Real Estate of Mind: "As Is" - Hawaii News Now - KGMB and KHNL

Real Estate of Mind: "As Is"

Posted: Updated:

HONOLULU (HawaiiNewsNow) - While shopping for your next home, you may see a property that's being sold "As Is". Coldwell Banker Realtor Associate Peter Van De Verg joined us on Sunrise this morning to explain what that means. Check out the video and Peter's outline of important points below.

An As-Is Addendum may be included in real estate contract.  

  • An As-Is Addendum says that the Seller is not making any warranties on the property and is not obligated to make any repairs or upgrades to the property.  The Seller is still obligated under state law to make full disclosure as to their knowledge of the property EXCEPT for bank-owned properties which are exempted from the disclosure law. 
  • It recommends that buyers inspect the property, the sellers' disclosure and public records regarding the property carefully. 

What does As-Is mean? 

  • Most people think it means that the seller will not do any repairs in an ‘As-Is' contract, but it is more complicated than that.  Realtors often add a one-page ‘As-Is' Addendum to purchase contracts when making an offer for their buyers in order to make the offer more attractive to Seller.  This makes sense for the seller who may be selling a 50 year old home.  Even if it has been upgraded, the seller can not possibly know all the history of upgrades and modifications on the property. 
  • You will not see an ‘As-Is' contract on purchases of a new home from a developer because they have to offer a warranty on newly built homes. 
  • With bank-owned properties – that is properties that have been through foreclosure – the bank sellers will require not only the one page addendum, but they will add another much longer addendum of their own including stronger ‘as-is, where-is' language because these properties often have condition issues and the banks do not have personal knowledge of the properties.  But even with an As-Is contract, the condition of the property can come up as an inspection or appraisal issue during escrow. 

What if a lender for the buyer requires improvements?

  • That will vary from seller to seller and may depend on the buyer's inspection and appraisal. 
  • Some bank-sellers will not spend a dime on the property even if the appraisal requires an improvement; they will let the buyers cancel the purchase as their only recourse. 
  • On the other hand, most regular homeowners will want to do a repair if it is arises from a health or safety issue that comes up during the inspection or appraisal.  Examples are maybe there is a hidden plumbing leak that is causing wood rot in the structure, or maybe there is a problem in the electrical wiring that is a fire hazard.  Often a seller would rather do a minor repair, even though they are not obligated to under an As-Is contract, just to get the deal closed and not have to re-market the property.

Who decides whether to do repairs?

  • With bank-owned properties, some banks will do repairs prior to marketing the property, but many will not.  It can be frustrating for us as Realtors sometimes because we know that if they just did some minimal upgrades, they could get a lot more value out of the property.  But if it is against their company policy, there is nothing we can do.  
  • With regular homeowners, even in an As-Is deal, there are sometimes repairs that are negotiated either at the time of the inspection or when the appraisal comes in.

What happens in an As-Is Transaction?

  • Once the contract is accepted, the buyer usually has about 10 days to do their inspections. 
  • Most buyers will rely on a professional home inspector to inspect the property and write a report for them.  The inspector may recommend additional inspections for things like electrical or plumbing issues or maybe the pool equipment needs a closer look. 
  • The buyer will also get a disclosure statement from the seller, unless the seller is a bank selling a foreclosed property. 
  • The buyers need to review inspections and disclosures carefully before deciding whether to proceed with the purchase or cancel the contract.  Once they decide to proceed, they need to follow the other contract guidelines including provisions for financing, title insurance etc. and close the deal in a timely manner.

 Example Property

  • The listing we are looking at here is the lowest priced view property in Kailua and even though it is in good condition with recent upgrades to the electrical system, newer custom cabinetry and a nice yard, we are looking for an ‘As-Is' contract on it because it is a 50 year old home that has had many upgrades over the years that were done by previous owners.
  • It has 4 bedrooms and 2 bathrooms and is priced at $663,000.

Copyright 2012 Hawaii News Now. All rights reserved.