What does it mean to purchase a home in “as is” condition?

What does it mean to purchase a home in “as is” condition?

I find that the public is often confused about the term “as is”. The term “as is” has changed somewhat over time. It is also used somewhat differently in REO (Real Estate Owned by the bank) and short sales than it is in the normal standard residential property sale.

The high percentage of distressed property sales in the last few years have educated many buyers in the meaning of “as is”. Savvy investors and lucky buyers started buying distressed properties well before the bottom hit. When a buyer purchased a bank owned (REO) property the bank usually had a lengthy addendum which spelled out the “as is” terms. The bank means what it says. It typically would make NO REPAIRS. There would be NO TERMITE repairs done. In addition there would be NO SELLER DISCLOSURE of property condition. Buyers do have a short contingency period in which to back out of the contract.

The Standard California Contract for the purchase of 1 to 4 units also uses the term “as is” on page 4 paragraph 9. Buyers understand that they are buying the home in “its present physical condition as of the date of acceptance.” Sellers must fill out certain statutory disclosures and provide them to the buyers. Also anything negative that is discovered by the seller during the time of the contract must be revealed by the seller as well. The seller must maintain the property in substantially the same condition as of the date of acceptance.

In substantial contrast to a bank owned sale, the buyer of an equity sale has the right, upon inspection, to go forward, back out of the sale or request that the seller make certain repairs. If repairs are requested then the two principles are back in negotiations. The seller does not have to agree to any repairs but sellers will usually comply with reasonable requests that involve safety or malfunctioning mechanical or plumbing conditions.

As a negotiating tool in multiple offer situations the buyer may make his offer truly “as is” by specifying that he will “not make any repair requests”. The buyer does not give up the right to back out of the contract based on inspections.

Ron Buck, Realtor®                Search Laguna Niguel & Dana Point Homes

Ron Buck has been a real estate broker for 16 years with over 800 successfully completed transactions. He is a 12-year resident of Laguna Niguel and is an expert in south Orange County real estate. You can contact him at Ron@JonRonRealEstate.com or 949.456.0505.