WASHINGTON — Take it or leave it, the two small words say.
When a seller lists a home “as is,” it means he can’t or won’t negotiate with the buyer over any fixes or credits. The buyer can get an inspection and make an effort to know what problems there might be, but he’s agreeing to take it without repairs.
Just about everything needed repairs in Mark Mueller and Charles Martinez’s Washington home when they bought it last year. The four-story house had been gutted, its staircase, appliances and cabinets ripped out, leaving holes in the floor. It was sold “as is” by a developer who wanted to walk away, said Mueller, 42, who manages clinical research. The lack of things that could break worked in his favor, he thought: “We had the really great advantage of having it gutted, where we didn’t have anything hidden.”
The standard sales contracts say appliances; heating, cooling, plumbing and electrical systems and equipment; and smoke and heat detectors must be in “normal working order” when a house is sold. Art Konopka, a real estate lawyer in Washington, D.C., said that, legally, it means only that the refrigerator cools food and the freezer freezes water, not that the appliances are free of bumps and wheezes. Typically, if one of those systems doesn’t work, the seller must fix it. Buyers can negotiate to get sellers to make other repairs, as well.
But if a seller adds the “as is” clause to the contract and the buyer agrees to it, nothing needs to work properly.
“They’re saying, ‘Come get it, come look at it,’ but under the contract, I’m not required to repair anything,” real estate agent Adrian Hunnings said.
Mueller and Martinez, 30, a registered nurse, had a contractor walk through the house before the contract closed but did not order a home inspection. And although they have had no major surprises in the renovations, real estate agents and lawyers still recommend that buyers get an inspection.
“Generally, there’s more risk associated with an ‘as is’ purchase, so it requires greater due diligence, greater inspection,” said Stuart Kaplow, a real estate lawyer in suburban Towson, Md. “But it may not mean there’s anything more wrong with the property.”
If problems are found during the inspection, the buyer can walk away from an “as is” deal within an allotted amount of time specified by the contract.
These days, owners of homes listed “as is” are often banks, which have taken them back through foreclosure, or distressed owners trying to achieve a “short sale” for an amount less than what they owe on the mortgage.
Glen Baird, principal broker at VirginiaMLS.com Realty in suburban Fairfax, said sellers often list homes “as is” because they don’t want to have to spend $5,000 or $10,000 to fix problems they know about.
If sellers know of something wrong with the property that would not be found in a normal inspection, they must disclose the defects. Not disclosing them could be fraud, Konopka said.
But bank-owned properties could have been vacant for months. Although a homeowner might know that the basement leaks, the bank probably wouldn’t. And that means the buyer wouldn’t know, either.
“There’s a slightly added risk factor there,” Hunnings said.
Not all foreclosures are take-it-or-leave-it. David Sunlin, senior vice president in charge of bank-owned properties for Bank of America, said his company doesn’t necessarily sell homes in “as is” condition.
“We make a conscious effort to try to bring all properties up to what we consider to be neighborhood standards,” Sunlin said.
That helps the bank get a price that’s closer to market value, he said. Bank of America also complies with all state disclosure laws, though Sunlin acknowledged that the company doesn’t have as much opportunity to know about problems with homes as an owner-occupant might.
Find out as much as you can before buying an “as is” property, real estate agents and lawyers advise. Ask neighbors if they know of any problems with the home, and be particularly cautious of anything that looks odd or poorly maintained.
A knowledgeable neighbor helped Mueller and Martinez, who paid $360,000 for the home and got a $300,000 construction loan. Work, which included adding cabinets and bath fixtures, underpinning the foundation and adding a deck, should be completed soon.
Their agent, Suzanne Des Marais, cautioned against shopping for “as is” properties solely online because “as is” could mean just about anything.
“It could be from the range of ‘you could move in and live in it once you turn the utilities on’ to ‘you need to completely gut and renovate it,’ ” she said.
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