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"AS IS"

 "AS IS" IN THE RESIDENTIAL SALE OF USED HOMES IN TEXAS

The "as is" defense has been misused by defense attorneys for real estate agents and brokers and their misuse has been aided and abetted by the Texas Real Estate Commission.  The result has been that untold numbers of home buyers have been precluded from taking any remedy against the sellers, agents or brokers who have made misrepresentations of fact that were concealed or hidden prior to closing.  Consumers and their attorneys are at a gross disadvantage since most attorneys are not familiar with the details of the One to Four Family Residential Contract for Sale (Resale), TREC Form 20-13.  And many will not be familiar with Prudential v. Jefferson, 896 S.W.2d 156 (Tex. 1995)

FORM CONTRACTS CAN NOT SERVE AS BASIS FOR "AS IS" DEFENSE

Reading Prudential v. Jefferson, 896 S.W.2d 156 (Tex. 1995) in detail reveals that the Supreme Court found that the specific "as is" clause in that contract was effective because it was negotiated between the parties. Prudential v. Jefferson, 896 S.W.2d 156 (Tex. 1995) was a commercial case with sophisticated commercial real estate parties.

That fact alone should distinguish that case from being used in the everyday residential real estate sale but the defense attorneys for the real estate industry have disregarded that reality and convinced trial judges as well as appellate courts to ignore the text of the case and simply focus on the ready made language that seems so powerful in their defense. But just as the "as is" can not stand in a residential case because of the dozens of representations of "value and condition", the fact that the residential sale in Texas uses the TREC form 20-13, a boilerplate contract with fill in the blanks means that the One to Four Residential Contract for Sale (Resale), TREC Form 20-13, is precluded from being used as an "as is" contract.

We think it too obvious for argument that an "as is" agreement freely negotiated by similarly sophisticated parties as part of the bargain in an arm's-length transaction has a different effect than a provision in a standard form contract which cannot be negotiated and cannot serve as the basis of the parties' bargain.


Prudential v. Jefferson, 896 S.W.2d 156, at 162 (Tex. 1995). Look at that language: We think it too obvious for argument... the Supreme Court is clear and lucid that "...a standard form contract which cannot be negotiated and cannot serve as the basis of the parties' bargain." cannot be used as an "as is" bar and defense. And yet, all across the state of Texas, the defense lawyers for the real estate industry regularly and routinely argue that the "as is" clause in the One to Four Residential Contract for Sale (Resale), TREC Form 20-13 bars claims by buyers when they have discovered after the closing that the seller made misrepresentations of fact or that the realtor did or that they both did.

Lawyers are bound ethically to represent cases and caselaw honestly and fairly. A lawyer can be zealous about the law and advocate for its change. But the misues of Prudential v. Jefferson, 896 S.W.2d 156 (Tex. 1995) are rampant in the district courts of Texas and consumers are paying for that dishonest use of "as is".

SELLER CAN NOT MAKE ANY REPRESENTATIONS OF

THE "CONDITION OR VALUE" OF THE HOME BEING SOLD

The Texas Real Estate Commission is doing its best to defeat consumers and make every used home sale in Texas an
"as is" sale. The lawyer broker committee, composed of lawyers that defend realtors and realtors, have progressively tried to make the One to Four Family Residential Contract an absolute AS IS contract. That is intended to mean that every house sold in Texas is sold as is and the buyers have no rights or remedies except if they choose an option period.

But even with the Texas Real Estate Commissions' attempts to preclude buyers from having remedies against sellers, these efforts are useless as long as the seller makes representations about the "condition or value" of the property. This they do in spades through the Sellers' Disclosure Notice, Advertisements and brochures and the MLS listing. There are dozens of representations about the "condition and value" of every house in the Sellers' Disclosure Notice. There are usually additional representations about the "condition and value" in the MLS listing and advertisements.

This matters because those representations about the "condition and value" DESTROY the "as is" defense. "As is" is only in play if the seller makes no representations about the "condition and value" of the thing sold.

By agreeing to purchase something "as is", a buyer agrees to make his own appraisal of the bargain and to accept the risk that he may be wrong. Mid Continent Aircraft Corp. v. Curry County Spraying Serv. Inc., 572 S.W.2d 308, 313 (Tex.1978). The seller gives no assurances, express or implied, concerning the value or condition of the thing sold. See TEX.BUS. & COM.CODE § 2.316(c)(1) ("as is" agreement excludes implied warranties in contract covered by UCC).


Prudential v. Jefferson, 896 S.W.2d 156, at 161 (Tex. 1995).

The Supreme Court went further with this:

A seller cannot have it both ways: he cannot assure the buyer of the condition of a thing to obtain the buyer's agreement to purchase "as is", and then disavow the assurance which procured the "as is" agreement.


Prudential v. Jefferson, 896 S.W.2d 156, at 161 (Tex. 1995).

So the Supreme Court is following strictly the UCC requirement that when a thing is sold "as is", there can be no corresponding representations of fact about its condition or value. Therefore, since the Texas Property Code requires every seller of a used home in Texas to make factual representations about the condition of the home and since home sellers universally make representations about the value of various improvements and conditions of the home, the "as is" defense is inapplicable to the used home sale in Texas.  

STRIKE OUT THE "AS IS" LANGUAGE IN THE ONE TO FOUR FAMILY RESIDENTIAL CONTRACT FOR SALE, TREC FORM 20-13

The TREC Form 20-13 is a form contract or what is called a boilerplate contract.  All the terms are included and usually not negotiable.  However, you are not bound to use all of the paragraphs or subparts of the One to Four Family Residential Contract for Sale.  The clause that contains the "as is" language is in Paragraph 7d.  It states as follows:

D. ACCEPTANCE OF PROPERTY CONDITION: “As Is” means the present condition of the Property
with any and all defects and without warranty except for the warranties of title and the
warranties in this contract. Buyer’s agreement to accept the Property As Is under Paragraph
7D(1) or (2) does not preclude Buyer from inspecting the Property under Paragraph 7A, from
negotiating repairs or treatments in a subsequent amendment, or from terminating this
contract during the Option Period, if any.
(Check one box only)
? (1) Buyer accepts the Property As Is.
? (2) Buyer accepts the Property As Is provided Seller, at Seller’s expense, shall complete the
following specific repairs and treatments:
.
(Do not insert general phrases, such as “subject to inspections” that do not identify
specific repairs and treatments.)

As the buyer, you can strike out the entire paragraph.  That eliminates any of the language of 7d regarding the "as is" language from the contract.  

You can also ignore the check boxes. This should preclude any claims by anyone after the sale that the "as is" language applies.  But the strike out is much better.  

Naturally, the real estate agents involved in your contract will doubtless advise you that you can not do this.   They are wrong.  You absolutely can strike out that or any other portion of the contract.  The seller can reject your offer because of your strike out or your disregard of 7d.   If that happens, it only proves that the term  is not negotiated freely.   However, it might be fuel for arguing your acceptance.   Hopefully, this clause never becomes an issue for you after closing.  The unfortunate result is that it only becomes relevant if you discover that the seller failed to make truthful or complete representations about the house.  

Evin G. Dugas - Attorney at Law 512.261.0044 Evin@housedefects.com
2303 RR 620 South,   Suite 135 PMB 361,   Austin, Texas 78734
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