Buyer Beware: Dangers of the "AS IS" Real Estate Contract
Teresa McLeod
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For most consumers, the purchase of their home will be the biggest and most important financial investment they will ever make. While most people are most concerned with the negotiations of the purchase price, it is imperative for the consumer to understand what the "As Is" clause in a Real Estate C 
ontract really means. The impact these two small words can have on the business transaction is second to none! Because of the legal and financial ramifications of an "As Is" property, it is important that the Buyer investigate a property's liabilities before starting the price negotiation phase.
Does "As Is" satisfy contractual Disclosure or Notice of the Property's condition?
For many years, it has become standard for Sellers to include the term "As Is" in Real Estate Listing Agreements or Purchase Contracts, in hopes that this clause will alleviate them from their responsibilities. They intend for the "As Is" clause to be their "official notice" of the property's condition or lack of warranty, thereof. The ideology behind the phrase is two fold. First, the Seller is giving "official notice" and opportunity to the Buyer to discover any defects in the property; and second, the Seller is transferring the responsibility of finding and then accepting said defects to the Buyer.
The Discovery Phase of the Real Estate Transaction
The "Discovery Phase" of the transaction allows the Buyer the opportunity for discovery of any latent defects. In essence, allowing the Buyer to discover any problems should give them the knowledge they need to make an educated purchase decision.
Most Buyers are lured into accepting the "As Is" clause with the false sense of security they attain by hiring the services of a Home Inspector. Until recently, the Home Inspector was not required to have formal training or a license to practice his trade, therefore, anyone with little to no training could start up their own business. After years of reported fraudulent practices, Legislators stepped in and created laws that mandate the Inspector now be licensed and held to a higher accountability.
Does "As Is" satisfy contractual Disclosure or Notice of the Property's condition?
For many years, it has become standard for Sellers to include the term "As Is" in Real Estate Listing Agreements or Purchase Contracts, in hopes that this clause will alleviate them from their responsibilities. They intend for the "As Is" clause to be their "official notice" of the property's condition or lack of warranty, thereof. The ideology behind the phrase is two fold. First, the Seller is giving "official notice" and opportunity to the Buyer to discover any defects in the property; and second, the Seller is transferring the responsibility of finding and then accepting said defects to the Buyer.
The Discovery Phase of the Real Estate Transaction
The "Discovery Phase" of the transaction allows the Buyer the opportunity for discovery of any latent defects. In essence, allowing the Buyer to discover any problems should give them the knowledge they need to make an educated purchase decision.
Most Buyers are lured into accepting the "As Is" clause with the false sense of security they attain by hiring the services of a Home Inspector. Until recently, the Home Inspector was not required to have formal training or a license to practice his trade, therefore, anyone with little to no training could start up their own business. After years of reported fraudulent practices, Legislators stepped in and created laws that mandate the Inspector now be licensed and held to a higher accountability.
- Case Law: State of New York Appellate Court Case, "Schooley vs Mannion."
- Official Manual of the TN Real Estate Commission, reprinted from TN Code Annotated & Supplement by LexisNexis.
- The Law of Contracts and The Uniform Commercial Code by Pamela R. Tepper.