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Why Buyers And Sellers Must Understand As-Is Sales

If you are buying or selling an “as-is” residence during this peak home selling season, it is very important to understand the pros and cons of such a home sale. Thousands of houses and condos are sold “as-is” every day.

But an “as-is” sale usually isn’t the best way for a home seller to get top dollar. The reason is an “as-is” sale gives a warning signal to prospective buyers there might be something wrong with the property.

However, an “as-is” home purchase might be an incredible bargain for the buyer who understands the possible benefits and detriments.

What is an “as-as” home sale? Most of us are familiar with “as-is” used car sales. It means the seller makes no warranties or representations as to the car’s condition.

Although similar, “as-is” home sales are a bit different, thanks to state laws and court decisions.

The old days of “caveat emptor” (let the buyer beware) are long-gone in most residential sales. Today’s rule seems to have become “Home seller, beware of the buyer’s lawyer.”

When a home is sold “as-is,” that means the seller makes no warranties or representations, and will not pay for any repairs of even obvious defects. However, in most states “as-is” home sellers are now required to disclose to their buyers all known defects in the residence. The buyer can then consider these disclosed defects when making a purchase offer.

For home buyers, an “as-is” sale is a “red flag” warning to be especially careful. At a minimum, buyers of “as-is” houses and condos should make their purchase offers contingent on a satisfactory professional inspection by a reputable inspector.

Personally, I recommend members of the American Society of Home Inspectors (ASHI) because of their tough membership requirements. Local ASHI members can be located at or 1-800-743-ASHI.

Why some home sellers sell “as-is.” As experienced real estate agents know, many homes are listed for sale “as-is” for a variety of reasons.

The three major reasons for selling “as-is” are 1) the seller doesn’t have the funds to correct the disclosed defects and prefers to discount the sales price instead, 2) an older fixer-upper house is likely to be renovated to the buyer’s standards, and 3) the seller doesn’t want the inconvenience and hassle of making repairs.

Additional reasons for “as-is” home sales include the seller 1) didn’t live in the house and is not familiar with its possible defects, 2) recently acquired the property by inheritance or purchase and just wants to make a quick profit, or 3) has owned the home many years and doesn’t care about getting top dollar for the property.

The unspoken reason for selling “as-is.” But there is another unspoken reason some home sellers sell “as-is.” They think they can get away with selling a home, which has a hidden defect that the buyer or a professional inspector won’t discover.

For example, a few months ago I received a letter from a nice couple who bought their first home with virtually every dollar they had. Shortly after moving in, the sewer backed up into the basement. Upon investigation, the buyers learned the sewer pipe to the street was badly broken and needed replacement. They spent about $4,750 for a new sewer line and basement cleanup.

After talking with their new neighbors, they learned the Roto-Rooter man was a frequent visitor to the house so the seller obviously knew of the problem. Unfortunately, for the buyers, the seller had moved out of the area and couldn’t be easily sued for damages.

Unless there was evidence in the basement of previous sewer backups, even the world’s greatest listing real estate agent and professional home inspector probably never would have discovered this serious defect.

Don’t reject an “as-is” home. Personally, I’ve bought many “as-is” residences for investment, which were incredible bargains. However, I always insisted on making my “as-is” purchase offers contingent upon approval of a professional inspector’s report.

To illustrate, the best “as-is” bargain I ever purchased was a house that had been rejected by dozens of other prospective buyers. As I walked into the living room and saw the ugly crack in the fireplace brick, my first reaction was “yuck.”

However, I made a very low purchase offer, contingent on the approval of a professional inspection, thinking my “low-ball” offer would be rejected. To my surprise, my offer was accepted.

Of course, I accompanied my professional inspector and asked him many questions about the fireplace, which he thoroughly inspected, even up in the attic. He reported it was just a superficial but very ugly crack, which could be repaired for about $150 with special fireplace mortar.

How to handle undisclosed home defects. Buyers of “as-is” homes should always 1) insist their sellers provide a written disclosure statement of all known defects, and 2) make their purchase offer contingent on the buyer’s approval of a professional inspector’s report. The buyer should always accompany the inspector to discuss any undisclosed defects, which are discovered.

If the inspection report reveals significant unexpected defects which, in fairness to the home seller, might have been hidden (such as attic roof leaks), the buyer then has two choices: 1) cancel the purchase and obtain an immediate refund of the good faith deposit, or 2) re-open negotiations to obtain a repair credit for the estimated cost of correcting the unexpected defect.

Many sellers are so anxious to sell their home, especially in a slow “buyer’s market,” they will gladly agree to buyer repair credits for the undisclosed defects, even if the seller was unaware of those problems.

Conclusion: For various reasons, many houses and condos are offered for sale “as-is.” That means the seller must disclose all known defects but will not pay for any repairs.

Home buyers should not automatically reject “as-is” homes. However, they should 1) insist the sellers provide a written disclosure statement of known defects, and 2) make their purchase offer contingent upon a satisfactory report by a professional home inspector. More details on “as-is” home sales are available from a local real estate attorney.