I found this article in WSJ "As-Is Sales Can Raise Disclosure Questions" provides a very good advice for would-be sellers and buyers.
Here's the excerpt:
Question: We sold our house in August. The buyers bought it "as is" and didn't get a home inspection, although we did. Now, they claim that the backyard heavily puddles and doesn't have proper drainage. When we owned it, we noticed some small puddles during very heavy rains, but none that we considered significant. Hence, we didn't check off drainage problems on the disclosure form. Our home-inspection report noted that the backyard didn't have proper drainage. The new owners got a $15,000 bid for installing proper drainage and want us to pay for it. What are our legal responsibilities?
-- Name withheld by request, Los Angeles
Answer: Your responsibilities are unclear at this point, I'm sorry to report.
June Barlow, general counsel of the California Association of Realtors, says people frequently misunderstand what it means to sell a house on an "as is" basis. That contractual term doesn't release the seller from his obligation to disclose all known material defects. It just means that the seller won't fix the problems.
In your case, there are two questions to consider. The first is whether this drainage problem is really material. That may be a matter of opinion; one man's puddle is another man's swamp. A court ruling may hinge on whether the buyer can produce evidence that the problem is serious and must be repaired.