Should A Buyer Be Wary of Homes Sold “As Is”

Posted by Lise | Filed under: Buyers

“Sold in As Is Condition” can mean anything from minor defects to major problems. What can a prospective buyer do to protect themselves?  Should the buyer just skip the house completely or is it worth a chance?

An “as-is” sale puts the buyer on notice that the seller has no intention of doing any repairs to the property, and that the buyer should have the property inspected exhaustively, as the buyer will be taking possession of the property in its current state.  An “as is” sale does not mean that the property is a major fixer. Frequently, properties owned by deceased sellers and sales with out of town sellers are sold “as is” because the sellers don’t want to be drawn into making repairs to the property.   Sellers with desirable properties may try to sell them in “as is” condition, in order to simplify the post contract contingencies.      Investors looking for a foreclosure will certainly encounter “as is” properties, but the first time home buyer and the purchaser of a luxury home can also deal with “as is” homes.   I have never encountered a bank owned property or a foreclosure that was not in “as is” condition – because the bank doesn’t know the condition of the property and the bank is not going to make any repairs.

The “as is” condition also is used when the seller knows that the property has problems, and he/she is unwilling or unable to repair the property.  However,  the “as is” condition does not permit the seller to hide from the buyer defects known to the seller.

Section 10-702 of the Real Property Article, Annotated Code of Maryland, requires the owner of certain residential real property to furnish to the purchaser either (a) a RESIDENTIAL PROPERTY DISCLAIMER STATEMENT stating that the owner is selling the property “as is” and makes no representations or warranties as to the condition of the property or any improvements on the real property, except as otherwise provided in the contract of sale, or in a listing of latent defects; or (b) a RESIDENTIAL PROPERTY DISCLOSURE STATEMENT disclosing defects or other information about the condition of the real property actually known by the owner.

DC is even stricter than Maryland since it doesn’t permit the sellers to disclaim.   § 42-1305 of the DC Code provides that:

The residential real property disclosure statement approved by the Mayor shall contain the following:

(1) A list of actually known defects or information concerning the following:

(A) Water and sewer systems;
(B) Insulation;
(C) Structural systems, including roof, walls, floors, foundation, and basement;
< conditioning air and heating, electrical, plumbing,>
(E) History of infestation by rodents or wood-boring insects, if any;
(F) Appliances;
(G) Alarm system and intercom system; and
(H) Garage door opener and remote control; and
(I) Fixtures

So, the first step a buyer can take in protecting themselves in an as-is sale is to fully read and understand the contract and the seller’s disclosures/  Ask your realtor or attorney to explain what disclosure duties the seller owes you, in your state. Disclosures should be carefully reviewed, and any defects or work that the seller reports having done to the property should be investigated.

Ask questions and request copies of work permits or warranties and generally get an understanding for what work this seller has had done to the home. If the seller was not the first owner, it can also be revealing to ask if he still has any of the disclosures from the preceding owner.

Most important, though, is to have the property thoroughly and professionally inspected before the end of your contingency or objection period. At the very least, get a home inspection and any “special inspections” the general home inspector recommends.

Consult with your agent and use your judgment. When I was actively selling real estate, I would generally advise my clients to have an overall property inspection, a pest inspection and a roof inspection. Of course, if the seller had just obtained a pest inspection from a well-respected inspector or the roof was new with 29 years of warranty remaining, we might forgo those.

Fireplace and foundation inspections were also fairly common, given that I sold homes in an earthquake-prone area where chimneys often separated from houses and foundations required ongoing maintenance.

In an as-is deal, inspection reports serve less as your launch-pad for a repair request than as your post-closing home improvement store shopping list. They are a way to begin understanding what needs to be done so you can get estimates and bids on the work before finalizing the purchase of the home. Think of inspection reports as a tool for making sure you are completely comfortable taking the home in that condition. If you are not, the reports can serve as an alert that you should back out of the deal or renegotiate with the seller, given the defects revealed by the inspections.

The second step in protecting yourself in an as-is transaction is obtaining inspections from a qualified inspector. Ask your agent for referrals and hire a certified and/or licensed home inspector — not your cousin who happens to be a really handy accountant.

Read and follow up on the inspectors’ written or digital reports by getting any further information indicated from the seller, obtaining “specialized” inspections as recommended, and getting bids for repairs needed before the expiration of your contingency or objection period.

Buying a home in “as is” condition can be a good decision, just don’t go into it with your eyes closed. If you are thinking of buying a home, please give the Lise Howe Team a call. We can help you find a great home and navigate your way through the contract process!

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