The “As Is” Real Estate Contract Defined
In short, this contract sells the home in its existing condition. This means all regular defects are carried over to the next buyer after the home sale. Furthermore, the “as-is” contract only gives the buyer an inspection period of 15 days (usually only 10 days).
Inspection Period & “Backing Out”
It is important for a buyer to schedule all inspections within those 10-15 days (the sooner the better) in order to fully understand the home. If serious issues are found during this inspection period, the buyer may use this time to “back out” and have their escrow deposit refunded.
The seller is still required to deliver a disclosure document that highlights known issues. These issues can range in categories:
- Potential or actual legal claims, complaints, or proceedings that affect the property.
- Disputes against property boundaries.
- Environmental concerns.
- Any termite/pest damage.
- Any sinkhole damage or potential damage.
- Problems with home systems: HVAC, Electrical, Plumbing, and Roof.
Keep in mind, this is only what the seller is aware of. You still need your own inspections and reports to fully understand the condition of the home.
Summary of the “As Is” Contract
In essence, the seller is not responsible to make any additional repairs on the home with this contract. There are circumstances to which the seller must comply with repairs which we will cover next.
A contingency during a real estate transaction is an instance to where the contract becomes voided and has to be re-evaluated. This is like a clause that is an “out” to the contract. It is common for real estate transactions to have contingencies, and here are a few examples.
Typically with contracts it spells out that the potential must pay X% down and will receive an interest rate of 5%. In the contract, it might read: “This contract is contingent upon Buyer obtaining a mortgage loan at a 5% interest rate or less.”
Home Inspection Contingency
Contract contingencies relating to the home inspection are again quite common. This happens when items are discovered that the buyer may not want to deal with since the property is selling “as is.”
Home inspection findings can change the price of the home through negotiations.
The real estate transaction is contingent upon the home appraising for at least the price of the home. If the home appraises for less than the selling price, new price negotiations can occur.
You can read more about contingencies here.
The as is contract is used most frequently in real estate contracts. Moreover, this contract type has common contingencies that open up for new negotiations. However, new negotiations may not always occur.
Special thank you to Crystal Brady for this blog idea!
Just sign your first contract? Read about the next steps.
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