Denver Real Estate Law and Family Law Blog. (Vol 1.26)  

By Craig Franklin Chambers Esq. 7851 S. Elati Street #204, Littleton,  CO 80120

The Littleton Lawyer.

With a law practice that focuses on civil ligation, real estate law and divorce law in Littleton, Denver, Highlands Ranch, Roxborough, and South Jeffco, one of the terms I often come upon in a residential real estate transaction is that the home is being "SOLD AS IS." This is a general term that attempts to waive any kind of warranty there might be on a property.

Sometimes there are common law warranties of merchantability or fitness that come with the sale of a product that the Seller is trying to avoid. For example, if you purchased a car "AS IS, WITH ALL FAULTS", that means the Seller is not providing a warranty on the car, and the Buyer is buying the car at his own risk. Although warranties are usually in writing as part of the transaction, there are common law warranties in some retail or business transactions, and it is these warranties that the Seller is seeking to have voided or waived with an "AS IS" clause.

In a residential real estate transaction, there are no common law warranties. However, Sellers often designate that the home --or an element in the home such as an appliance-- is being sold "AS IS." By agreeing to this term, the parties are acknowledging  that there is no warranty or guarantee by the Seller as to the functionality of the component, and the Buyer is accepting the property in its current condition.

Does that mean the Buyer cannot have the home inspected? No, of course, not. The right to inspect the property --and to walk away from the deal--is clearly set forth in the Colorado Real Estate Purchase Contract.

Does that mean the Buyer cannot ask  the Seller to make repairs? No, of course not. The contract can always be modified by the parties. The "AS IS" clause is useful in making it clear to the Buyer that the Seller has no liability for the condition of the property the Seller is selling. Under the inspection provisions of the sales contract, the parties are free to renegotiate the terms of the deal if the condition of the home is worse than the Buyer originally supposed when he made his purchase offer.

The problem with the clause in a residential real estate transaction is that each Buyer comes with a different level of sophistication. Many Buyers will understand that the Seller may not want to guarantee the condition of the home. Other buyers might interpret it as an act of bad faith and the trust level between the buyer and seller might be impacted.

Even though a real estate transaction is a business transaction, and the Buyer and Seller have interests that are adverse to each other, a residential real estate transaction is a highly personal decision, and whether or not the parties are perceived as acting in good faith greatly impacts the reasonableness  and ease of the parties as the transaction progresses.