If you’re in the market for a new property, you may have come across the term “as-is” in property listings. While some buyers may view it as a red flag, others see it as an opportunity. In this article, we’ll take a closer look at what “as-is” really means, the common issues that come with it, and whether “as-is” properties are right for you.
Traditional Sale Transactions
In a traditional sale transaction, the buyer typically has the opportunity to pay for and obtain an inspection of the property’s structural components during the closing period. This inspection can include the foundation, electrical, plumbing, and other areas. A licensed inspector conducts a visual inspection of the property and creates a written report of any issues that require attention. The buyer then reviews this report and decides which items they would like to request the seller to repair and which ones they are willing to accept as a condition of purchasing a pre-existing home. The buyer should not expect a property to have zero issues listed on an inspection report unless it is new construction. Both parties negotiate until they agree on the repair requests or cancel the purchase agreement if they can’t reach an agreement.
What is an “As-Is” Property?
The seller lists an “as-is” property for sale in its current state, indicating they won’t spend additional resources on any repairs or improvements. This often occurs in an estate sale when the decedent’s children are selling a home they have never lived in. If a buyer purchases an “as-is” property, they agree to purchase the property in its current condition. The purchase agreement may still allow the buyer to conduct an inspection, but it is often “for informational purposes only”. This allows the buyer to have knowledge of the home’s condition and defects while assuming the liability for those defects.
Foreclosed properties auctioned off at Sheriff’s Sales represent another common example of an “as-is” purchase. Buyers of these properties often can’t inspect the home’s interior. They agree to a purchase price, understanding repairs may be required.
Common Problems with As-Is Properties
When purchasing an “as-is” property, the buyer is assuming responsibility for any issues with the property. The seller isn’t obligated to make any pre-sale repairs or improvements, so buyers should be prepared for potential issues like:
- Leaking or faulty roofing;
- Termite infestation and damage;
- Minor or major structural issues;
- Mold problems;
- Asbestos present;
- Malfunctioning systems such as HVAC;
- Foundation instabilities; or
- Deteriorating windows.
The number of issues and their significance will vary from property to property. As a purchaser of real estate, it is crucial to understand your rights and obligations provided by a purchase agreement before signing the contract.
Is an “As-Is” Property Right for You?
The decision to purchase an “as-is” property ultimately depends on the buyer’s level of risk tolerance. If a buyer is willing to assume the risk and cost of any necessary repairs, an “as-is” property may be a great opportunity to purchase a property at a lower price than other comparable properties. However, buyers should keep in mind that the cost of repairs and renovations can quickly add up and should be factored into their decision.
Conclusion
In conclusion, “as-is” properties can be a great opportunity for buyers willing to assume the risk of repairs and renovations. However, it is essential to fully understand what “as-is” means and the risks involved. If you have any questions about buying or selling residential real estate in Iowa, please contact Danilson Law.
