As-Is Properties: What Does That Mean

While looking for homes, buyers will sometimes come across a property listed "as-is" or have to make an "as-is" offer to get a home they love under contract. So what does "as-is" mean exactly?  An "as-is" offer means you can do an inspection, but you can't ask for any  concessions, repairs, credits or price reductions based on the inspection results - what you see is what you get. Don't worry though, before heading for the hills, there are some safeguards to protect you when purchasing an as-is property.

• Buyers still have an opportunity to do an inspection during the attorney review time period and you can back out if you find something really concerning during the inspection. If you back out due to an inspection item and it's still during the attorney review time period then you should not lose your earnest money; instead it should be refunded to you. That said you will be out the cost of the inspection as the inspector did his job and found inspection issues.  Very occasionally if there's something really bad in the inspection like asbestos, mold, etc we can try asking the seller to remedy it, however, that is officially breaking the As Is contract and gives the seller the right to cancel the contract if we do end up asking them to repair or credit an item. But if you're thinking of walking away anyway, it can be worth a shot to ask especially if it's a disclosure issue that they will now have to disclose to other buyers going forward.  

• Sellers still need to disclose any and every issue with the house, regardless of the as-is sale.

Types of As-Is Sales

• As-is with a normal sale -  This clause may indicate that the home will be sold "as-is". If this is the case, the buyer has time to inspect the home, but isn't supposed to ask for any repairs or credits, however, the buyer can walk away during the inspection time period if the buyer is unhappy with the results of the inspection.   
• As-is with a short sale - This situation happens when a seller owes more on the mortgage than the house is worth.  Typically the bank will not agree to make any repairs as they are already losing money on the home and the seller has no money to put into any repairs either. In short, the buyer will be responsible for all repairs.
• As-Is with a Foreclosure - The bank already owns this property and they are typically listed as-is. The bank will not be inspecting or even seeing some of the foreclosed homes they have. Sometimes the property is in very good condition and will not need any repairs, but the bank doesn't have the knowledge of what the property looks like or its history, so it does not provide disclosures and adds the "As-Is" label. With this stipulation, the bank cannot be sued by a buyer if there are major issues that were not disclosed and also serves as an indicator that any repairs or negotiations will probably not happen. It is important to note, though, that the bank will sometimes repair items to get the best possible price on the house, so it doesn't hurt to ask! Good condition foreclosed homes tend to sell quickly.

As-Is properties can sometimes be really good deals, but they can also be problematic if you find tens of thousands of dollars of repairs that are needed and can't ask the seller to pitch in to cover the cost of those repairs (although in that case you can walk away).  Sometimes with As Is sales, sellers will include a home warranty, but that warranty won't cover items that were listed on the inspection report. It is important to weigh carefully how comfortable you are with an As Is offer before agreeing to an As Is sale as there  may be unseen issues that will be costly to repair without anyone to share repairs costs with and no opportunity for price negotiations.  That said, you also have to take into account the age and type of property. If the property is two years old and being sold As Is you're probably in better shape agreeing to As Is than a 100 year old property which is likely to have more issues.