In every real estate transaction there is an implicit element of risk. If you are buying real estate, understanding how an AS-IS contract affects your rights can significantly impact the success of the transaction. For example, every special warranty deed carries with it some implied warranties that the seller guarantees. “As Is” specifies that the buyer is buying the property in the condition as it exists and cannot look to the seller for any problems that may arise. In essence, the Seller is disclaiming the implied warranties that are part of the deed.
For the buyer, this is the first warning that it is time to “beware” and hire the a professional engineer so you can be certain of the condition the real property which you are about to purchase. Engaging a competent professional engineer early in the due diligence period of a real estate contract can help to ensure that major problems with the property are identified early on in the contract process and potentially give the buyer a chance to get out of the contract.
Traditionally, Sellers have used the “as is” addendum in purchase agreements for real estate to prevent any express warranties from being given to the Buyer. This is particular prevalent when the property being sold is a flip. It is no surprise that as the DC housing market continues to heat up, we are once again seeing an increase in flips and correspondingly an increase in As-Is sale contracts. Because the “As Is” sale does not disclaim any of the express warranties made by the Seller, AS-Is sales present a very tempting method for a Seller to unload a problematic piece of real estate on an unsuspecting Buyer.
Recently the District of Columbia Superior Court held, that despite the existence of an as-is clause in a contract, a seller is subject to liability if he fails to disclose to a buyer defects in the property that are known to the seller, or if the buyer is prevented by the seller from discovering these defects (considered “facts basic to the transaction”). This is a form of fraud and with so many homes being “flipped,” that new paint on the walls could be concealing a greater problem.