Two Ways an "As Is" Clause is Used in House Sale Contract

  1. If you are selling a property that needs a fair amount of work, your salesperson may suggest or insert an “as is’ clause in any offer you receive, either as a schedule sent to the buyer’s agent with direction to include it with the offer or write it in a counter offer to the buyer. As well, the listing remarks will likely state, “property sold “as is’”.
     
  2. Such a clause is typically used in the sale of properties in which the seller may be a mortgagee selling under power of sale, an estate trustee selling an estate, or a power of attorney for property selling on behalf of the registered owner. Each of these signing authorities do not live in the property being sold and can’t, therefore, vouch for its condition.

A typical “as is” clause basically says:

  • The buyer accepts the property on an “as is” basis with no seller representation or warranty as to the fitness, state of repair, defects in workmanship or condition of the property;
     
  • The seller has no responsibility to remedy any defects or complete any unfinished work;
     
  • The buyer has relied entirely on his own inspections and investigations as to any defects, as well as quality and value of the property.

Buyer Obligations

In reference to the last point above, the buyer is entitled to perform his due diligence. So aside from a condition to obtain a mortgage, he can include any conditions that concern him, such as home inspection, zoning, legal usage and cost to remedy stated defects to name a few. Hence an “as is” clause does not hamper the buyer from making sure he knows what he is buying.

Seller Obligations

There does seem to be evidence that some salespeople misunderstand the “as is” clause with respect to sellers. You’ll sometimes hear a salesperson say something like this,
“With the ‘as is’ clause the seller has no obligation to disclose anything.”

This is a mistaken interpretation. The Seller has an obligation to disclose a hidden or latent defect in spite of the “as is” clause. Further, if the seller corrected a defect there is no guaranteeing that the problem might not reappear, so this too should be disclosed.