As you are looking for listings online or with your Realtor, you may see stipulations on certain houses that say they are considered an "As-Is" property. For some individuals, these two words are enough to make them run away from the home as fast as possible. For others, they see it as a necessary part of the real estate world. Which is it, and what exactly does an "As-Is" property entail? Read on to find out more!
What does "As-Is" mean?
When a home is listed "As-Is" it means that when the home is purchased, the buyer has gotten it exactly as it is, with any structural or cosmetic defects. The seller won't bend on the price and there won't be negotiations on repairs for the home. It's a "what you see is what you get" home purchase.
There are "As-Is" clauses within the purchase contract of every home and, depending on the different types of homes that are being sold "As-Is", the clause may have different stipulations.
Although this article can be helpful for understanding a general sense of "As-Is" clauses and properties, please make sure to read through your property contract to know exactly what your "As-Is" clause states, if it exists.
As-Is Clauses and Seller Disclosures
In a normal sale, there will be an As-Is clause within the purchasing contract. This limits liability for the seller, if (and only if) they provide disclosures about the property. If the buyer purchases the home, but the seller did not disclose major problems within, the buyer could have a case against the seller even with an "As-Is" clause. Talk to your realtor if you have questions about this type of situation.
As-Is Clauses and Home Inspection Contingencies
You may be asking yourself "Wait! If I am in contract on an "As-Is" property, does that mean I really have to buy it, no matter what's wrong with it?" The answer is no "“ while the seller is covered by the "As-Is" clause, the buyer is covered by a home inspection contingency. Here's how it works:
When there is a listing that says the property is "As-Is", it should tell potential buyers two things. First, they should get a home inspection before purchasing the house. Every buyer should heed this advice when getting a home, but getting an inspection on an "As-Is " property is imperative. You won't be able to use it to reduce the price or have the seller fix the problems the inspection brings up, but you'll know what work the home needs as you go into the purchase. You can gauge based on that if you're still interested in purchasing the home or not.
The second thing an "As-Is" condition tells the potential buyer is that you are not necessarily bound to purchase the home. By getting a home inspection, the home inspection contingency lets the buyer back out of the sale if the property is too costly to repair.
When do you see "As-Is" Listings?
There are three main places you see As-Is Listings: the normal sale, a short sale, or a foreclosure (bank-owned property). The "As-Is" clause for the listing means something relatively different for each situation.
As-Is on a Normal Sale
Every sale has an "As-Is" clause in the purchasing contract. Sometimes the clause states that the home will be considered "As-Is" on the closing date. This means that the buyer has time to inspect the home and negotiate with price or repairs with the seller. As long as the seller has disclosed any and all problems in the home, it removes liability from the seller.
As-Is on a Short Sale
When a home is being sold by the owner of the home, but the profits of the sale will not be enough to cover the debt owed to the bank, it's called a short sale. If the bank (or whoever has the lien on the property) agrees to it, the property can still be sold. This property comes with an "As-Is" clause in the purchasing contract, too. In this case, there is no negotiation for repairs or price, as the seller virtually has no money to put into the home to repair it and the bank or lien owners have a certain price in mind. If you buy a home in a short sale, you will be repairing all the problems on your own.
As-Is on a Foreclosure
When the property has been foreclosed "“ is owned by the bank "” the listing will commonly say that the home and property are being sold "As-Is." This doesn't automatically mean there are structural or cosmetic defects in the home. In fact, the home may be in great condition. Banks, though, don't see or inspect the foreclosed homes they sell. They aren't able to provide disclosures about the property because they know nothing about it. The "As-Is" stipulation is a clause that protects the bank from being sued by a buyer if the home has major defects that weren't made known to the buyer when they purchased the property. It also alerts the buyer that the bank will most likely not repair or replace problems that are found within the home during the inspection. (It's worth a chance to ask in negotiations with the bank if they will, as it's not unheard of for the bank to help with repairs, it's just less likely than a normal seller.) The bank will also not decrease the price of a home based on what is found in the inspection. A bank wants to sell to recoup money lost when the property was foreclosed, so rates are lower than normal. This can mean that a foreclosed home could go fast, so keep that in mind.
As-Is Properties and Home Warranties
Although a home warranty may come with your "As-Is" property, or your Realtor may purchase a home warranty for you as a closing gift, be careful when looking at repairs and thinking they will be covered by a home warranty. Usually, home warranties do not cover repairs and replacements that are shown as failed in the home inspection. However, if the home inspection doesn't show the systems and appliances as failed in the inspection and they fail after the home warranty is in place, Landmark's new real-estate home warranty plans do cover for lack of maintenance, rust, corrosion and more. Make sure to compare our plans and pricing here to learn more about the coverage you can get on your "As-Is" property.