What is an “As-Is, Where-Is” term and how should it be used?

 If you are selling an old washing machine, a car you pulled out of the back forty, or the old brick cellphone you had when you still had hair, you could use an “As-is, Where-is” term to ensure the buyer knows you aren’t providing any warranties on the item. This works well in the realm of personal property, but what about the realm of real property? Well, let’s consider the appropriate time and use of an “As-is, Where-is” term for real property.

When to use

There are times it is entirely appropriate to use an “As-is, Where-is” term for real estate. The most common of these situations would be where the person who has the legal authority to sell the property has never lived there and does not know the property specifically. For example, a bank-owned property would be a situation where the bank has no knowledge of the property because they never lived there and simply could not warrant the condition of the property to a buyer. Similarly, with a court-ordered sale, the judge isn’t going to inspect the property, or in a probate situation, the executor may have never even visited the property either. In such situations, it is not only possible but right to use such a term to signal to the buyer that they should seek additional due diligence conditions to satisfy themselves about the property, or alternately assume the additional risk with proceeding.

When not to use 

Since there exist appropriate times to use “As-is, Where-is”, there must also be times when it would be inappropriate. This term can never be used to shield the seller from a known material latent defect. For example, if the seller knows that the basement floods every spring and feels that making a statement about the property being sold as-is to the buyer will protect them from liability the next time the basement floods, they need to think again. The disclosure of known material latent defects is a requirement of the law, and you cannot contract around a legal requirement.

How to use

In the standard AREA real estate purchase contract, the property is typically sold with the land and buildings, attached goods, and select unattached goods such as appliances. As part of the agreement, the seller warrants that on the completion day the attached and included unattached goods will be in normal working order. So, when using an “As-is, Where-is” term in the standard contract, it should be worded something like “The buyer understands that the property including land, buildings, attached and unattached goods included are sold in “As-is, Where-is” condition with no warranties expressed or implied by the seller.”. This type of a term makes clear to the buyer that even the goods, such as appliances are also sold under the same condition as the land and buildings, and they should do their due diligence in regards to these items as well.