Laying Down the Law: Buying Property “AS IS

Most real estate transactions today include an “as is” clause. Indeed, virtually all commercial transactions are “as-is,” and most residential real estate transactions, including those involving the standard form AAR Purchase Contract, carry a standard “as-is” clause. Real estate that is listed “as is” may not be in perfect condition or may require some repairs. Alternatively, the seller simply may not want to have any obligation to fix major problems with the real estate, such as heating and cooling systems, plumbing, roofing, or electrical work.

Purchasing a property “as is” has important consequences that you should be aware of before you agree to complete the transaction. Therefore, REALTORS® and their buyers you should consult an experienced Arizona real estate lawyer and understand the ramifications of an “as is” clause before agreeing to this variety of a real estate transaction.

Defining “As Is” in Real Estate Transactions
When a seller offers to sell real estate “as is,” the seller is offering it without any guarantees about its condition beyond what you can observe before you buy it. The seller is not making any warranties as to the condition of the real estate after completing the sale, agreeing to make any repairs, or promising you that any part of the real estate is in a certain condition. In other words, when you and the seller close on the real estate transaction, you accept the real estate in its current condition, no matter what that condition may be.

However, using an “as is” clause is not quite as expansive as it might initially seem, at least when it comes to real estate transactions. Arizona courts have placed some limits on the “as is” clause that might otherwise seem to exonerate a seller of all responsibility for real estate.

Seller’s Duty of Disclosure
Although sellers can sell real estate “as is,” Arizona courts have made it clear that sellers still have a common law duty to disclose material facts about the property they are selling. They have a legal obligation to be honest and forthcoming about major material defects in the property or needed repairs, to the extent that they are aware of them. The “as is” clause in no way relieves them of their legal obligation to disclose known defects that are material to the purchase. A seller’s failure to disclose such defects could still expose the seller to liability if the buyer later discovers material defects known to the seller.
Whether a contract contains an “as is” clause, the only way for a seller to avoid liability for a known material defect is to engage in fair dealing with the buyer. This legal duty requires the seller to disclose the defect in writing to the buyer and allow the seller the opportunity for a pre-purchase inspection.

Buyer’s Duty of Due Diligence
In any real estate transaction, particularly when the property is being sold “as is,” the buyer has a duty to perform due diligence concerning the real estate. The buyer should be thorough in their inquiries about the condition of the property and any known defects that might exist. The purchase agreement typically gives the buyer an inspection period during which the buyer has the right to obtain independent inspections by qualified inspectors of the property to determine the presence of any defects. The buyer may need to obtain various types of inspections, which may require more than one inspector to complete.

After completing all inspections, if the buyer discovers any problems, they are free to renegotiate the terms of the transaction or ask the seller to make repairs or otherwise resolve the problem. If the buyer cannot reach a reasonable solution to the problem, the buyer is always free to walk away from the transaction altogether.

We Are Here to Help You with Your Legal Needs
Provident Law’s goal is to help REALTORS® and their clients understand each step of the real estate transaction and protect your interests throughout the process. Contact the offices of Provident Law today at (480) 388-3343 or online and schedule an appointment to speak with our Arizona real estate attorneys about your legal matter.

Attorney Christopher Charles regularly represents property owners in real estate transactions. If you or someone you know has questions about a potential or pending deal, or any other real estate matter, contact us today to schedule an office meeting or virtual consultation with Mr. Charles or one of our other excellent real estate attorneys.

Christopher J. Charles is the Founder and Managing Partner of Provident Law ®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS ® (the “AAR”). Mr. Charles holds the AV ® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions. Christopher regularly teaches continuing education classes at the Arizona School of Real Estate and Business, and he can be reached at chris@ProvidentLawyers.com or at 480-388-3343.