What is an as-is offer?
According to the website www.Foreclosures.com, one of the Top 10 questions of home buyers is, “What is an as-is offer?”
When a property is advertised as-is, the seller is announcing he or she will make no repairs. The buyer must be willing to accept the property in its present condition and willing to take the responsibility for upcoming repairs.
You may be very surprised to learn that most homes are sold in the as-is condition, contingent on the buyer’s inspections. Generally, the buyer is allowed 17 days to conduct all their inspections. This includes a home inspection to determine the general condition of the property. Many buyers also have a wood destroying pest inspection as well. If there is erosion noted or a leaning retaining wall, the buyer may want an engineer to inspect the slope stability. If there is water intrusion, the buyer may elect to have a mold spore count. In some cases, the buyer chooses to have the property surveyed.
During the 17-day inspection period, the seller is expected to make the house available to the buyer’s inspectors, but the seller is not required to move anything for the inspection. The buyer pays for the inspections and must not damage the seller’s property. They must have seller’s written permission to make any invasive inspections (like cut into a build-up to inspect for termites). Buyers must offer indemnity and hold the seller harmless in case of an injury or liability caused from an inspection.
In a very tight market or on a bank-owned foreclosure sale, the inspection period is usually shortened drastically; some only allow three days for inspections. These sellers do not want to wait nearly three weeks for the buyer to decide.
Normally, once all the inspections are complete, the buyer will ask the seller to make repairs or a price adjustment; sometimes it’s a little of both. But, when the seller has advertised it as as-is, they usually are not agreeable to any modifications of the original agreement.
Occasionally, the inspections will reveal a condition the as-is seller was not aware of. When that happens, sometimes the seller will agree to correct that condition, or drop the price and the buyer can correct after escrow closes. This is why any Realtor will strongly suggest having a home inspection, even on an as-is deal.
I have noted on some distressed properties that they must be sold at auction; the seller advertises that there is no inspection period, and the seller expects the buyers have already inspected the property. Once the earnest money deposit is wired to escrow, it is nonrefundable. These homes are sold at a discount price because of the poor condition. Most often, they are purchased by professional investors who have trained eyes and offer a low enough amount to absorb the cost of repairing anything they miss. In some cases, they reduce the house to a shell and rebuild it.
If you have a real estate question, give me a call at (909) 338-9995. I’d love to hear from you.