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What does the term "as is" mean?



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By : Karen Parsons Fiddler    99 or more times read
One of the most common questions we get when working with buyers is about the listing statement "as-is." This is one of the most frequently misunderstood comments in the listing description. Most people assume that when an offer is given on a property advertised "as-is," that you have to have done all inspections necessary prior to the offer. This is NOT true. A good buyer's agent will make sure that the home inspection contingency is preserved.

So what does "as-is" really mean? First, in a bank-owned property it's quite common to see "as-is" language. They will also include clauses to clarify that they have not occupied the home and have no first hand knowledge of its condition. They will also outline what, if any, seller disclosures they will provide for the buyer. Seller disclosures are required in sales transactions in California and if a bank does have knowledge of an existing problem, perhaps from a previous inspection, they are still obligated to disclose this to the buyer. The main purpose of the "as-is" clause is to pre-warn the buyer that the bank will not make repairs nor concessions based on the results of a home inspection.

During the home inspection contingency period (normally 17 days) we will do as many different inspections as needed. We will start with a comprehensive home inspection by a licensed professional. This might lead to other suggested inspections or estimates. These can include electrical, furnace, roof and even mold inspections. More and more banks are also refusing to pay for termite and other wood destroying pest inspections and repairs. If this is the case, we would want to get a termite company out there as well.

Once the inspections are all done and we find there are some problems, is the buyer forced to choose between the problems or walking away because of the "as-is" language in the contract. Maybe!!! It really depends on the problem. Everything in real estate is negotiable, so we negotiate. As mentioned above, if the seller (in this case the bank) is aware of existing problems with the property, they must disclose it to all buyers. If we find a mold problem for instance, often a bank will provide a credit or even remediate the problem, because if we walk away they will have disclose our report to all future buyers. They often decide it's better to just keep the buyer they have. The same might be true of a major electrical problem, slab leak, termite infestation...if it makes financial sense they will still negotiate with us.

What if we see "as-is" on a short sale? How does that affect the buyer? This is trickier! Remember that in a short sale, the bank doesn't own the property yet and in accepting a settlement, they have to deduct all the real estate expenses from their profit. The sellers are getting no money out of the sale, so they have no incentive to pay for any repairs out of their pocket. This is the toughest situation to get some concessions for repairs, but the bank is trying to mitigate their loss, so they will look at reasonable requests for concessions. Again, mold is a common issue where the bank will include some reduction in proceeds to repair the problem and complete the transaction.

Finally, in this market we are seeing more sellers with equity using the phrase "as-is." This is an effort to set the expectation with the buyers not to ask. But, we will anyway! As mentioned before, everything in real estate is negotiable. In better markets, buyers were used to expecting the seller to replace screens with tears, replace loose tiles and other small items of wear and tear. This could lead to 100s of dollars of cost for the sellers. With so many sellers having big drops in their equity, they often will place "as-is" in the listing to prevent such requests. In case where there are handyman issues, as just mentioned, we often ask for a $500-1000 credit in escrow. This is usually easier for the sellers to agree to than an itemized list which can seem nit-picking. It's all in the presentation. Larger problems again are usually something sellers understand and will normally address.

Obviously we need to pay attention to all information in the home listing and we are not trying to minimize the importance of an "as-is" clause. But it doesn't mean you are buying a problem, sight unseen.
I'm an experience realtor who leads a team of agents who specialize in the different aspects of real estate. We are a full service realty group! We serve all of Southern California and we specialize in internet search methods. This allows you to see all new listings as they come to the MLS, you have the ability to begin your search privately, we respond to your needs and your questions.

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