One of the many questions that I get in connection with a real estate transaction is “what does it mean to sell or buy a property in ‘as-is’ condition?”  At first blush, this seems like a fairly simple question.  However, there are certain nuances that the public should understand regarding this concept.

In order to fully understand this issue, I need to explain to you what the law is regarding a seller’s warranty of the condition of the property being sold.  Louisiana law provides that a seller warrants to a buyer that the property being sold is free from a hidden defect.  The time frame to bring a claim against a seller is one (1) year after closing.  As a result of this law, any seller, whether it be real estate or another kind of property, would potentially be responsible for hidden defects in the property sold.  The defect is not “hidden” if it could be discovered by a reasonable inspection of the property.

When I first started in this business 30 years ago, virtually none of my closings were “as-is” closings.  In today’s market, virtually all of my closings on existing homes or properties are sold “as-is.”

The key benefit for a seller selling their property “as-is” is that, after closing, they are no longer responsible for any hidden defects that existed in the home at the time of the closing.  The only exception to this rule is if the seller knew of a defect and failed to disclose it.  This would be considered “bad faith” and the “as-is” language would not protect them from liability.

The buyer needs to understand the risk that they take when they buy a property “as-is.”  They should take reasonable steps to inspect the property before closing.  There are many types of inspections.  The more typical approach is to have a general building inspection and a termite inspection.  Even with these inspections, there are no guarantees that hidden defects would be discovered.

I did a closing several years ago for a woman who was selling a property that she had purchased one (1) year before.  When she purchased the property, she had a building inspection and a termite inspection done prior to closing.  The inspections were satisfactory and she closed an “as-is” sale.  Shortly after closing, she discovered major termite damage.  She filed suit against the seller, the building inspector, and the termite inspector, and lost in court.  The court concluded that the seller was in good faith and sold “as-is” and therefore, was not liable.  The court also found the building inspector and the termite inspector were not negligent in that the termite damage was not apparent from an inspection.  If this seller had not sold “as-is,” they would have been liable for the repair of the termite damage.

Hopefully the above information is helpful to you.  If you have any questions regarding your real estate closing needs, feel free to contact our office at any time.