We are often asked the question of how to approach the matter of inspections pursuant to a contract signed by the purchaser where the contract includes an “as is” clause. As an initial matter let us define what an “as is” provision in a real estate purchase contract means. An “as is” clause merely provides that the seller does not provide any guarantees on the physical condition of the property and it is on the purchaser to take all necessary due diligence steps to inspect for defects that may exist in the real estate. Certainly, this does not allow the seller to either hide defects or fail to disclose a known defect of the real estate. But the seller is not under any obligation to investigate and find such defects.
Most real estate contracts provide for an inspection provision, allowing the purchaser to retain the services of a professional inspector or a contractor to inspect the premises. Under most circumstances the results of this inspection are usually the basis for negotiations to have these defects repaired by the seller or for adjustments to the purchase price or credit from the seller to the buyer to be utilized to address the defect.
When the transactional contract incorporates an “as is” clause this often times leads to confusion on the part of the purchaser of whether or not to make an inspection. Our recommendation to our clients is to always secure the services of a professional licensed inspector to inspect the property. For although the “as is” provision precludes the ability to negotiate with the seller for either a reduction in the contract purchase price or for credits from the seller to the buyer to make repairs, the “as is” provision in combination with the inspection provision allows the buyer to cancel and terminate the contract if they discover defects that are unacceptable to buyer. Certainly, a better situation than having to purchase, or blindly purchase without an inspection, real estate that may be nothing but a huge money pit requiring repairs to make it livable.
The other real-world aspect to this is that in many instances, even though seller is not obligated to discuss amending the terms of the contract by way of a change to the purchase price or credit to the buyer for the defects that are discovered in the inspection, in reality many sellers do so anyway. For at the end of the day when it relates to real estate, the art of the deal really does really depend on the contract proceeding to escrow closing. If the seller is too rigid and refuses to negotiate, this may come back to bite them in so far as if the defects are of a particular nature or extent they will then be required to disclose said defects on the residential real property disclosure report for any future contract buyers that may come along and make an offer.