The Real Definition of an “As-Is” sale

You are in escrow on a home. You do your inspections and see that the chimney needs $20,000 worth of work.  Because of this new found knowledge, you request a price reduction of $20,000 to cover the cost of the work.  The seller’s response: “No, you will not get a $20,000 price reduction because this is an ‘As-Is’ sale.”

But what does “As-Is” really mean?  Many people, including real estate agents, think that the term “As-Is” means that you are buying the home in the present condition and that is that.  However, that isn’t the case.  Fortunate for us, the California Association of Realtors, Legal Department, touches on this for us.

The leading case involving this was in the 1986 case Shapiro v. Hu.  Lee Shapiro, his brother and a friend, were purchasing a hot dog restaurant, using the listing broker, as representation.  No one during the escrow period noticed a giant bulge coming out of the basement wall and it was never disclosed by the seller.  Once the transaction closed and Shapiro and his brother saw the bulge and received an estimate of $35,000, filed a lawsuit for breach of contract, fraud, and negligent misrepresentation.  The jury found no fraud or misrepresentation, however, did find breach of contract and awarded the Shapiros $65,841.52 in damages.  However, the judge set the award aside stating that the “as-is” clause dismisses the sellers of any responsibility for disclosing the condition of the property with the exception of fraud or misrepresentation.

After going through the appellate court upholding the trial court’s ruling, gave more meaning to the term of “as is”.

The true definition of “As Is” meets the following conditions:

1. This clause puts buyers on notice that there is no warranty on the home in regards to the condition or quality of construction.  In other words, the house isn’t perfect.
2. Reselling the property does not possess any form of implied warranty about the condition and quality and has to be expressed to the buyer from the seller.
3. The use of this “as-is” clause relieves the seller of any liability other than what is found to be fraud or misrepresentation.

Now, that doesn’t mean that the seller is obligated to provide repairs, price reductions, or credits.  They can very well say no.  The term As-Is mostly refers to after the sale has closed and that no warranty is implied.

View this article as a guide and seek legal advice if you need to take the issue further.