“As is” Clauses in Residential Real Estate Contracts
Residential real estate buyers who heed the adage of caveat emptor — buyer beware — take steps to inspect the property being purchased for defects. Such an inspection may lead the buyer to ask about apparent defects and about any that may not be apparent. Generally, a seller has a duty to disclose known material defects and to provide a good faith answer to questions about other defects. The duty of the seller's broker follows the seller's duty under most circumstances.
Condition of the Property
Some states' residential disclosure laws require brokers to thoroughly inspect the premises to determine the condition of the premises. In general, though, material defects that are known to the broker must be disclosed to the buyer.
“As is” Clause
When preparing the residential real estate contract, the broker may insert a clause, stating that the buyer agrees to purchase the property “as is.” This means that the buyer has either inspected the property or waived the right to inspect and is not relying on any representations that may have been made by the broker as to the condition of the property. The representations referred to may consist of either a statement or an omission.
Effect of the Clause
Although the clause may be invoked to insulate the broker from liability for nondisclosure damages, each case is judged on its facts. In some states, the “as is” clause will not apply to cases in which the broker intentionally misrepresented a particular defect or condition. In other states, the clause may be ineffective for negligent misrepresentations as well.
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