Understanding ‘AS IS’ in Real Estate: What You Need to Know
What Does ‘AS IS’ Mean?
The term ‘AS IS’ in the context of a sale, often in real estate, signals that the property is being sold in its current condition with no guarantees or warranties regarding its state. This means the buyer or tenant agree to accept the premises, including any physical defects except for latent defects which may not be visible or obvious upon standard inspection.
Implications of ‘AS IS’
When a property is sold ‘AS IS,’ it is a clear indication that buyers must exercise greater diligence. The seller will not be responsible for repairing any issues found post-sale. Consequently, potential buyers need to conduct thorough inspections and possibly hire professional inspectors to identify any problems that may affect their decision.
Example Scenario:
Emily purchases a historic house from John with the stipulation that the house is conveyed ‘AS IS.’ After moving in, Emily discovers that the electrical system is outdated and unsafe. Under the terms of the ‘AS IS’ agreement, John is not legally obligated to repair or replace the electrical system.
Conducting Due Diligence
Steps for Protecting Yourself as a Buyer:
- Hire a Qualified Inspector: Always enlist the services of a certified inspector to conduct a comprehensive evaluation of the property. This includes checking the structural integrity, plumbing, electrical systems, and any other areas susceptible to damage, such as the roof or foundation.
- Review Disclosures: Ask the seller for any available property disclosures. Although the property is sold ‘AS IS,’ the seller might still reveal known issues that could influence your purchasing decision.
- Consult a Real Estate Attorney: To mitigate future disputes, it’s frequently beneficial to consult with a real estate attorney who can oversee the agreement terms and identify any potential pitfalls.
Frequently Asked Questions (FAQs)
What types of issues are considered latent defects?
Latent defects are those problems not immediately observable or discoverable by routine inspection. Examples include mold hidden behind walls, foundation issues, or faulty plumbing within the structure of the house.
Can I negotiate the price if I find significant issues during inspection?
While selling a property ‘AS IS’ generally means the seller does not intend to make any repairs, buyers can still negotiate the sale price based on the inspection findings. The seller may be inclined to lower the price or offer other concessions given the discovered issues.
Is an ‘AS IS’ sale common in all real estate markets?
The frequency of ‘AS IS’ sales varies between markets. In distressed property markets or in cases where sellers hope to offload property quickly, ‘AS IS’ sales might be more common. Always discuss the state of your local market with a real estate professional.
Related Terms: CAVEAT EMPTOR, LATENT DEFECTS, real estate contracts, real estate transactions.
