Why You Should Beware the 'As-Is' Real Estate Clause When Buying a Home
Are you trying to sell your Niwot, Colorado home but don't want to deal with later repair requests from a buyer about problems with the property? Or maybe you're a buyer who is concerned about what happens if the seller purposefully conceals a defect in the property that you discover after you've signed a home purchase contract with an as-is clause. Even when working in higher-dollar neighborhoods such as Legend Ridge, there are certain things both sellers and buyers should know about what an as-is clause actually represents.
What is an As-Is Real Estate Clause?
An as-is real-estate clause is an addition to a real-estate contract that puts the burden on the buyer to use their own resources to determine the condition of a property rather than relying upon the seller to discover and disclose any problems. It is essential for both parties to understand that an as-is clause does not permit dishonesty on either side of the deal. While sellers are still required to disclose any known issues in most cases, buyers should always do their due diligence to ensure they have as much information as possible before moving forward with a real estate transaction.
What Does an As-Is Real Estate Clause Entail?
Contrary to popular belief, an as-is clause in a home purchase contract could mean a number of different things. For a seller, it could mean what you've seen in the house is what you should expect to get. Alternatively, a seller could be trying to tell a buyer that he or she is refusing to make any representations on the condition of the house whatsoever.
What is the Risk of Buying a Home With an As-Is Purchase Clause?
As a buyer, the main concern tends to be worry about a seller's purposeful concealment of a latent defect of the property. This concern is viable in many ways, because it could end up costing a buyer a lot of money to fix that problem. Most states, however, protect against this very situation by making void an as-is clause in a home sale contract if the discovered defect is both material and was known about on the seller's part. Another instance where an as-is clause might be found is in the event of a short sale.
A short sale occurs when a homeowner can no longer afford to pay the bank's mortgage on the owned property. In lieu of a foreclosure proceeding, the bank gives the homeowner the opportunity to try to sell the property at a price that is lower than what is still owed on the mortgage. If both the bank and seller approve the buyer's offer, the house is generally sold as-is.
How to Protect Yourself When Buying a Home "As Is"
One important thing to note is that just because a house is sold with an as-is clause, this doesn't mean a buyer can't request a home inspection before signing the contract. In fact, any buyer who is concerned about the shape the house is in should insist upon the offer being contingent upon a home inspection. While the discovery of a defect will not require a seller to repair it absent other contractual agreements, it does give the buyer the opportunity to back out of the home sale if he or she determines the cost of fixing the home would be too high.