Home > News Category > Understanding “As-Is Where-Is” In Real Estate Contracts

You may see the term “as-is where-is” in real estate contracts, especially in the sale of bank owned properties. People often misunderstand “as-is where-is” to mean a buyer has no rights and is blindly purchasing a property. What many people don’t know is that even though a real estate sales contract may have an "as-is where-is” clause, the buyer still has rights, and the seller still has responsibilities. Here’s what the term means and how it works in real estate.

The “As-Is” Part

“As-is” means the seller is selling a property in its current condition, and the buyer is agreeing to purchase that property "with all faults,” even if the faults are not immediately apparent. The buyer is purchasing the property in it’s present condition, and the seller is not providing any guarantees of its condition. Another purpose of the clause is to state that the seller will not make any necessary repairs or improvements.

The “Where-Is” Part

In real estate, the “where-is” part is very important. It means the buyer agrees to purchase a property in its condition at the time of the contract. To put it another way, if the property has broken windows when you sign the contract, you agree to purchase it with the broken windows. However, if a tornado rips the roof off the building after the effective date of the contract, but before the close of escrow, the buyer is released from the purchase contract. The reason: the property is no longer in the same condition as it was at the time of contract.

The Buyer Still Has Rights

It’s important to realize that an “as-is, where-is” clause doesn’t mean the buyer has given up the right to have the property thoroughly inspected. The buyer can still get an inspection, and at the end of the inspection period, decide to accept the faults, or not continue with the sale. Keep in mind, a buyer must ask for a home inspection period to know the exact condition of the property in order to be satisfied with the “as-is” condition and proceed with the purchase.

The Seller Still Has Responsibilities

The “as-is where-is” clause does not absolve a seller from all liability, or provide an opportunity to commit fraud. It does not alleviate the seller’s duty to disclose any known property defects, or prevent the buyer from discovering those defects. The seller must abide by state laws and must honestly answer questions regarding the condition of the property. For example, if the seller knows that the plumbing system is sub-par, or the electrical system poses a risk, the seller has a duty to disclose this information to the buyer.

In the final analysis, the old adage “buyer beware” holds true when purchasing an as-is property. There will be no recourse against the seller for anything that could have been discovered through proper inspection of the property. For that reason, the buyer should vigilantly conduct all due diligence, ask the right questions and carefully inspect the property for defects before accepting the property’s condition.

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