Whatever Happened to "As-Is"?
January 30, 2013
There was a time when the California Association of Realtors' Purchase Agreement contained a clause in which the seller "warranted" that all electrical, plumbing, heating, air conditioning systems would be in working order and that the roof would be free of leaks at close of escrow. By contract, the seller was obligated to deliver the property with all these elements in this "warranted" condition. Sometime in the 1990s, the C.A.R. Purchase Agreements changed and this "warranting" clause was removed. Today, our purchase agreements have a clause that states that the buyer is purchasing the property in its "as-is" condition as of the date that the contract was accepted. There is one caveat. This "as-as" condition is subject to the buyer's inspection and subsequent request for repairs. By contract, the seller does not have to make the requested repairs but the buyer does not have to complete the purchase if the seller refuses to do the repairs.
As the real estate market has cycled through up periods and down periods, the buyer's willingness to proceed depends on the buyer's desire to complete the purchase. The repairs became the second serious negotiation in any purchase transaction.
In recent times, however, another player has entered into the repair arena. Lenders, and their appraisers, now may list items that must be repaired prior to the lender funding the loan. In these cases, the sellers have very little choice if they wish to complete the transaction. Sellers complain that they were selling the property "as-is". Why must they incur these additional costs? Unfortunately, lender requirements are non-negotiable. Either the repairs are completed and an appraiser re inspects to check that they were completed satisfactorily or the buyer cannot get the loan. It can be difficult for a seller, and sometimes even the buyer, to understand why a roof certification is necessary or appliances need to be in working order. Isn't a lender's primary concern whether the buyer has sufficient funds, a track record showing that the buyer fulfills the credit obligations and an appraisal that takes into consideration the condition of the property sufficient to approve a loan? Apparently not.
"As-is" seems to have many qualifiers.
There was a time when the California Association of Realtors' Purchase Agreement contained a clause in which the seller "warranted" that all electrical, plumbing, heating, air conditioning systems would be in working order and that the roof would be free of leaks at close of escrow. By contract, the seller was obligated to deliver the property with all these elements in this "warranted" condition. Sometime in the 1990s, the C.A.R. Purchase Agreements changed and this "warranting" clause was removed. Today, our purchase agreements have a clause that states that the buyer is purchasing the property in its "as-is" condition as of the date that the contract was accepted. There is one caveat. This "as-as" condition is subject to the buyer's inspection and subsequent request for repairs. By contract, the seller does not have to make the requested repairs but the buyer does not have to complete the purchase if the seller refuses to do the repairs.
As the real estate market has cycled through up periods and down periods, the buyer's willingness to proceed depends on the buyer's desire to complete the purchase. The repairs became the second serious negotiation in any purchase transaction.
In recent times, however, another player has entered into the repair arena. Lenders, and their appraisers, now may list items that must be repaired prior to the lender funding the loan. In these cases, the sellers have very little choice if they wish to complete the transaction. Sellers complain that they were selling the property "as-is". Why must they incur these additional costs? Unfortunately, lender requirements are non-negotiable. Either the repairs are completed and an appraiser re inspects to check that they were completed satisfactorily or the buyer cannot get the loan. It can be difficult for a seller, and sometimes even the buyer, to understand why a roof certification is necessary or appliances need to be in working order. Isn't a lender's primary concern whether the buyer has sufficient funds, a track record showing that the buyer fulfills the credit obligations and an appraisal that takes into consideration the condition of the property sufficient to approve a loan? Apparently not.
"As-is" seems to have many qualifiers.
posted by shirley harry at 8:09 AM
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