimney, sewage pipes, and reports on the natural disaster disclosure, to supplement the explanation of the property situation beyond the seller’s knowledge.
- The condition covered by the “as-is” provision in the purchase agreement has a time limit, which is “as of the date of acceptance.” In other words, from the time both parties being the contract until closed, generally within 30 days after the transaction is completed, the seller is obligated to maintain the same condition as when the buyer signed the contract. During the 30-day transaction period, if the condition of the property changes or deteriorates, such as sudden plumbing leaks, burglary, damage to the property, or scratches on the walls when the seller moves furniture, the seller is responsible for repairs.
The meaning and impact of the “as-is” clause for buyers are as follows:
- Since the buyer purchases on the condition of an “as-is” sale, they have the right to know the full condition of the property, and what is covered under the “as-is” sale.
- The “as-is” clause only includes the problems mentioned in the seller’s disclosure and the inspection report conducted before signing the contract. This does not mean that the buyer must give up their right to inspect the property or use other channels to learn more about its condition. For example, if the seller is vague about whether their property has legal building extensions, I will assist my buyers in checking the specific history of the house renovation through City websites or offices. If the existing inspection report provides vague conclusions about the foundation, I will recommend that my buyers hire a professional foundation company to conduct further inspections. For any undisclosed issues that arise after the contract is signed, or any discrepancies found during the buyer’s inspection, the buyer has the right to renegotiate with the seller.
- The buyer has the responsibility to conduct another inspection of the property before making the final down payment and signing closing documents. If there are any changes in the condition of the property that occur after the contract is signed, the buyer can negotiate with the seller and request repairs. Such situations are also not covered by the “as-is” protection.
In summary, the “as-is” clause is not a perfect shield for the seller nor is it a compulsion for the buyer to give up their right to inspect and understand the full condition of the property. I hope that my explanation can help everyone better understand the meaning of this legal clause and encourage both buyers and sellers to behave responsibly during the transaction process. Thank you for watching this video, and please feel free to contact me, Carol Zhang @510-565-0005, for any real estate-related questions or assistance in the Bay Area.