Buying and Selling Property “As Is” in Texas

“As Is” Property in Texas

When owners sell a house “as in” in Texas, they are signaling that updates or repairs will not be part of the negotiation process with buyers. The buyer is agreeing to accept the physical condition of the house in its current state. An “as is” clause protects a seller if a buyer later makes claims about the property and asks for compensation. Texas real estate contracts include “as is” clauses, which Texas courts have agreed are enforceable, particularly when the clauses include specific terms such as “as is” or “in its present condition.” Lutfak v. Gainsborough, No. 01-15-01068-CV, 2017 WL 2180716, at *3 (Tex. App.—Houston [1st Dist.] May 18, 2017, no pet.) (mem. op).

Advantages and Disadvantages

By listing a property “as is,” sellers may save themselves the time, expense, and headache of making repairs in advance of listing a property. In addition, the “as is” clause relieves sellers of potential liability since the buyer is responsible for inspecting property. A disadvantage is that the label of “as is” sometimes chases away buyers who may assume the worst about the property.

An “as is” property provides potential advantages for buyers as well. They may be able to get a better purchase price on an “as is” property. Bidding competition may be less since some buyers shy away from “as is” properties. Although buyers assume greater risks, sellers still must disclose any significant issues with the safety and property value of the home, which decreases buyers’ risk. “As is” property may be a disadvantage for buyers on a tight budget, however. Because of the risk involved, buyers assume responsibility for inspecting the property and should allow a larger than average repair budget.

Seller’s Responsibility

The TREC residential contract provides an “as is” option, which the seller chooses by ticking the option following paragraph 7.D.(1). Cherry v. McCall, 138 S.W.3d 35, 39 (Tex.App.—San Antonio 2004, pet. denied). Although the “as is” clause relieves sellers of most responsibility for the condition of the house and frees them from repairing items before selling, a seller still must disclose certain information to a potential buyer in order to be in alignment with Section 5.0008 of the Texas Property Code. This section requires a seller to disclose crucial details about the property which might have an impact on the value and/or the buyer’s ability to occupy the property. Sellers should disclose, for example, hazardous environmental conditions such as mold, lead, paint, asbestos. They must also disclose structural issues and any significant plumbing issues. A seller is liable for issues such as these and any fraudulent claims or omissions about the property. An “as is” clause also does not allow a seller to purposefully limit or prevent the buyer from inspecting the property before closing. Lutfak v. Gainsborough, No. 01-15-01068-CV, 2017 WL 2180716, at *3 (Tex. App.—Houston [1st Dist.] May 18, 2017, no pet.) (mem. op).

Buyer’s Responsibility

An “as is” clause signals to a buyer, caveat emptor – buyer beware. Buyers who agree to purchase property “as is” are accepting responsibility for inspection of the property and its valuation. If the value of the property turns out to be less than the purchase price, the seller is not responsible. Prudential Insurance Company of America v. Jefferson Associates, Ltd., 896 S.W.2d 156, 161 (Tex. 1995). Breach of contract is also not an issue with an “as is” clause, so the buyer has little recourse unless the seller has withheld information fraudulently and/or prevented inspection of the property.

An important first step when selling or buying an “as is” house is to find a good real estate attorney. Working with an experienced, knowledgeable professional paves the way for a client to earn a profit and enjoy peace of mind in the process.

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