'AS IS' CONTRACT MAY STILL REQUIRE CLARIFICATION

It's a good bet that more than a few California real estate agents don't know that the standard purchase form -- The California Residential Purchase Agreement (RPA-CA) -- is an "as is" contract. To be sure, the fact is somewhat buried, but there it is, in not-bold print, in section 11 on page 5 (of a 10 page contract), under Condition of Property. It says this:

"Unless otherwise agreed in writing: (i) the Property is sold (a) ‘AS-IS' in its PRESENT physical condition as of the date of Acceptance and (b) subject to Buyer's Investigation rights; (ii) the Property, including pool, spa, landscaping and grounds, is to be maintained in substantially the same condition as on the date of Acceptance; and (iii) all debris and personal property not included in the sale shall be removed by Close of Escrow."

So, absent any other agreement to the contrary, saying the sale is "as is" doesn't mean the seller can stop watering the lawn. Nor is it OK to leave the rusting frame of the trampoline in the back yard.

It is important to note that the "as is" clause allows for agreed-upon repairs or work to be done. For example, the parties may, somewhere else in the contract, have agreed that the seller will provide corrective termite work that is needed. Other than that, the sale is "as is". Moreover, the "as is" provision also allows that the buyer retains his inspection rights. If the buyer's inspection uncovers some condition that needs repair, he can still ask for that to be fixed. Of course the seller can say ‘no'. The buyer may then cancel; but he won't have breached.

The presence of the "as is" clause does not, of course, eliminate the possibility of ambiguity or misunderstanding. Suppose an offer is written, using the RPA-CA form, and the only request made by the buyer is "Seller to paint the barn door." The seller then gives a counter offer with only two provisions: 1. An increase in the price; and 2. The statement, "Sale to be As Is". The buyer accepts the counter offer.

Some weeks later, shortly before closing is due, the buyer asks the seller when he is going to paint the barn door. The seller replies that he is not going to paint the door; the sale, after all, was "as is."

But, the buyer replies, "your having said that in the counter offer was just a redundant reiteration of Section 11. It was ‘as is' with the exception of any written agreements to the contrary. You accepted the offer without specifically rejecting the request to paint the barn door, so you are obligated to do it."

(First of all, we all know how this is going to turn out. A real estate agent, or two, will put up the money to have the door painted. But that is beside the point.)

It is pretty clear that, at the point of accepting the counter offer, there was not a true "meeting of the minds." When that occurs, it is often not immediately apparent. If it is, steps should be taken to reach clarification.

No one should be blamed for missing the need for clarification. But we can all learn that, when an "as is" clause is in play, we want to be sure that all parties understand what is intended.

Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way. His email address is scbhunt@aol.com

Source: realtytimes.com