What Is “As-Is”?

This scene from a PAR Legal Hotline session has been lightly edited for content: 

Caller: “Our Agreement of Sale has the words ‘sold as-is’ in the additional clauses section. What does this mean?”

Hotline attorney: “I don’t know.” 

End scene. 

The reason this hypothetical hotline attorney can’t answer the (not hypothetical) question is because those four letters, by themselves, have no universal meaning. Or to put it another way, “as-is” might have any number of meanings depending on the context in which it’s used, so it only has a clear meaning in a specific transaction if the parties to the transaction actually reach a clear meeting of the minds that shows they both have the same understanding. And since hotline attorneys are not inside the heads of the parties, we can’t tell you what they thought they meant. 

Let’s look at some of the ways this word can create problems instead of solutions, and techniques you might use to minimize those potential problems. 

Seller Disclosure 

Sellers sometimes try to claim that “as-is” language in the Agreement of Sale overrides the need to provide a seller disclosure form. It doesn’t. 

The seller disclosure law says that in most residential real estate transactions, a disclosure form filled out by the sellers “shall be delivered to buyer.” In a 2018 Superior Court case where a seller made this claim, the court clearly explained that “shall” means “must,” which means the form is mandatory and the seller can’t just wish away the requirement by claiming to sell the property “as-is.”  

Should you encounter a seller or listing agent who tries to claim this as an exception to the seller disclosure law, try responding with what I like to call the Index Finger Rule. Ask them to get the list of exclusions from the law (it’s helpfully included on the first page of PAR’s version of the seller disclosure form) and then use their index finger to point to the one that says the form isn’t necessary for an “as-is” sale. It’s not there, so they can’t point to it, which means the claimed exception doesn’t actually exist. (Practice tip: You probably want to be nicer about it and not use those exact words, but you get the point.) 

Buyer Inspections 

Any “as-is” clause targeted at the inspection contingency suffers from the same fatal flaw as the dreaded “informational purposes only” language. The PAR Agreement of Sale already contains two paragraphs of explicit, comprehensive language regarding a buyer’s ability to elect or waive certain inspections and what rights they have after receiving inspection reports, so adding a couple of words without addressing the existing language just ends up creating confusion and contradictions. 

The most common scenario involves an agreement with some sort of “as-is” language where the buyer also elected to do certain inspections, and there are no changes to the inspection contingency. The seller might think that “as-is” implies the buyer’s options under the inspection contingency are wiped away. The buyer might think they have retained the right to terminate or submit a written corrective proposal since none of that language was struck or altered, but that “as-is” simply expresses a likely unwillingness to do repairs if asked.  

So, what happens when the two parties are operating under drastically different assumptions? Chaos? Shouting? Lawsuits? All of the above, and more. 

To avoid all of that, try what I call the Plain English Rule. Instead of assuming that everyone else in a transaction understands what’s in your head, have an actual, real-life conversation with your client and the other agent in plain English — ideally using words and sentences and paragraphs, not abbreviations and emojis — and keep talking until both people in the conversation can express what they’re agreeing to. 

Only after everyone can speak the same sentences about the intent of the parties does anyone (ideally, an attorney for one of the parties) consider adding/deleting/modifying the Agreement of Sale with contract language. And even then, everyone is probably better served if the language is plain English — i.e., words that describe the specific intent of the parties rather than just throwing in the catch phrase “as-is.”  

Third-Party Inspections 

The property inspection contingency for buyer inspections gets most of the attention, but members often overlook similar language in the mortgage contingency and the Notices, Assessments and Municipal Requirements paragraph of the contract. Both have subparagraphs with a process for the buyer and seller to address repair requirements that may be imposed by other entities such as the lender, insurance company and/or municipality. Even if everyone is totally in agreement with the rights of the parties related to buyer inspections, they still need to address these third-party requirements separately — and might even want to address them differently.  

PAR has a form on this topic (PAR Form RRT; Repairs/Corrections Required by Third Party Addendum to Agreement of Sale), which might help the parties address these inspections without drafting new language. 

It’s all their fault, right? 

Let’s assume a scenario in which some confusing and unclear language is proposed and added by the listing agent, seller or seller’s attorney. When that buyer agent calls the hotline, it’s often to say, “Well, this is the seller’s language, so it’s all on them, right?” 

Nope, sorry. It’s not that easy. 

No matter where the language came from, if you discussed the contract with your client and they signed it based on your professional guidance, you’re now in the line of fire. Or to put that in much more practical terms, the more an agent points out how bad the language was, the more likely it is that the client might well respond with something like “well, if it was so bad, why did you let me sign the contract without clearing it up for me?” 

And that leads to the universal hotline advice to direct clients to an attorney when there are potentially complex contractual issues to address. Dropping in a few words that make sense in your head may be a quick and easy path getting a contract signed, but without considerable thought and discussion, you may be creating more problems — for your client and yourself — than you’re solving. Guiding clients to counsel for drafting additional contract clauses that reflect their expectations will take some time and money, but probably not as much as defending against an ethics complaint or lawsuit if one is filed.