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Selling Homes 'As Is' Sparks Responses

October 02, 1994

There are three salient points about "as is" sales, all of which speak against the practice:

1--Let's take two identical adjacent homes, one for sale "as is" and the other not. The one without "as is" will attract more qualified buyers. You don't have to be an economics Nobel laureate to know that more qualified buyers equals a higher price.

2--Suppose someone buys the "as is" home and shortly after the sale a defect is discovered. California law still requires full disclosure of what the seller knows or should have known. Naturally, the seller will profess ignorance of the undisclosed defect. However, the buyer may assume that the seller's motive for the "as is" was to protect himself from a failure to disclose the defect. "They must have known or they wouldn't have sold 'as-is'!" the thinking goes. Consequently the buyer will have a greater propensity to sue with the "as is" than he would without.

3--Finally, suppose there is litigation for the above defect. The jury will assume that the seller had something to hide or he wouldn't have used the "as is." Again, "They must have known or they wouldn't have sold 'as is'!" Consequently an "as is" seller is more likely to lose in litigation due to the perceived guilt (deserved or not).

A properly constructed real estate transaction conducted by a competent realtor is the best protection for both the buyer and seller in today's consumer-protection world.

CHARLES H. ELLIS

Los Angeles

The writer is a realtor.

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You make a very "easy answer" to a very difficult question. You categorically state that the "as is" clause has no use whatsoever in modern residential sales practice.

Thirty years ago the longstanding rule of caveat employer customarily placed the burden of investigation of the quality of the property on the buyer. Along with the advent of consumer rights as enforced by the courts, the pendulum has swung far over to the side of the buyer so that the buyer can bring to court any disappointment he or she may see fit, whether substantial or frivolous.

You may not think there is a problem in the litigation system with silly lawsuits. You may not think there is a problem of wasted millions of dollars in attorney's fees by litigants fighting over which end of the egg to open, but a number of my clients, including the broker you mention, believe that responsible citizens should take steps to reduce the flood of costly litigation in our courts. The "as is" claim is a simple tool to let buyers know that the seller is not willing to guarantee perfection, and that the risk of unknown problems is on the buyer.

You suggest that use of the "as is" clause is not a smart way to get a top price. There are other issues in such an important contract as the sale of a residence. One of the important ones is the reduction, perhaps to zero, of the risk of frivolous lawsuits that can cost tens of thousands of dollars to defend, even where the seller is blameless.

JOHN W. SHELLER

Haight, Brown & Bonesteel

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