As-Is Properties: What Does That Mean?
While looking for homes, buyers will sometimes come across a property listed “as-is” or have to make an “as-is” offer to get a home they love under contract. So what does as-is mean exactly? An as-is offer means you can have an inspection, but you are not supposed to ask for any concessions, repairs, credits, or price reductions based on the inspection results – what you see is what you get. There are some safeguards to protect you when purchasing an as-is property.
Should I have an inspection?
As a buyer, you have the opportunity to have an inspection during the inspection period and you should. After all, you did not waive inspections. In Indiana, we use an as-is addendum that is provided with an offer spelling out the timeline and terms of an as-is purchase. A defect in Indiana is, in short, defined as a condition affecting the health or safety of inhabitants or significantly shortening or adversely affecting the life of the home. If a defect is revealed during the inspection that was not previously disclosed, you have the opportunity to walk away from the sale and request a refund of earnest money. Typically, when a buyer goes into an as-is situation they know what they are getting into minus what isn’t easily determined in a walk-through of the home unless the seller has provided an inspection. In some cases, there are more defects revealed than the buyer is comfortable addressing or can address due to budgetary constraints.
Should I provide an inspection response?
If you find that the number or magnitude of defects is too great to address and that has changed your desire or ability to purchase the home, then I suggest providing a response. If the situation is too extreme and you don’t want the home, then walk away as the as-is addendum provides for that. However, if you still want it, but are not willing to move forward at the agreed upon terms then I recommend providing a response. If the seller is not willing to consider the response, then they can terminate the contract on their own accord and must return the earnest money to you per the language in our as-is addendum. The reality is that whatever is causing you to want to walk is likely going to be something that will now have to be disclosed to future buyers and it may be worth it to the seller to preserve the deal in hand. Sellers still need to disclose any and every issue with the house, regardless of the as-is sale.
Is an as-is sale for me?
As-Is properties can sometimes be a good deal, but if you don’t have a good handle on what the costs are to make repairs or updates that you think need done plus some extra cash for unforeseen items that come up on an inspection, this may not be for you. You need to ask yourself how comfortable you are with an as-is offer knowing a seller is not planning to address or share the cost of inspection items. The idea is that the price is such that it is accounting for the work that needs done. Not every buyer has the stomach for this, emotions can get in the way of whether you should move forward. Buyers ultimately have the power to pull the plug on as-is deals with little to no consequences. Like I tell my sellers, it’s not always the best path if you want to get to closing. I have tips for sellers that I share to minimize the risk of an as-is deal.
Please let me know if I can answer any questions about “as-is” sales!