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Buying Real Estate 'As Is' Can Be Risky Business : Disclosure: Most states now require sellers to report all defects of property known by them.

November 05, 1989|ROBERT J. BRUSS | Bruss is a San Francisco-area lawyer, author and real estate broker.

If you've ever bought a used car as is, then you understand the meaning of those words. When I was in high school I recall buying my first used car from what I thought was a reputable dealer. I vividly remember the salesman's statement that the car was being sold as is.

The next morning when I tried to start my car I learned as is meant "something is probably wrong." Not only was the battery dead, but one of the tires was almost flat. Fortunately, my dad talked the dealer into returning my $350 and I bought a new Chevy from another dealer where my dad co-signed on the loan. But getting out of an as-is real estate purchase isn't as easy.

Buying an as-is house is much like buying an as-is used car. Such a purchase can be either a very good or a very bad deal. Needless to say, buyers of as-is properties should be extremely careful.

I recall buying my first as-is property in the Dark Ages of the 1960s. The seller, a foreclosing savings and loan, insisted I sign a statement that said I was buying the property as is and would not hold the seller liable for any property problems.

Those were the good old days of caveat emptor, which means buyer beware. Looking back, I'm pretty certain the REO (real estate owned) officer at the S&L knew the plumbing was bad, the water drained toward rather than away from the building, the wiring was defective and the dancing termites were what held the building up.

After I discovered these and other defects, I began studying my legal remedies. I had two choices. One was to rescind the sale and get my money back if I could prove the seller knew of these defects and failed to tell me. However, proof could be very difficult.

My second legal remedy was to sue the seller for monetary damages, but I would have to overcome the hurdle of the as-is sale to which I had agreed. Realizing either choice was unprofitable, I had the defects cured and about a year later made a nice profit on the resale of the property.

A few years later, court decisions began to hold realty sellers and their real estate agents liable for damages to as-is buyers, even for adverse influences beyond the property boundaries, undisclosed but visually observable defects and known defects that a buyer failed to ask about.

Today, when real estate is sold as is, neither the seller nor the real estate agent makes any representations or warranties about the property, nor will they pay for any repairs to correct defects.

However, either by statute or court decision, in most states property sellers must now warn as-is buyers about all known defects in the real estate.

For example, if the home is not connected to the city sewer, the seller must inform the buyer. But an as-is home seller probably need not pay for pumping the septic tank if it plugs up the week after you receive the deed to the home.

Some states, such as California, now require home sellers and their realty agents to tell buyers in writing about all known property defects. Intentional failure to notify the buyer makes the seller liable for damages. But disclosing a defect relieves the seller and the realty agent of liability to pay for repairs.

For this reason, the best realty agents now provide written disclosure statements for buyers to read before making a purchase offer. Full disclosure is always the best way to avoid future problems, especially when the property is being sold as is.

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