Purchasing A Property In As Is Condition

With an increase of Real Estate Owned (RE0) and short sale properties in the market place, we are seeing an increase of properties being listed and sold in their “as is” condition. Is this a red flag and should a buyer be concerned?
In California, most brokers use the Residential Purchase Agreement, which has an “as is” clause stating the property is sold in its present physical (as is) condition. The simple explanation of these two little words is the property is being sold without any warranty and in its present physical condition.
Just because a property is being sold in an “as is” condition, it doesn’t necessarily mean there is something wrong. Every property purchase is unique and there are things to take into consideration prior to making an offer.
Is the property an REO (Real Estate Owned) property? Usually, with bank owned property, the bank does not know the history of the property. When the bank states that the property is sold “as is” they are normally saying we don’t know what is wrong and don’t ask for any repairs.
Is the property being sold as a short sale? When the seller of a short sale property states the property is being sold “as is”, they are making no warranties or representations, and they too will not pay for any repairs. Remember, the seller of a short sale property has a hardship and the seller commonly has no money to make repairs.
The home could be an older home or a fixer-upper that needs lots of renovation and the seller just doesn’t want to bother with the fixes. He may also feel it better to let the buyer decide on how the repairs and or updates and remodel will be done.
The seller may have inherited the property, never lived there and has no history with what the possible defects could be.
A property that is sold “as is” underscores the importance of having a home inspection. Whether a property is sold “as is” or not, a buyer should always have a professional inspector look at the property. It is also important the buyer have the opportunity to walk through the property with the inspector after he has done his inspection. This is the buyer’s opportunity to ask questions and view exactly what the inspector is referring to in his report.
In California, a seller is required to disclose, disclose, disclose. This is stated three times to emphasis it’s importance. A seller provides the buyer a detailed report called the Transfer Disclosure Statement. In addition to this report, the seller provides any and all inspections they have done on the property. It is the sellers responsibility to disclose any and all material facts about the property. Particularly things that would not be easily discovered by an inspector or the buyer. An example of this would be, the neighborhood has hundreds of children, who trick or treat in the neighborhood every Halloween. Just because a seller discloses everything he knows about the property, it doesn’t mean he has to fix it.
If, during the buyer’s due diligence, the inspection reveals significant defects, the buyer can certainly draw it to the attention of the seller. Sometimes a defect may be found that the seller honestly wasn’t aware of. In this situation, the buyer has a few options. He can submit a request for repair, obtain a credit for the estimated cost to make the necessary repairs or withdraw the offer.
Should a buyer stay away from an “as is” sale. I don’t think so. The important thing every buyer needs to remember; do your due diligence, get your reports and ask lots of questions.