Defining “AS-IS” when Buying or Selling a Home

The “AS-IS” title has a different meanings to different people.  When I speak with buyers and sellers about selling or purchasing a home, they rarely have the same definition of what “AS-IS” means.  If you speak with a seller they might believe that by having their real estate agent advertise the home “AS-IS” on the local multiple listing service (MLS), it will prevent them from completing any repairs that the buyer might request.  Sellers can also believe the “AS-IS” statement protects them from legal charges down the road.  If you speak with the buyer they might believe the “AS-IS” really means there is something terribly wrong with the home or more specifically, what is on the MLS is not exactly the true picture of the home itself.  Let’s break this down from both perspectives.

For the Seller:

First and foremost, as a seller you are never protected from legal actions because of an “AS-IS” statement.  You are best protected by disclosing all known issues with the home.  If you know about it, disclose it.  If you suspect something is wrong, not working, might be, could be not quite right; disclose it. If you think there might be a plumbing leak but think that if you don’t look for it, you don’t have to disclose it, an you are covered. You are not.  However, if you had no clue, no reason to suspect, no one ever told you, that the foundation had a crack; you are not responsible for disclosing the fact you didn’t know.  If you are not clear on what to disclose, here is a simple rule; If you know of anything that might affect the value of the home in a buyer’s eye – disclose it.asishouse

If you have lived by the railroad tracks 40 years and you fall asleep every night to the sound of the choo-choo running down the tracks, you should disclose that there is a rail road track near your home.  Don’t wait until you are in the court room to state,  “But your Honor, it never bothered me.”  Even with incredible tools like Google Earth, the seller is responsible for telling the buyer everything that is known about the home and neighborhood.

One piece of advice to sellers.  Forget “AS-IS”.  In my opinion advertising “AS-IS” raises questions that don’t need to be raised about the home’s condition.  When a buyer comes to buy your home they see the home “AS-IS”.  They are buying it “in current condition”.  The seller does not need to explain why the house is 40 years old, it simply is 40 years old.  The advertising “AS-IS” sets up more challenges then it is worth.  Leave opportunity for negotiation on everything.  If it is a simple plumbing leak, why wouldn’t you want to fix it to sell your home?  If it is a foundation crack with a $40,000 price tag to fix, why should a buyer simply accept it without seeing a credit for repair or discount in price to reflect the true value of a home with foundation issues?   The best way to negotiate any deal to the best interest of all parties is to slip on the other side’s moccasins. Remember, a key component of any contract is a meeting of the minds between parties.

The next piece of advice to sellers is to complete inspections prior to marketing your home.  Knowing what needs to be fixed and fixing it almost always cost less then when the buyer finds it through inspections.  Negotiating repairs in the middle of the contract almost always cost more because of the emotions involved.  Always complete repairs with an appropriate professional.  Your local code may require licensed contractor for repairs over a certain dollar amount.  Make sure the receipt details the work completed and ask for a transferable warranty.

For the Buyer:

Fair market value is in the eye of the buyer.  The buyer should be aware that signing an “AS-IS” addendum may be a good trick to get an offer accepted to the unknowing seller but in the end, the buyer has the right to negotiate anything discovered during the contingency period.  If you write an “AS-IS” addendum, expect an agitated seller when you ask for repairs.  It is much more difficult to negotiate with someone who thinks you pulled a fast one on them with an “AS-IS” addendum. If the buyer makes an offer on the house based on an hour walk through, then completes inspections and finds items that were not known to the seller but affect the value of the offer they presented, they should attempt to negotiate repairs, accept the home without repairs, or cancel the contract.

On the other hand, if as a buyer you receive all the inspections and disclosures from the seller before you make the offer and then later ask for repairs of known/disclosed items, it is a tough negotiation.  The buyer has the absolute right to ask for anything during the contingency period, but your chances of getting your wish may be limited by your knowledge at the time of writing the offer.  It is always best if you can review disclosures and or inspections prior to writing an offer.  It is better for everyone involved when a buyer is able to make an informed offer to purchase.  Before writing an offer to purchase a home ask your agent for comparable properties sold in the last three months and if there are any inspections or disclosures available to review.  If you can, see all the homes that agent provides to you as comparables.

In summary, the “AS-IS” discussion is kind of moot.  It does not prevent a buyer from asking for repairs or re-negotiating price. It does not limit the buyer in completing all investigations of the home during allotted contingency time.   It does not remove the responsibility nor protect the seller from legal action regarding the disclosing of known defects.  It does not mean something is wrong with the home.  It does not mean nothing is wrong with the home.  It is an intention.  It is an intention for the seller to say to the buyer, “Don’t ask for the moon because I won’t be able to give it to you” and the buyer to say to the seller “OK, I won’t ask now, but maybe later I will ask for the moon”.  Both are silly as you don’t need a stated intention to realize, this is a negotiation.  Beginning to end.

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  1. Trevor Moore says:

    I thought this was an excellent article. There are so many “as is” contracts with the banks and investors trying to dump properties. They are trying to quickly recoup lost funds without putting any money into the property. It is up to the agent to really take the time to educate and go to bat for their client when they come across these types of properties. If you rjob is not done up front then you will have a very angry client who will probably not recommend you in the future. Thanks for the post CJ.

  2. CJ says:

    Trevor – thanks for the comment! Yes, REOs definitely place a further complication no AS IS, especially with the new appraisal process.

  3. SB says:

    seller in hayward trying to sell an “as is” cunstruction special with $150,000 of fees needing to be paid before construction can begin. Do your homework people

  4. Ali says:

    Very nice and wonderful post. Thanks for taking the time to share this with us.

  5. CJ Brasiel says:

    Thanks Ali for reading and taking time to comment! Very much appreciated!