Purchasing Real Estate “As Is” in Arizona

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The “as is” clause appears in the purchase of all types of items, including real estate. For example, you often buy a used car “as is” or without a warranty. In its broadest sense, buying a piece of real estate, whether commercial or residential, “as is,” means that you are purchasing it with no warranty or guarantee as to its condition.

“As Is” Clauses in Real Estate Contracts

When a seller includes an “as is” clause in a real estate contract, they often intend that the buyer take ownership of the property as it is, with no regard to any apparent faults or problems that it might have. In other words, the seller doesn’t want to be responsible for any repairs that the property might need or defects that the buyer might discover after the purchase is complete. When the transaction closes, the buyer accepts the real estate in its current state and should have no expectations that the buyer will fix any problems with the property.

Exclusions to the “As Is” Clause

However, an “as is” clause in a purchase agreement does not allow a seller to disclaim all liability for the condition of real estate. According to the Arizona Court of Appeals, the seller of a property still has a legal duty to disclose to a seller any defects that real estate has that they know about and that are material to the purchase. Even if the purchase agreement contains an “as is” clause, the seller still has a common law duty of honesty and fair dealing. S. Development Co. v. Pima Capital Management Co., 31 P.3d 123 (Ariz. App. Div. 1, 2001).

Defects that are “material” to the purchase of real estate are those defects that a reasonable person would want to know about before purchasing the real estate. For instance, a reasonable person likely would want to know if the basement of a home or building regularly leaks and floods when it rains. This defect, if known to the seller, is likely a material defect that the seller would have to disclose to the buyer, even if the purchase contract contained an “as is” clause.

Residential Seller’s Property Disclosure Statement

In keeping with this legal duty, Arizona law requires that residential sellers disclose certain information in all residential real estate transactions. As a result, the Arizona Association of Realtors® has developed a Residential Seller’s Property Disclosure Statement (SPDS) for use in residential real estate transactions. Generally, the SPDS calls for a seller to disclose the following information about real estate:

  • Basic structural information, including the roof, plumbing, heating and cooling systems, wood infestations, electrical systems, problems with water systems such as swimming pools, etc., and any major repairs that have been completed or are needed
  • Available utility services
  • Known environmental conditions
  • Sewer or wastewater treatment system

State law also requires sellers of residential property to disclose any known presence of lead-based paint in homes built before 1978 and any lead paint inspections or reports concerning the home. In addition, if the seller has a realtor, the seller must also disclose the last five years of insurance claims made on the home or all the seller’s claims on the home if the seller owned it for less than five years.

Seller’s Right to Inspection

A seller also always has the right to have the property inspected before agreeing to purchase it, and it generally is wise to do so. An inspection may allow a seller to discover any major defects in the property. The seller then can decide whether to purchase the property “as is,” further negotiate the price, or walk away from the transaction.

We Are Here to Help You with Your Legal Needs

Our goal is to help you understand each step of your real estate transaction and protect your interests throughout the process. Contact the offices of Provident Law® today at (480) 388-3343 or online and schedule an appointment to speak with our Arizona real estate attorneys about your legal matter.

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