“As-Is” Sales in California
17 Aug
A lot of REALTORS® have seller clients who want to sell a property “as- is.” In the current market where there are a lot of REO sales, most agents are familiar with REO addendums that state in some fashion that the property is sold “as-is” with no warranties. Some REALTORS® wonder why C.A.R. does not have an “as-is” addendum.
In a state like Alabama, saying a property is sold “as-is” has real meaning. If a seller sells a property “as-is ” it is like saying “buyer beware” and the seller then has very limited disclosure duties. This is NOT the way it is in California.
A property sold “as is” in California basically means that a seller will not be performing any repairs or improvements to the property being sold. “As-is” does not relieve the seller of having to perform his many disclosure duties under California law including the general duty to disclose in all real property transactions (not just residential 1-4) all known facts which materially affect the value or desirability of the property. This provision applies to all sellers including REOs.
The C.A.R. residential, residential income, vacant land and commercial property purchase agreements all state in the body of the contract that the property is sold in “as- is” condition as of the date of the acceptance of the purchase agreement unless otherwise agreed. That is one major reason why no “as-is” addendum is necessary with C.A.R. purchase agreements.
Remember though that it is “as-is” as of the date of acceptance. Meaning that if something happened to the property after the acceptance date, the seller would be obligated, unless otherwise specified, to bring the property back into the condition of the property at the date of acceptance, but unless the seller agrees elsewhere in the contract, he has no responsibility to make or perform any repairs or make improvements to the property.
You can see “as-is” does not have the power some sellers seem to think it has in this state. To make this clear to sellers, all of the above-mentioned C.A.R. purchase agreements make sure to say in the same paragraph where it says the property is sold in its “as-is” condition as of the date of acceptance, to remind the seller in capital letters that he or she still has a duty to disclose material facts affecting the property.
Tags: as is, disclosure, home seller, legal, legal hotline, real estate law, REO, seller
Great post. I would add another "beware" when it comes to short sales. The typical seller is more motivated to maintain the property during the escrow than a distressed property owner. If something breaks during the escrow on a short sale, it is less likely to be repaired by a seller experiencing financial hardship and even more unlikely to be repaired (or credit applied at closing) by the short sale lender. This can surprise buyers and frustrate them as they have very few options. If contingencies have been released and a deposit made in escrow, the buyer can find themselves fixing any items that came up after the offer was accepted or cancel the contract with possible issues/delays in having their deposit returned. The AS IS part of the CAR contract takes on a different meaning with short sales and agents should make sure their buying clients understand the potential challenges before writing a short sale offer.