“AS IS” Term Can Cost You A Fortune
I don’t mean to scare anyone but as a real estate educator, trainer, and coach, I feel a responsibility to everyone that might buy real estate in Alabama sometime in the future that you should be told about your legal rights and obligations. If you are former students of our school you should also know your fiduciary responsibilities to disclose this information to all your clients. If you are currently a Realtor® in Alabama you need to understand the seriousness of this issue too.
Two words, “As Is” are very small words but they can impact you for life. When buying real estate in Alabama, if the words “As Is” are used in the purchase agreement (sales contract), the buyer may have no legal recourse should a problem arise after closing. According to the Alabama Court of Civil Appeals “As Is” has a much deeper meaning than the connotation the general public perceives. Another phrase, “As Is – Where Is,” has been used in sales contracts for many years. They are generally inserted into a contract during the negotiations process when a property that’s being sold is in bad repair and would require a large sum of money to bring the property up to livable standards. Under such conditions, a lending institution won’t make a loan on the property unless certain repairs are made, and the owner doesn’t want to spend any additional money toward improving the property. The owner determines the best price they are willing to take, without any repairs, in its current condition and inserts into the purchase agreement ( not a contract until all parties have signed the agreement) the purchase price shall be $ xxx,xxx.xx “As Is – Where Is.” The owner doesn’t realize the position the buyer is being placed. Regardless what situation arises, the buyer has no recourse, legal or otherwise.
“Caveat Emptor” Has Special Meaning in Alabama
Alabama is a “Caveat Emptor” state. Caveat emptor means, “Let the buyer beware.” Other words it is the responsibility of the buyer to thoroughly research a property to know for certain they know all they can possibly know about a property before entering into a contractual agreement to purchase it. This is one of the reasons a Realtor® strongly suggest the buyer have a home inspection done as well as having a home warranty on the property. This is why it is so dangerous for a consumer to purchase real estate without having a Realtor® to represent their best financial interest. The following is a quote from Charles Sowell, General Counsel for the Alabama Real Estate Commission. “Caveat emptor, as spelled out by Alabama courts means that sellers and their agents in pre-existing real estate transactions, as opposed to new construction, have no duty to disclose defects in property. The main exceptions to this are if a fiduciary exists between the parties; if a buyer specifically inquires about a material condition concerning the property; or if there are defects or conditions known to the seller or any agent involved, but not known to or readily observable by the buyer, which said defects affect health or safety.” To thoroughly understand Mr. Sowell’s statement of facts, one must understand agency relationships; their importance, and how they are established.
Always Seek Advice From Your Attorney
I am not an attorney, nor do I practice law. I always suggest to my clients that they seek legal counsel for legal answers to legal questions. However, since Mr. Sowell is the senior Counsel for the Commission which enforces the laws licensing and governing the sale of real estate in Alabama, I base my opinion on his authority. Personally, I will not write a contract to purchase for my client if the words, “As Is,” are used in the contract language because case studies document judicial decisions that says, “The buyer relinquished his rights due to the “As Is’ term in the contract.
Additionally, Mr. Sowell states, “the supreme court has indicated that all fraud claims are barred if the sale is subject to the doctrine of caveat emptor and the purchaser signs an “as is” sales contract. This is so, because an ‘as is’ clause negates the element of reliance essential to any claim of fraud and/or fraudulent suppression. Signing an “as is” sales contract…barred not only the purchasers’ fraud claim but also their negligence claim.”
Well, that’s clear enough for me and I hope you find it useful also. For a more thorough explanation, I recommend that you consult your personal attorney. To read an article written by Charles Sowell titled, “As Is,” visit this link and scroll down to page two.
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It’s pretty scary what people agree to these days without reading the fine print. Whether it’s a 95 page iTunes service agreement, a 20 page real estate contract (or even a big home inspection report 🙂
Thanks for the reminder to always look out for the “as is” kind of language. It can definitely save you time, money and a huge headache.