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What does it mean to purchase a home in “as is” condition?

The term “as is” has changed somewhat over time. It is also used somewhat differently in REO (Real Estate Owned by the bank) and institutional real estate sales than it is in the normal standard residential property sale. I find that the public is often confused about this issue.

You would have to be living under a bridge somewhere to not be aware of the real estate downturn of the last few years and the resulting rise of distressed property sales. Savvy investors and lucky buyers started buying distressed properties before the bottom hit and the pool of real estate buyers increased dramatically. When a buyer purchases a bank owned (REO) property the bank usually has a lengthy addendum which spells out the “as is” terms. The bank means what it says. It typically would make NO REPAIRS. There would be NO TERMITE repairs done. In addition there would be NO SELLER DISCLOSURE of property condition. Buyers do have a short contingency period in which to back out of the contract. REOs and short sales have fallen to only about 3% of the inventory today.


Today the California Real Estate Purchase Contract reads (page 4 paragraph 9) this way. “…unless otherwise agreed to, the property is sold in its Present Physical Condition (As Is) as of the date of acceptance.” The sale is also subject to buyer investigation. The seller (on properties of 1-4 units) must fill out certain statutory disclosures and provide them to the buyers. Also anything negative that is discovered by the seller during the time of the contract must be revealed by the seller as well. The seller must maintain the property in substantially the same condition as of the date of acceptance.

The buyer may perform inspections and, as a result of the inspections, either cancel, go forward or request that the sellers make repairs. At this point the two principles are back in negotiations. The seller does not have to agree to any repairs but sellers will usually comply with reasonable requests that involve safety or malfunctioning mechanical or plumbing conditions.

As a negotiating tool in multiple offer situations the buyer may make his offer truly “as is” by specifying that he will “not make any repair requests”. The buyer does not give up the right to back out of the contract based on inspections.

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