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Be wary, but don't rule out "as is' homes

 
Published July 1, 1995|Updated Oct. 4, 2005

(ran HP, HS editions)

If you are in the market to buy a home and have been inspecting many homes, sooner or later you will see one offered for sale "as is." These "as is" homes are usually older and in obvious need of repairs.

You ask the realty agent, "What does "as is' mean?" He or she will probably reply something like, "Well, the seller doesn't want to pay for any repairs" or "The seller isn't sure of the home's condition." But "as is" means more than that.

Statutes and court decisions in most states now require home sellers to tell buyers about known defects in the property. The best real estate brokers even try to get their home sellers to voluntarily fill out additional multipage, detailed disclosure forms.

The reason for these required and voluntary disclosure forms is to prevent buyer lawsuits against sellers and realty agents after the sale closes and the buyer discovers something wrong with their home.

But even in "as is" home sales, sellers and their realty agents must disclose known defects. An "as is" sale is not a legal method for sellers to hide discovered defects.

However, an "as is" sale does mean the seller and realty agent make no warranties or representations as to the condition of the home. In addition, "as is" means the seller will not pay for any repairs. However, there is usually a very good reason for an "as is" home sale.

For example, the seller of a run-down fixer-upper "as is" house may know the leaky plumbing needs replacement but she doesn't have the necessary funds. Or the home seller might not be familiar with the home, such as an heir who recently inherited it, and doesn't want to put money into fixing up the house.

When I was a young whippersnapper buying my first "as is" rental house for investment in the late '60s, I quickly learned "as is" really means "watch out." This was in the old days of "caveat emptor," which means "let the buyer beware."

The house had been repossessed by a bank. When I expressed an interest in buying it, the realty salesman became very anxious to quickly get my signature on a sales contract. He didn't want me to inspect the house too closely, probably fearful I would discover its hidden, as well as obvious defects.

After closing the sale and obtaining possession of this fixer-upper house, during the first rain I quickly discovered one of the home's major defects. Thankfully, the roof didn't leak. But the back yard sloped downward toward the house and there was no place for the water to drain away.

Until I figured out what to do, after each rain there was a mini-lake in the back yard. Fortunately, for less than $100 I had a drain installed to solve this problem, which the tenants said had existed as long as they lived in the house.

Although a few other hidden defects became evident after my purchase, that bargain-priced property turned out to be a very profitable investment. But looking back, I should have been more careful.

If a home seller instructs the realty agent to offer the property for sale "as is," that decision is not made without considerable thought. Advertising a home "as is" casts doubt on the property and definitely does not enhance its desirability or market value.

But, as I discovered, "as is" homes can be bargains if not too many things are wrong. The best way "as is" home buyers can protect themselves is to include in their purchase offers a professional inspection contingency clause.

After the seller accepts the purchase offer with an inspection contingency, then the buyer has the right to hire a professional inspector to thoroughly check the residence for defects. Smart buyers accompany their inspectors, who will point out defects discovered and the cost of repair.

What looks like a serious defect, such as a crack in a chimney brick, can often be safely repaired at minimal cost. Or the inspector might discover a serious defect, such as an unsafe chimney, which must be replaced. If the seller won't agree to pay for repair of serious defects discovered by the inspection, then the buyer can cancel the sale and obtain prompt refund of the good faith earnest money deposit. Further "as is" realty sales details can be obtained from your real estate attorney.

Robert J. Bruss is a nationally syndicated columnist on real estate. Write to him at the Tribune Media Syndicate, c/o the Times, 64 E Concord St., Orlando, FL 32801.