Andrew Wetzel's Musings

March 20, 2019

Selling and Buying Real Estate “As-Is”

Filed under: Buying,Ethics,Selling — awetzel @ 5:33 PM

One of my favorite expressions in Real Estate is “as-is”.  Unfortunately, it means different things to different people.  I don’t hear it as often as I used to but it comes up every now and then so I decided to discuss it.  I am not an attorney so this is NOT intended as legal advice.

Let’s look at the term from the seller’s perspective first.  When a seller tells me that they are selling their property “as-is” they typically mean that they will do no repairs. Whether they price it low to sell fast or they do not want the inconvenience or expense of making repairs for a sale that may fall through does not matter.  I prefer that we disclose their intention up front to avoid any confusion or time wasted with a buyer who insists on repairs.  At the very least, the seller’s intentions should be made know once the start to negotiate an offer.

Some have used the term “as-is” to mean that they do not want to complete the property and lead-based paint disclosures which are required by law.  The term “caveat emptor” or “buyer beware” does not mean that the seller can withhold knowledge about material defects or environmental hazards.  I have been mediating disputes between buyers and sellers since 2002 and, other than buyers and sellers trying to resolve who gets the deposit money when a sale falls through, many of my mediations have involved a buyer who thinks that a seller failed to properly disclose something to them.  In PA the law requires that sellers disclose “material defects” in their property in writing to prospective buyers so that they can make an informed decision before making an offer.  There are exceptions to the law.  In addition, there is a federal lead-based paint disclosure form for houses built before 1978 and I am not aware of any disputes regarding how that form has been used.

From the buyer’s perspective, in addition to reviewing the disclosure statements, assuming they are available which is not always the case, a buyer has several alternatives if they wish to make an offer on a property with obvious issues which some nicely call “deferred maintenance”.  They can subtract the anticipated costs of addressing the problems from their offer (assuming they can justify the amount they deducted), they can ask a seller to correct specific problems as part of the negotiating process or they can ask for a “seller assist”, assuming they do not jeopardize their ability to finance a purchase or commit mortgage fraud.  Whichever option they choose, the result may turn off a seller or make their offer less competitive if there are multiple offers.  I would respectfully suggest that a buyer not discount an offer and then ask for a repair anyway or avoid mentioning an obvious concern as this may cause a seller to think the issue does not concern the buyer.  Negotiating an offer can be challenging enough without creating a later issue when property inspection issues needs to be resolved.

When a property is marketed, there is a general expectation which is written into two different paragraphs of the PAR Standard Agreement for the Sale of Real Estate.  In paragraph 25 REPRESENTATIONS, the language states that “Unless otherwise stated in this Agreement, Buyer has inspected the Property … before signing this Agreement or has waived the right to do so, and agrees to purchase the Property IN ITS PRESENT CONDITION, subject to inspection contingencies elected in this Agreement.”  In Paragraph 18 MAINTENANCE AND RISK OF LOSS, the language states that the “Seller will maintain the Property … specifically listed in this Agreement in its present condition, normal wear and tear excepted.”  In other words, the buyer is buying what they saw when they walked through the property.  There is a trend in some markets to buy a property “sight unseen” and this can get complicated by the simple fact that a buyer will not have seen the property condition before making an offer or, perhaps even worse, they may be relying on someone else to describe what they are trying to buy.  Later issues with the property condition could get interesting.

Most buyers will do one or more inspections which will offer them three alternatives:  they can accept the property as inspected, they can ask the seller to do repairs/ agree to a “credit” or they can terminate the sale meaning that they do not accept the property “as-is” and will not ask for repairs.  Given these options, I find it interesting that some buyers do not accept that a seller may simply say NO when asked to do any repairs.  I believe that a seller should make their intention to sell “as-is” known up front so that a buyer does not waste their time and money thinking they can negotiate repairs that a seller might have to disclose to the buying public when the property goes back on the active market.  Sellers should not ignore inspection results.  That being said, when a buyer sees “as-is” in the MLS or Internet information, it can make them wonder exactly what the seller knows and expects the buyer to want them to fix.

There is no time for inexperience, empty promises or false expectations!

Remember:  HIRE WISELY!  We are not all the same!

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