Gilbert Real Estate Blog
~ by Randy Hooker of Dreamcatcher Realty
-
Archive for February, 2011
What does AS-IS mean?
With so many bank owned (foreclosure) and short sale properties for sale in Gilbert, Arizona these days, I get this question quite often: “What does AS-IS mean?” The AS-IS terminology is showing up in a lot of MLS listings, and the true meaning of AS-IS continues to be a mystery to many home buyers – and apparently to many real estate agents as well.
In my almost 14 years in this business, I’ve never seen a bank owned listing where the seller would NOT insist on selling the home in AS-IS condition, and their addenda are always loaded with AS-IS language to which the buyer must agree. They declare upfront that the seller will NOT preform any repairs on the property, no matter how major or minor. They also state unequivocally that the buyer will receive absolutely NO disclosures about the property – even if the seller happens to know things.
And then there are the listings that test the very fabric of sanity: Short Sales. It’s become common practice for short sale homeowners/sellers to refuse to perform any repairs on the property, irregardless of the severity. The logic seems to be that if the homeowner/seller is truly in a hardship situation with their lender(s), then how could they possibly afford to make repairs (however reasonable) for the buyer?! So while navigating through Gilbert foreclosed real estate can be a bit tricky and challenging, it pales in comparison to the insanity of short sales.
For those of you that know me well, it will come as no surprise that I can’t write this post without editorializing a bit. But first let’s touch on the meaning of AS-IS. In basic terms, AS-IS means the property is being sold in its existing condition, or as I like say, “What you see or don’t see – is what you get.“ It also means the seller is unable or unwilling to do any repairs on the property, even if we say “Pretty please.“ And to paraphrase the standard Arizona Association of REALTORS® AS-IS Addendum, it also means the seller makes no warranties concerning the condition, zoning or fitness of the property.
For my mini-rant, I’ll say that I know for a fact there have been certain pre-existing property conditions and repairs that were known of and/or done by an asset manager and/or contractor on a bank owned home that could have been and should have been disclosed to the buyer. That doesn’t seem to matter to them, though, so once again we buyer’s agents are left with waiving the ‘Caveat Emptor‘ a/k/a ‘Buyer Beware‘ caution flag. How and why banks are allowed to get away with selling foreclosed properties without having to disclose ALL known facts is still beyond me.
As for short sale properties, there’s absolutely no reason the homeowner/seller cannot deliver a Seller’s Property Disclosure Statement (SPDS) to a buyer. It just makes no sense whatsoever that certain listing agents try to exclude seller disclosures under the guise of AS-IS, and yet I see it all the time.
Word to the wise — it is HIGHLY recommended by the real estate industry as a whole, including yours truly, that every home buyer hires a reputable, licensed home inspector to perform a professional home inspection on the property. Even though you might have signed an AS-IS Addendum, hopefully your buyer’s agent made sure you didn’t sign off your rights to perform inspections. Typically, there is a limited time in which to do your inspections (Inspection Period), but what prevails is what’s in writing. It’s absolutely imperative to do a home inspection as well as a termite inspection. Standard AAR Purchase Contract language gives the buyer an opportunity to cancel the contract and receive a refund of earnest money if anything big, bad or ugly is discovered during the Inspection Period. Please do NOT construe anything in this post as being legal advice, as each contract and addendum is unique to each seller and buyer. If you have doubts, consult with your real estate agent and/or attorney.
I’ll wrap up by telling you that just because a home buyer signs an AS-IS Addendum on a bank owned property, it doesn’t necessarily mean they have no other options. We’ve now negotiated several exceptions to sellers’ AS-IS policies and addenda.
One of my favorite examples is a home that had three (3) covered patios/balconies that on the report of an outstanding home inspector, had little to no life expectancy. The estimated cost of repair/replacement of the patio covers was somewhere in the $15,000 range – much more than the buyer was prepared to suffer. In spite of the AS-IS Addendum, we submitted the inspection report to the listing agent, along with a formal request that the seller repair or replace the patio covers. Guess what –> the seller agreed, and 3 days later all 3 patio covers had been professionally rebuilt, and the transaction closed on schedule. What do you know – a win/win for both parties!
The moral of this story is that in spite of all the attempts by sellers to avoid any responsibility for any property condition(s), AS-IS is not necessarily set in concrete. If you as a home buyer are ever faced with a seemingly frustrating and bitter situation, be sure to have your buyer’s agent at least ask! After all, at that point what do you have to lose?
