As Is Real Estate Contract – Serious Problems

An As Is Real Estate Contract can sometimes lead to serious problems. This type of purchase agreement is typically used by Professional Rehabbers and Landlords. It is not usually recommended for the average home buyer but it is not uncommon for them to enter into one without fully understanding the intent of the language in this type of contract.

We will take a look at this from the purchaser’s point of view but if you are the home seller, you may want to consider the implications this type of misunderstanding could have on the potential sale of your property.

A true As Is Real Estate Contract means you have agreed to buy the property in its current state. There is no right to terminate the contract due to the condition of the property. If this is your intention when you enter into the agreement to purchase the property, that is fine. However, many homebuyers think that they are simply agreeing the seller will not have to do any repairs but that they still have the right to inspect the property and canceled the agreement if the house needs more work than they originally thought it would. You can hire all of the home inspectors you want to but you have already agreed to purchase the property “as is”.

If you breach the contract, that is you do not purchase the property, you will probably lose your earnest money deposit and can be sued for damages. You took the seller’s property off of the market, agreeing in writing to buy it “as is”. Now you’re backing out of the deal. They have missed out on other potential buyers and will be starting the marketing process all over again, so the court may award money damages in their favor.

This is usually not an issue with the type of purchasers this contract was intended for: Flippers, Rehabbers, Landlords and other real estate professionals. They can do a quick inspection of the property before they make the offer or sign a contract to purchase. Most of them are experienced enough to recognize whether the home simply needs paint and carpet or it is going to be a complete remodel job. They usually are also “big boys” in the game of real estate and understand the risk of making this kind of offer.

If you are wondering why they would make this type of offer in the first place, it can give them huge leverage on price negotiation. They are basically saying – I am buying the property no matter what we find wrong with it.

If you are the standard homebuyer and do not wish to commit to this type of contract, the solution is simple. Do not check the AS IS box. Explain to the seller that you understand they do not want to do any repairs to the home and you are more than happy to enter zero dollars ($0.00) into the seller required repairs blank. But you do want the right to inspect the property and be sure you are fully aware of its condition. Also assure them that you will have the inspection performed quickly and let them know immediately if you find something that would cause you to terminate of the contract.