San Carlos Real Estate Agent, San Carlos Realtor Four Myths of the “As-Is” Sale | The White Oaks Blog
San Carlos Real Estate July 2, 2008

Four Myths of the “As-Is” Sale

by Chuck Gillooley

“As-Is” Becoming the Norm?

It has been a seller’s market for so long in San Carlos that buyers have grown accustomed to offering to purchase homes in “As-Is” condition.  It’s an absolute no-brainer in multiple offer situations, since you want to make your offer as easy to accept as possible.   But along with this trend comes a few misconceptions about what an As-Is sale entails, what rights the buyer has, and what obligations and duties the seller must adhere to.    The purpose of this post is to hopefully clarify some of these myths.

First of all, let’s define what “As-Is” really means.  When you check the “As-Is” box in the purchase contract, what you’re essentially saying is that you are aware of all known and disclosed issues (this is important, and we’ll touch on it again later) with the home, and you’re willing to purchase the home in the present disclosed condition.

So here are the 4 most common myths and misconceptions that I encounter from buyers and sellers when it comes to As-Is transactions:

Myth #1:  If I offer to purchase the home “As-Is”, I give up my right to get inspections done on the home.

  • Wrong.  If you read Section 11 in the PRDS Sales contract carefully, it clearly states that even if you agree to take the home “As-Is,” you’re fully entitled to get any and all inspections done on the home — BUT..make sure you specify a Property Condition Contingency in your contract.

Myth #2:  The Seller is not obligated to complete their disclosures if they’re selling the home “As-Is.”

  • Wrong.  The disclosure laws are designed to protect buyers from fraud and misrepresentation, and the seller’s disclosure obligation is not changed in any matter just because it’s an “As-Is” sale.    Note that there are situations where the seller may be exempt from completing disclosures, such as certain trust sales — but simply selling it “As-Is” isn’t one of them.

Myth #3:  If I offer to buy “As-Is,” I give up my right to cancel the Sales Contract if something “new” is discovered or disclosed.

  • This is a bit of a trick question;  first, simply agreeing to “As-Is” doesn’t alter your rights as a buyer when new information is discovered and/or disclosed at any time in the sales process.  There are rules in place that protect both the buyer and seller when new information is introduced into the contract that may affect the value of the home.   Be sure to have your broker and/or real estate attorney explain these rules to you.     Here’s a recent example that I heard about that’s unfortunately too typical:
    • After thoroughly reviewing all of the disclosures as well as the pest and property inspection that were provided by the Seller, the Buyers made an “As-Is” offer to purchase a home.  They requested (and were granted) the normal 10-day contingencies for Title, Property Condition and Finance.  During one of the Buyer’s inspections,  a previously undisclosed condition was discovered, and it was estimated that the remedy of condition would cost nearly $25k.  This certainly qualified as “new” information, and warranted a discussion on how to remedy the situation.   This situation resolved itself when the seller refused to pay for any of the repairs, and  the buyer then opted to cancel the contract and recovered all of their deposit — regardless of the original  “As-Is” stipulation in the contract.
  • So, simply signing “As-Is” doesn’t strip you of your rights regarding newly disclosed information.

Myth #4:  I can’t ask the Seller to make any repairs.

  • Everything in life is negotiable, and a real estate transaction is no different.  The example above is a prime case of when the Buyer is very justified in asking for concessions from the Seller.   If you’re buying the property “As-Is” you can still ask for things to be fixed, even if they’re already known and disclosed.  There’s nothing wrong with saying “We’ll take the property as-is, but we’d like you to fix the front gate.”  For situations like this, the best time to make that request is when you write the original offer.    You can still ask a question like this after the contract is accepted — the Seller might be in an accommodating mood and grant your request.  However, if the Seller says “No thanks,” that usually doesn’t give you a ticket to back out of the deal.

Summary:

There are a couple of obvious conclusions to this post:

  • Sellers:  Even though it seems counter-intuitive, it’s definitely in your best interest to disclose anything and everything regarding the condition of your property.  The more up-front you are, the less likely your deal is going to fall through later due to surprises…regardless of whether it’s an as-is sale or not.   Take this obligation seriously!
  • Buyers:  The sellers took time to get inspections and write up their disclosures — take the time to read these thoroughly and understand them completely.  If you decide to make an “As-Is” offer on a home, know that you have many rights that protect you from fraud, misrepresentation, or simply newly discovered information.  The laws, however, won’t protect you from your own negligence if you don’t do your homework.

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Comments 5
  • This is really helpful. Thank you!

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  • KR,

    You’re quite welcome — I figured this might be useful since virtually all sales these days are as-is. Thanks for your comments!

    Chuck

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  • This is a helpful post, but it leaves me a little bit confused, as follows: Since checking the “As-is” box does not relieve the seller of any disclosure obligations, nor deprive the buyer of the ability to back out of the sale if new information is discovered later, what is the difference between checking the “As-is” box and not checking the “As-is” box?

    Put another way, if I am a seller, and I get two offers which are absolutely identical, except that one of the buyers has checked the “As-is” box and the other has not, what is the difference between the two offers? Presumably, both of these buyers are saying, “Based on my walkthrough and everything you have disclosed, I am willing to buy this house for $X, and you can bind me to this offer by accepting it.” If nothing new is disclosed during subsequent inspections, and there are no other contingencies, both buyers would be bound to buy the house. If something new IS disclosed during inspections, both buyers could back out, or renegotiate. Intuitively, it seems I am better off accepting the buyer who is willing to check the “as-is” box, but I don’t know why.

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    • AJ,

      Great question. The answer lies in the seller’s obligations when a buyer doesn’t check the “as-is” box in the contract. (For the purpose of this post, I am referring to the PRDS Real Estate Purchase Contract since it’s the one most commonly used in this area. There’s also the California Association of Realtors (CAR) purchase contract which handles it slightly differently.)

      Per the terms of the PRDS contract, if a buyer does NOT check the as-is provision in Item 10 in the PRDS contract, then the seller is obligated to pay for and repair all Section 1 items that are specified in the Pest Inspection report — this is spelled out in more detail in Paragraph 11. Additionally, in Paragraph 12 “Sellers Obligation to Repair or Correct”, there is a host of other things the seller must fix or repair. Both of these must be completed before escrow can close.

      On the other hand, once the buyer checks the “as-is” provision of Paragraph 10, then the seller’s obligations that were specified in Paragraphs 11 and 12 are deleted from the contract. There can be exceptions, but they must be explicitly stated in the contract.

      So hopefully you see the difference in the two paths. If a pest report calls out $2,500 worth of Section 1 repairs, the Seller is not obligated to fix these issues in an “as-is” sale (unless specifically agreed to by all parties.) That’s not to say the buyer won’t try to negotiate the cost of the repairs out of the sale price. If it’s not an “as-is” sale, then the seller must pay to get this $2,500 worth of repairs done prior to the home selling. Same goes with Chapter 12.

      My best advice is to make sure your Realtor reviews these Paragraphs in detail with you in details when you’re either making a purchase on a home, or selling your home.

      Thanks for your question.

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  • Thanks! That certainly clears it up!

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