The last several years have seen one of the tightest real estate markets we’ve seen in a while. Although the housing market is cooling off, it’s no secret that low inventory continues to make it difficult to buy a property. If you’re looking to buy but finding the competition too steep, you may be considering purchasing a property as-is. While there are some advantages to doing this, there are certainly some risks a buyer takes on in such a situation.
In this month’s newsletter, you’ll learn what you need to do to protect yourself legally as much as you can in an as-is purchase. As always, please let me hear from you. Reply to this email to send any comments or inquiries my way.
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Managing Partner
——– Law Firm
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Why Purchase As-Is?
Purchasing a property as-is means the buyer accepts the property as it currently stands–including all defects–thereby releasing the seller from any responsibilities for needed repairs. This creates risk because now the buyer is financially on the hook, so to speak, for all repairs that may pop up. So the buyer can take quite a financial hit purchasing in this way.
There are, however, certain advantages of an as-is purchase. In a tight real estate market, the buyer can beat out the competition by agreeing to purchase a property as-is. Most potential buyers are not willing to assume the risks involved with an as-is purchase, and so those who are may rise to the top of the competition. A seller who knows he won’t have to spend any money on repairs before a sale is in a good spot financially–he transfers the risk to the buyer.
Because the seller is often financially better off with an as-is purchase, the purchase price of the property is often lower. A buyer who has the means to fix a property herself (rather than hire it done) may be able to recover any money lost with the responsibility for repairs.
Finally, the sale of an as-is property is often faster and less complicated, so if a buyer wants the transaction over with quickly, an as-is purchase offers an advantage.
Legal Protections
There are several ways a buyer can still protect herself with an as-is purchase.
- First, don’t waive your inspection rights. Even though you may agree to purchasing the property as-is, it does not mean that you have no right to have the property inspected. You should still go into the sale with your eyes wide open about the scope of repairs that are needed on the property. Consider hiring specialty inspectors to look for things like mold, the condition of the foundation, or the condition of the roof. Be sure to include an inspection contingency in your purchase agreement.
- Secondly, include an exit contingency in your contract. This means that you as the buyer retain the right to cancel or renegotiate the sale. You can also provide yourself time for you to obtain financing and time to have an attorney review the purchase. Although you may want a property quickly, it’s worth the time it takes to talk with an attorney who can look over the agreement and make sure you are in the best position you can be in the sale.
- Finally, even with an as-is purchase, you still need to complete a full title search. This means visiting the County Recorder’s Office to research the property. Look especially for the history of ownership to find any liens, restrictions or legal disputes on the property.
In a Nutshell
If you are considering purchasing a property as-is, I’m available to help you review a purchase agreement to make sure you are in the best position you can be. Reply to this email to start a conversation about how I can help you!
About Us
We specialize in helping our clients navigate the legal complexities of real estate transactions, whether as buyers or sellers. Our areas of expertise include family homes, duplexes, and rentals. We have helped thousands of clients make sound financial decisions when purchasing their dream home or selling a starter home. Learn more here.
