What does "as-is" mean in real estate? We all know what the term infers when buying a used vehicle, but is it the same in real estate? Technically, when a home is listed for sale as-is, it means that the property owner is selling the home in its current condition and will make no repairs or improvements to the property before the close of the sale. It can also mean that no repair credits or price negotiation are available to finance the repairs/improvements. The term as-is essentially tells prospective buyers that what they see is what they get.
In the State of Oregon's residential purchase contract, there is a clause that expressly addresses "As-Is." It states, "Except for Seller's express agreements and written representations contained herein, and the Seller's property disclosure, is any, Buyer is purchasing the Property "As-Is," in its present condition and with all defects apparent or not."
If the aforementioned statement is already in the purchase contract, why would a seller specifically state in the listing that the property is being sold as is? In some cases, people who are selling homes with the as-is declaration up front, it could be that the seller does not have the financial capacity or capability to fix the flaws, deferred maintenance or repair/replace broken items. Alternatively, perhaps the property is bank-owned or was left to an heir in an estate settlement where the selling party doesn't have any knowledge of potential issues or repairs.
While a property is listed to sell as-is, it does not exempt the seller from disclosing any problems or repairs that they have knowledge of. The seller must still fill out the seller's property disclosure forms and addenda to the best of their knowledge. In addition, this as-is clause does not prevent the buyer from the opportunity to perform a professional home inspection to determine and assess potential issues. The buyer may still terminate the contract based on what they find during a home inspection, unless the buyer has expressly waived their right to a home inspection and home inspection contingency period. It is extremely important to consider the consequences of waiving a home inspection, especially on a property that is an as-is fixer-upper. More often than not, there are issues that cannot be seen during a walkthrough. Having an inspector with a trained eye who crawls all over and under the house is crucial when buying a home that is in disrepair.
The term as-is can certainly be an indication right out of the gate that the property is in need of repair or is a fixer-upper. The downside of listing a property for sale as-is is that the term automatically denotes that there are serious problems with the property. This in turn can lead to lowball offers from potential buyers, lead to a longer sale process and time on market, and limit the pool of buyers. For a buyer it can provide an opportunity to purchase at a lower price, add value and create profit. It can also mean a fun project that turns into a money pit.
In either case, it is important to discuss with a real estate professional the benefits and pitfalls of selling as-is or purchasing as-is.