Friday, February 27, 2009

What does As Is really mean?

What does As Is really mean?

When the term As-Is is used in a real estate listing, it is a notice to readers that the seller of the property has taken a position that the condition of the property is not negotiable. It does not mean that the seller has no responsibility for the condition of the property, and it does not necessarily mean that the seller will refuse to listen to reliable information provided with regard to the condition of the property. Contrary to what seems to be a popular misconception, As-Is has nothing to do with a potential purchaser's right to discovery with regard to the conditions of the property.

Sure, anyone can offer to sell anything without offering any representation about or warranty of its condition. Standard purchase contract forms often contain a lot of stuff about condition, but that can be lined-out, leaving no responsibility on the seller and abandoning the purchaser to decide what to do about the condition of the property. Nevertheless, a savvy purchaser will want to know about the condition of the property, and a savvy selling agent will want to ensure the purchaser is aware of those rights and chooses to take action on every one of them, or acknowledges in writing that they have been waived. It is foolish to assume that the notice As-Is stated on the listing is enough to discourage a purchaser from even attempting to discover the conditions of the property and that the As-Is statement in some way automatically protects agents from liability for property condition.

With the recent downturns in residential real estate largely caused by questionable practices in marketing and financing, we are being treated to what seems to be an almost endless stream of foreclosed properties and short-sales. These properties are almost always listed As-Is, since those who represent the properties are only rarely familiar with the properties. Agents bringing purchasers for these properties might be inclined to tell their clients (erroneously) that they have no real right to inspect anything or to do anything but sign a contract to purchase on an As-Is basis. Of course, agents who conduct themselves in this manner are "skating on thin ice."

Meanwhile, sometimes inspectors contacted to do an inspection of an As-Is property are told in advance that the seller is not willing to fix anything. . . as though that information might influence the inspection. Apparently, some agents are under the impression that the purpose of a home inspection is to find conditions for the seller to fix. Professional inspectors are committed to discovering and relating useful information about a property's conditions to their clients, with no regard about who (if anyone) might be responsible for repairs or corrections. Property condition rightfully has an effect on property value, so knowledge about condition (in the hands of a savvy purchaser) should influence the price a purchaser is willing to pay. Conversely, an uninformed buyer might agree to a sale price that does not properly reflect the actual value of the property. If an agent does not encourage his or her client to become as informed as possible, regardless of an As-Is provision in the listing, the difference between the purchase price and the real value might show up on his or her doorstep.

As the ranks of practicing REALTORS® and truly professional home inspectors dwindle, those who remain might look around and identify what characteristics the survivors share. Could it be that real integrity actually counts? Is loyalty to one's client a worthwhile trait, or was cynicism about buyers and sellers more appropriate? Professionalism in practice is now more obviously not just an advertising claim . . . it actually counts! If you are reading this, you may be a survivor. This would be a good time to connect with some of the other survivors in allied fields. Look for appraisers who work hard to develop realistic and defensible estimates of property value. Look for home inspectors who are recognized by legitimate professional associations and who adhere to tough standards above those required by the State. Hang out with people you would trust if you were the purchaser . . . it is part of your job!

Bruce LaBell
Royal Home Inspectors
602.765.2140 Phone
602.765.2142 Fax

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