Wednesday, February 20, 2008

What does it mean when a home is sold "as-is".

So you've found that perfect property after looking at many around Fort Knox Kentucky with your Hardin County Kentucky Real Estate Agent, only to find out that your dream property is being sold “as-is”. When buyers see or hear the words “as-is”, housing or automobiles, they instantly change from interested to skeptical. Real estate is a large investment, and no buyer wants to leap into such a huge property investment with a chance that “as-is” must be pointing to something expensive. Are the fears worth the pain and stress? Or are “as-is” properties okay to buy?

To make a long story short, "as-is" clauses are nothing to worry about if you know what you're doing.

First we will need to define the term “as-is”. You may also see the term "as-is, where-is". An “as-is” home means just that, the home is being sold in the current condition and the seller does not intend to make any further changes. It is very common for a home in foreclosure to be sold "as-is". Sometimes sellers just say "as-is" because they don't want the cost or the hassle of repairs. Home buyers will walk through a home prior to making an offer and list the items they want fixed as part of the agreement. Buyers almost always order a home inspection to ensure there are no major problems that may eventually make the home unlivable. With an "as-is" home, if the buyers don't structure the offer carefully, they will have no one to complete the small repairs, and if there are big repairs discovered during the home inspection, the buyers will be responsible for those as well.

On the flip side of the coin, many homes listed in “as-is” condition are in great shape and may need only minor repairs. But, how can buyers know this about a home without entering into a contract with the seller.

There are basically two options when buying an “as-is” home. We would NOT recommend the first.
1) The buyers can hire a home inspector, at their cost, to inspect the home before writing an offer. This way the buyers will know what they are getting into before they make an offer on the home. The buyers must keep in mind that the home is still on the market during the home inspection process. So if another buyer comes along and makes an offer that gets accepted then the first home buyer just lost the home and the cost of the home inspection.

2) The wisest choice for the buyers is a post contract inspection. When the offer is written, the buyers can ask for anything they want. Even though the house is being sold "as-is", the buyers can be as specific as they like. Many buyers and even some real estate agents don't know that; it's all about negotiation. A clause (also called a contract contingency) is written into the offer regarding the “as-is” nature of the home and the need for an inspection before closing on the real estate (final proceedings). Depending on the specifics of the contingency, the buyers can be released from the contract and will have their earnest money deposit refunded to them if there are problems with the home that cannot be resolved. Most real estate sales contracts include a contingency allowing the buyer to have a home inspection.

An “as-is” home has the potential to be a risking situation. If you choose to think about the sale for too long, someone else may get the house, but if you are too quick to write an offer and forget about the “as-is” clause, you could potentially be stuck with a home needing thousands of dollars in repairs. Home buyers need to understand the seriousness of an “as-is” home and approach the situation strategically.

1 comment:

Anonymous said...

this information was very helpful. my husband and i are in the process of purchasing our first home and we are looking at the banked owned homes. most of them are sold "as is" and we were afraid that there might me some internal problems that we would be responsible for. now i know that just because it says "as is" does not mean we would be stuck will all repairs.