Properties sold “as-is” may have great potential, but buyers should fully understand their responsibilities and risks
The terms “as-is” or “sold as is” can mean many different things to a home buyer, depending on who the seller is and the circumstances surrounding the condition of the house. The general purpose of this modifier is to put on record the fact that the seller does not intend to perform any repairs or make any changes to the property as part of the sale, and makes no guarantees that all appliances or fixtures, including structural, exterior or interior surfaces are in good working condition. This also suggests that the seller will not provide a Seller’s Property Disclosure. What are the circumstances that might result in an as-is listing? The seller may not have the financial wherewithal to repair any deferred maintenance at the home, or a seller may not want to delay a sale if needed repairs are major and could take months to finish. It could also mean that the home is being sold by a bank in a foreclosure process.
In an as-is scenario, a buyer should still have a thorough property inspection performed before going to contract. There could be major structural issues that will wipe out any perceived discount for the as-is label, so a buyer would be wise to get estimates of all major repairs needed from the various contractors. Some sellers will agree to a price adjustment to help defray the cost of the repairs.
A potential hurdle for would-be as-is buyers relates to the mortgage loan. A typical home acquisition loan will likely have minimum property requirements (“MPR”) that deal with the livability of the property, and these are reviewed closely by the lender’s appraiser. If the appraiser deems the property to be unlivable, the bank will not issue a loan, so only cash offers will be acceptable to the seller.
Just because a home is listed as-is does not mean the seller can hide all known problems. The seller may be required to disclose water damage, lead paint, termites or mold.
An as-is sale typically results in a lower sale price than would be the case with the seller making normal representations and warranties, which could represent a great opportunity for a contractor or enterprising home buyer to get a good deal. However, any as-is sale should be viewed with a strong dose of caveat emptor.
Coldwell Banker Realty, 203-637-1300 office, 203-918-1523 cell, cynthia.deriemer@cbrealty. com