“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.
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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