What is an AS IS property?

If you are one currently keeping your eye on the available listings in your preferred location of choice, you may have come across as a part of the description showing the term ‘AS IS.’ What does this mean and what implications are there as a buyer of real estate.

The term AS IS refers to the property being sold ‘in its current state and condition.’ No repair requests will be accepted, no cleaning or no hassle in preparing the property to the likes of the buyer. Hmmm. Does that seem fair? Well let’s break this down. . . .

Ease for Seller: Most of the time, a property being sold AS IS simply has either too many repairs needed, or the seller isn’t prepared either financially, or feasibly to take the time to do the repairs. In most cases, the seller just needs to get it sold. Easy and as quick as possible.

Time and Money A: For the standard real estate sale, there is a lag between the time an offer has been accepted and the day of closing so that the buyer and seller have time to negotiate repairs needed based on a professional inspection being completed. The process of the completion of these processes can take a few weeks or longer depending on the amount of time needed to do the inspection and getting a contractor out to do the repairs. The lag time could be between a couple weeks to a couple months again, depending on the repair work. And, contractors in most cases want to be paid up front. So between the time it takes to get the repairs done and the amount of money the seller needs to come up with, an AS IS sale removes much of these barriers.

Time and Money B: On a traditional real estate sale, the longer it takes to sell a property means more money paid out in pre-paids and mortgage payments. Pre-paids are things like property taxes, insurance and the like. The owner of the property makes payments ahead of time, in most cases. Once the property closes, those items that were paid in advance, will be refunded back to the seller and prorated for the buyer. The longer the process is delayed due to inspections and repair negotiations, the less the seller gets back from these pre-paids, and the less they have to pay towards their mortgage. For the seller, this is a benefit. An AS IS sale can close quicker based on the financing terms of the offer, though it is not always the case.

Terms of Payment: Many times a buyer comes to the offer table with a cash payment because the buyer sees the value in the property to do so (usually much less than market value). Obviously, Cash payments are great because it doesn’t require a bank to underwrite a loan, which takes time and is a bit of risk of the financing getting fully approved. The buyer often has cash on hand to pay outright for the property. Quick and easy. Sellers in a rush for cash love this kind of offer.

Buyer Liability: Buyers may still request an inspection in the offer and do their due diligence of an inspection, but they simply don’t have the option to request repairs from the seller. Based on how the contract is written up will determine if their Earnest Money is refundable when an inspection is unacceptable. How the original contract is written up in critical to protecting the buyer from a loss of Earnest Money. As a Clark County Realtor, I ALWAYS encourage my buyers to do an inspection contingency so they know what kind of problems are present and they have an option to back out and get their Earnest Money returned to them. But in the end, Buyer does take on the liability of repairing anything substandard in the home once the home closes and is recorded by the County.

As you can see there are some nuances to an AS IS property that need to be understood. We all need to also consider the fact that an inspection on a property never uncovers everything. Inspectors can’t look behind walls and insulation around every inch of the home. There are often surprises in all homes that are sold, but AS IS homes bring a greater level of risk to the buyers, but often at a great purchase price.

For more information about buying or selling a home AS IS, please reach out to me. I am dedicated to doing my best to protect my buyers and sellers during every step of the process.