Q: We have seen a very nice house and would like to put in a contract offer. However, the seller has indicated that the house is to be sold in an "as-is" condition. Can you tell me what that means?
A: When a buyer signs a contract to purchase residential real estate, it is generally recommended that the contract contain a provision to the effect that the plumbing, heating, air conditioning and other mechanical systems be in operating (or good operating) condition at the time of settlement.
The purchaser should have the right of a pre-settlement inspection, to make sure that all of these systems are functioning. There is often a long period of time between the date of the original contract is signed and the date of settlement, and one often hears of the hot water heater that goes bad on the morning of settlement.
If the contract contains provisions as outlined above, the purchaser can insist that the hot water heater be repaired or even replaced at the seller's expense, before settlement takes place.
Purchasers often obtain the services of an independent inspection service, to inspect the property to determine that the house is structurally sound, and that the mechanical and other systems are functioning properly.
It is generally recommended that every contract for the sale of real estate contain such a contingency inspection clause, giving the purchaser at least three to five business days to back out of the contract, if he or she is dissatisfied for any reason with the inspection report.
When a seller indicates that the house is sold "as is," this should be a big red flag to prospective purchasers. While there may be a justification for the seller, the purchaser is put on notice that if a contract is signed, the seller will not be obligated to make any repairs.
Often, a seller might restrict the "as is" condition to certain types of items within the house -- for example, a refrigerator, or a window air conditioning unit -- but the limitation does not apply to the rest of the property.
However, in your case, since your seller apparently wants to put the "as is" condition on the entire house, I suggest that the doctrine of "let the buyer beware" guide your decision making.
Here are some suggestions:
You should insist that the contract be contingent on your obtaining a satisfactory inspection report by a home inspection service of your choice. If you are dissatisfied for any reason, you should have an opportunity to declare the contract null and void and get your deposit back in full.
When you have the inspection service, go with the inspector to look at the house. Since you may have to take the house in an as-is condition, you want to be satisfied that the inspector has carefully reviewed the entire house.
Try to include language in the contract that the seller will comply with any housing code violations existing as of the date of settlement. Your seller may balk at this, and you can compromise to drop the date back to the date of acceptance of the contract.
A recent case in the District of Columbia defined the phrase "as is" to mean that "real property is to be conveyed in the physical condition in which (it) exists on the date of contracting and the date of settlement, and that the seller makes no warranty or representation as to the physical condition of the property or its fitness for habitation. Because of the 'as is' clause, the risk of loss and risk of change in the physical condition is placed upon the buyer."
This places a heavy burden upon you as buyer.