Understanding “As Is” Properties
Here, we will explain to you how to protect yourself with “as is” properties.
You will see that these types of properties are really nothing to be afraid of if you know what you are looking for. They also can be a source of great bargains.
When you are a home buyer you will probably encounter the term “as-is” sale. Just as used-car dealers sell thousands of automobiles “as is” without any warranty or representations, houses and condominiums are sold using the same term.
But an “as is” home sale is different. Thanks to state laws and court decisions, a real estate “as is” sale is far more complicated than the sale of an “as is” used car.
An automobile “as is” sale means “buyer beware.” However, the best way to describe a real estate “as is” sale means “trust, but verify,” as the late President Reagan said many times when referring to political situations.
What is an “As Is” Home Sale?
Simply stated, an “as is” home sale means the seller must disclose to the buyer all known defects, but the seller will not pay for any repairs.
Does an “as is” home sale mean the seller doesn’t have to disclose known defects and can conceal them, as the seller of a used car might do? The answer is “definitely not.”
In other words, even “as is” home sellers must reveal to the buyer all material defects of which they are aware. But “as is” sellers do not have to make any warranties or representations, and need not pay for any repairs to correct material defects.
Why Many Homes Are Sold “As Is”
The reason many older homes are sold “as is” is because the seller doesn’t want to pay for any repairs.
There are at least four major reasons some home sellers want to sell “as is”:
- The seller doesn’t have the money to correct the disclosed defects and prefers to let the buyer fix the problems;
- The buyer is likely to renovate an older “fix up” house so the seller would be wasting money on minor repairs;
- The seller has owned the house many years and doesn’t insist on earning top dollar;
- The seller doesn’t want the hassle and inconvenience of fixing the problem.
Possible additional reasons for “as is” home sales with a seller who inherited the house:
- Acquired the residence by inheritance or purchase and is reselling for a quick profit;
- Hasn’t lived in the property and is not aware of its problems;
- Doesn’t want any responsibility for fixing problems that might occur after the sale closes.
How “As Is” Home Buyers Can Protect Themselves
Knowing the key reasons many home sellers elect to sell “as is,” home buyers can benefit from such sales if they know how to protect themselves. Rather than reject such a home sale, usually advertised “as is” in the local MLS (multiple listing service), savvy buyers welcome such profit opportunities.
The best way for a buyer to protect against an unscrupulous seller who “forgot” to disclose a serious but known home defect is for the buyer to include a professional inspection contingency clause in the purchase offer.
Buyers of every house and condominium should include such an inspection clause making the purchase offer contingent on the buyer’s approval of their professional home inspector’s report. That means, after the home seller accepts the buyer’s purchase offer, the buyer hires a professional inspector and then approves or disapproves their written report.
When “As Is” Means a Bargain Purchase
As explained, there are many legitimate reasons for selling a house or condo “as is” after all known defects are disclosed so the buyer can consider them when making a purchase offer.
Many home sellers are not fully aware of their home’s defects. You may come accross a run-down, fixer-upper, “as is” house that obviously needs work. It may have already been listed for sale for a few months. If the seller is an estate they could be even more motivated to sell it.
Don’t be afraid to come in with a “low-ball” offer because there may be a good chance that it will be accepted.
Make sure that your offer includes a professional inspection contingency clause. A professional inspector may discover several problems of which you or the seller were not aware of. If this happens you have the right to ask for a repair credit to fix the addtional problems.
Show the inspection report to the listing agent and explain your case. More than likely the seller will agree to a repair credit on top of accepting your low offer.
“As Is” Home-Buyer Alternatives
Even when buying an “as is” home where the seller fully discloses all known defects a professional inspector will often discover unexpected serious defects. When that happens, the buyer has several alternatives.
One is to cancel the purchase and obtain an immediate full refund of the buyer’s good faith deposit. But a better alternative is to use the professional home inspector’s written report to re-open negotiations to obtain a repair credit for the estimated cost of correcting the unexpected problems.
Especially in a slow “buyer’s market,” many home sellers are so glad to receive any purchase offer they will gladly agree to credit the buyer with the estimated repair cost.
A repair credit is usually better than a price reduction because the mortgage amount is usually not affected. Another advantage of a repair credit is the buyer can shop around after the sale closes and often reduce the actual repair cost.
SUMMARY: Just because a house or condo is offered for sale “as is” does not mean it should automatically be rejected. But buyers should be very cautious of “as is” sales, realizing the seller might not have disclosed all known defects.
However, savvy buyers insist on a written disclosure of all known defects and a purchase offer contingency clause for the buyer’s approval of a professional home inspector’s written report. For more details on “as is” home sales, please contact a one of our knowledgeable real estate agents.
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