Occasionally, you will see a listing with the notation that the property is being sold “as-is”. Some buyers will see this and immediately head for the hills. Others will view it as an opportunity. What does it mean and why would a seller employ this in their selling strategy?
Essentially, stating that the property is “as-is” implies that the seller is not making any warranties or representations about the property. As in the sale of any other property, the seller must disclose any latent defects that may be present in the property; however they are also saying that they will not take financial responsibility for any problems that may be obvious or that are uncovered in the inspection.
Many potential buyers will assume that the home is either a disaster or that the seller is hiding something with the hope that it won’t be uncovered in the inspection. Sometimes this is a valid fear, but there are a variety of reasons why a seller may choose the “as-is” route:
· In some situations, the seller has not lived in the home for a very long time and does not feel they are familiar enough with the property to identify the potential issues
· Often in an estate, the executor will choose to sell “as-is” because of their unfamiliarity with the home
· Sometimes the seller is financially unable or just doesn’t have the time or energy to have repairs made prior to putting the home on the market
· The participants in investment property may not be aware of potential issues
It’s important to note that in spite of the “as-is” designation, it is still crucial for the buyer to have a thorough home inspection performed by a qualified inspector. If the buyer finds through the inspection process that there are greater problems than they had envisioned, the buyer has the right to attempt to negotiate with the seller to either repair or remunerate the buyer for the cost of the repairs. As is the case in any real estate contract, if the inspection findings cannot be successfully negotiated, the contract can be nullified.
Essentially, stating that the property is “as-is” implies that the seller is not making any warranties or representations about the property. As in the sale of any other property, the seller must disclose any latent defects that may be present in the property; however they are also saying that they will not take financial responsibility for any problems that may be obvious or that are uncovered in the inspection.
Many potential buyers will assume that the home is either a disaster or that the seller is hiding something with the hope that it won’t be uncovered in the inspection. Sometimes this is a valid fear, but there are a variety of reasons why a seller may choose the “as-is” route:
· In some situations, the seller has not lived in the home for a very long time and does not feel they are familiar enough with the property to identify the potential issues
· Often in an estate, the executor will choose to sell “as-is” because of their unfamiliarity with the home
· Sometimes the seller is financially unable or just doesn’t have the time or energy to have repairs made prior to putting the home on the market
· The participants in investment property may not be aware of potential issues
It’s important to note that in spite of the “as-is” designation, it is still crucial for the buyer to have a thorough home inspection performed by a qualified inspector. If the buyer finds through the inspection process that there are greater problems than they had envisioned, the buyer has the right to attempt to negotiate with the seller to either repair or remunerate the buyer for the cost of the repairs. As is the case in any real estate contract, if the inspection findings cannot be successfully negotiated, the contract can be nullified.
Please keep in mind; we are not attempting to provide legal advice here. For a legal opinion on this topic, please consult your attorney.
2 comments:
Are 'as is' property sellers required to furnish the two standard disclosure documents to prospective buyers? (I am thinking of the lead based paint disclosure and the residential property disclosure.)
Thank you.
Great question. Yes, all sellers are required to make those disclosures with several exceptions.
This is going to be a long winded response, but according to the Illinois Real Property Disclosure Act, the following provisions do not apply to the act:
(1) Transfers pursuant to court order, including, but not limited to, transfers ordered by a probate court in administration of an estate, transfers between spouses resulting from a judgment of dissolution of marriage or legal separation, transfers pursuant to an order of possession, transfers by a trustee in bankruptcy, transfers by eminent domain, and transfers resulting from a decree for specific performance.
(2) Transfers from a mortgagor to a mortgagee by deed in lieu of foreclosure or consent judgment, transfer by judicial deed issued pursuant to a foreclosure sale to the successful bidder or the assignee of a certificate of sale, transfer by a collateral assignment of a beneficial interest of a land trust, or a transfer by a mortgagee or a successor in interest to the mortgagee's secured position or a beneficiary under a deed in trust who has acquired the real property by deed in lieu of foreclosure, consent judgment or judicial deed issued pursuant to a foreclosure sale.
(3) Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust.
(4) Transfers from one co‑owner to one or more other co‑owners.
(5) Transfers pursuant to testate or intestate succession.
(6) Transfers made to a spouse, or to a person or persons in the lineal line of consanguinity of one or more of the sellers.
(7) Transfers from an entity that has taken title to residential real property from a seller for the purpose of assisting in the relocation of the seller, so long as the entity makes available to all prospective buyers a copy of the disclosure form furnished to the entity by the seller.
(8) Transfers to or from any governmental entity.
(9) Transfers of newly constructed residential real property that has not been occupied.
(Source: P.A. 88‑111.)
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