Right now, the Texas Supreme Court is considering a case on appeal that questions whether the standard Earnest Money Contract promulgated by TREC or the Texas Real Estate Commission, is actually an "AS IS" contract.
The key language is in Section or Paragraph 7d where the form states:
D. ACCEPTANCE OF PROPERTY CONDITION: (Check one box only)
?? (1) Buyer accepts the Property in its present condition.
?? (2) Buyer accepts the Property in its present condition provided Seller, at Seller?s expense, shall complete the following specific repairs and treatments:
This language is found by Texas Appellate Courts to be the equivalent of "AS IS" and therefore, carries with it the legal bar to claims brought for misrepresentations. This is wrong.
The "AS IS" bar or disclaimer comes from the sale of goods. If a seller wants to sell a million widgets without any warranties, he can sell it "AS IS". If you want to buy a used car, I can guarantee you that it will be sold "AS IS". This means there are no warranties that go with with the car or whatever you are buying.
In those cases such as the sale of goods or a used car, the seller never represents that the car has qualities and characteristics. There are no representations of the thing's condition because it is up to the buyer to figure it out. Of course a thing sold "AS IS" does not garner as good of a price.
A home is different. Texas law requires the disclosure of the condition of a home through a Seller's Disclosure Notice. Tex. Prop. Code 5.008. The sale is immediately removed from the "AS IS" status because representations about the condition of the thing, the house, have been made. A house can be sold "AS IS", but it would require that no Sellers' Disclosure Notice be proffered and no other representations of the home's condition be made.
So what does the Texas Real Estate Commission or TREC, the entity that creates the forms used by virtually every real estate agent in Texas think of the language they created? Here it is in black and white:
Sent on August 27, 2008
To my knowledge the Commission has not stated that the purpose and intent of the current or previous language in section 7D of the TREC form is to create an "as is" contract. The general purposes of TREC-promulgated contract forms articulated in the Texas Real Estate License Act are to "expedite real estate transactions and minimize controversy." Tex. Occ. Code §1101.254(a). I am unable to speak on behalf of the Commission to "declare and announce to the public" that the purpose of section 7D is to create an "as is" contract. However, at least one court in Texas has described the language in a previous iteration of the contracts as such. See LARSEN v. LANGFORD , 41 S.W.3d 245, 251 (Tex. App. - 2001). The court further stated in the Larsen case that although a contract may contain an "as is" clause, other factors are considered in determining whether the contract is in fact an "as is" contract.
The contract forms are adopted by reference under 22 TAC Chapter 537. The text of the preamble that proposed the rule that adopted the forms by reference described the most recent revision to paragraph 7D as follows: Paragraph 7D is amended to provide checkboxes to choose whether Buyer accepts property in its present condition or in its present condition with specific repairs enumerated.
I hope this information is helpful to you.
General Counsel and Assistant Administrator
Texas Real Estate Commission
So the Texas Real Estate Commission or TREC did not intend for this language to be "AS IS" language, so why should the Courts?