CONTRACT DISPUTES: DOES “AS IS” REALLY MEAN “AS IS”?

We’ve all been involved in deals involving used property of some kind where the seller throws in an “as is” provision.  An ”as is” provision can show up in the sale of anything.  But it is probably most significant in connection with the sale of a home or real property since those deals usually involve a fair amount of money.

The communication inherent in an “as is” clause is “you’re on your own . . . don’t come back to me with any problems”.

If you’re going to enter a deal with an “as is” clause, you better be sure you really want what you’re buying.  The clause should be a red flag for potential buyers because it likely means the seller is aware of a pretty serious problem and doesn’t want to tell you about it.

But for those of you who have already bought a piece of property with an “as is” contract, you should know that you are not completely out of luck if you discover a serious problem down the road.

In Arizona, an “as is” provision in a real estate contract protects the seller only to a limited extent. “As is” means that the seller does not have to tell you about problems that you would discover on your own by doing a reasonable inspection (whether by a professional or by you). These are called “patent defects.” If the problem is one you could have discovered by walking through the house and looking closely (for example, perhaps, cracks in the walls), the defect may very well be “patent”.

But if you do this sort of inspection, and do not and could not reasonably have seen the problem, the defect is “latent”. If, for instance, the problem is a leaking roof, or mold, or termites, and there was nothing that would have made the problem apparent in your walk-through, then you have a good argument that the seller should pay for the cost of fixing the problem. If the problem is so serious that the property becomes uninhabitable or dangerous to your health, you may be able to get out of your contract altogether.  The reason is that, under Arizona law, a seller must tell you about these “latent defects” even if the contract has an “as is” provision.
The lessons from this?  Get the home thoroughly inspected (ideally, by a pro) before buying, whether there is an “as is” clause or not.  No one wants to buy a lawsuit.  But if a latent defect does appear after the purchase, and even though there was an “as is” clause, see an Arizona contract lawyer or business litigation lawyer because you may well have a remedy available to you.