What is an “As Is” Home Sale?
At Minchella & Associates, we’ve handled thousands of real estate closings in Chicago. Often, the question arises, what is an as-is home sale?
In short, there are generally two ways to purchase a property: (1) as a full-price contract; or (2) “as is”.
Full-Price Real Estate Contract
A full-price real estate contract implies that the property is in good condition or that the Seller will make most of the repairs to sell it in good condition.
Paragraph 12 of the Multi Board 6.1 contract provides that “The fact that a functioning major component may be at the end of its useful life shall not render such component defective for purposes of this paragraph”. So not every problem needs to be addressed by the Seller.
Generally, we find that Sellers will address some concerns but not others; they may make repairs, give a credit or simply refuse to address the issue. So, a leaky roof will be repaired, but not replaced (although a credit may be given if the roof is at the end of its useful life). A leak may be repaired, but old lead pipes leading into the house might not be replaced. A property that is not brand-new will necessarily have some problems, but the seller is not giving a brand new house to the buyer, so repair issues are a part of contract negotiations.
What is an As-Is Home Sale?
An “as is” contract means that the buyer will accept the property in the condition it is in without requesting repairs or credits. The buyer is still entitled to conduct an inspection and they have the right to terminate the contract if the condition is worse or the expense of repairs appears to be higher than anticipated when the offer was made. It is therefore critical that the time frames for responding to attorney and inspection be met or extended timely.Even if the contract is “as is”, if there is an immediate and dangerous condition – for example a gas leak – the buyer can require the repair be made. Certainly, the seller would want to take care of something as problematic as that anyway.
Real Estate Disclosure Forms
An “as is” contract does not absolve the Seller of properly filling out the required disclosure forms. If the Seller has knowledge of leaks in the basement or roof, or knowledge of radon or plumbing problems, that information must be disclosed. For purposes of disclosure a “seller” does not include a party who has not resided in the property for the prior year. Therefore, it will be more important to rely on the inspection than the disclosure if the property has not been lived In by the seller in the year prior to the contract.
If you are making an “as is” offer, make sure that you budget for the repairs you will need to address on the property. All homeownership comes with the expectation that you will maintain and repair the property. Make sure your budget is sufficient to allow you to make the repairs you are taking on.
Many times an “as is” property allows you to gain sweat equity in a property, but be sure you know what concerns you will need to address. If you are considering purchasing a property as-is, contact Minchella & Associates to learn how to protect your interests.