The real estate industry has its own unique language that can sometimes be confusing. One term that comes up a lot, especially in these times of bank-owned properties, short sales, and foreclosures, is “as is” and its variations “where is”, and “in its present condition”. There are some agents who feel that part of the reason we see “as is” cropping up more and more is because more buyers are being coached to use the home inspection as a reason to reopen negotiations (sometimes justified, sometimes not) and that sellers and their agents, who may have already lowered the price several times, are using it as a tactic to close the door on this practice.
This is not a term to be used lightly by sellers, because there are costs as well as benefits, and if you don’t know what it really means, you shouldn’t use it. Sellers commonly mistake “as is” as a way to avoid making any repairs, rationalizing that a lower asking price will reflect the condition and eliminate expectations. Buyers, however, tend to interpret “as is” differently. There are two common negative reactions that have serious consequences to a seller’s ability to sell: first, buyers sometimes take it as a sign of blood in the water and think that they can bargain way down from the asking price because they are now suspicious that many things are wrong with the house; and second, they will be very wary of “as is” houses and even avoid viewing them or putting in any offer for fear of hidden defects that will require a lot of time or money. You might be better off without using that clause and instead having your agent stress that at the agreed selling price the home inspection will probably not result in repairs or a price reduction on the part of the sellers.
“As is” is actually a legal term and concept used to disclaim liability for the condition of the house being sold. It says that the seller is selling and the buyer is buying the house in whatever condition it presently exists, and that the buyer is accepting the house “with all faults”, whether or not immediately apparent. It is most commonly (and correctly) used in estate situations, selling rental properties or when banks or relocation companies own the property … the sellers have never/not recently lived in the house and have no first-hand knowledge of any issues/defects. In Massachusetts, the seller and their agent must disclose any known defects in the property in an “as is” purchase, but they don’t have to disclose what they don’t know. Seller’s gents are generally very good at disclosing known defects, but buyers should know that agents are required by law to answer direct questions honestly and to the best of their knowledge, so when in doubt – ASK THE QUESTION.
And last, when buying any home the buyer must take the time to thoroughly examine the home before accepting it, but buying a home in “as is” status is the ultimate “buyer beware” situation. That means obtaining expert home inspection(s) and legal advice and doing what their experts recommend. It also means checking with your mortgage broker to make sure their institution will finance an “as is” purchase – many won’t.
In closing, buyers should clearly understand that their contract to purchase any “as is” home is contingent upon acceptable inspection(s) and that they can take the house or walk-away but the seller is under no obligation to re-negotiate or correct any inspection issues no matter how severe.
I have represented many sellers and buyers with “as is” homes and done right the transaction can work out amicably for both parties.