Mike Explains: Buying and Selling As-Is

Disclaimer: the contents of this blog post do not substitute professional legal advice.

Imagine, if you will: you have been looking for a (potentially) forever home. It’s on the Hill in Seal Beach, and it feels like they never come up for sale. With the advice of your real estate agent, you write a solid purchase offer. Then, you get a counteroffer that reads: “property sold as-is." This might be a dealbreaker for your agent.

Should you worry about this? What does this mean, and what are the risks of moving forward with this ‘as-is' transaction?

We'll look at it from the buyer’s and seller's perspectives.

First, the California Association of Realtors® Purchase Agreement (C.A.R form RPA, 12/21) explicitly states on page 5, section 7, paragraph B, point #1:

"Unless Otherwise Agreed: (i) the Property shall be delivered “As-Is” in its PRESENT physical condition as of the date of Acceptance; (ii) the Property, including pool, spa, landscaping, and grounds, is to be maintained substantially the same condition as on the date of Acceptance."

Here are 10 points that unpack what the clause means and what the protections offered to both parties:

  1. Selling as-is means the seller is under no obligation to make any repairs or modifications to the property as a condition of the sale.
  2. The only exceptions would be statutory requirements, like strapping the water heater.
  3. The property must also remain in the same condition as it was when the agreement was made.
  4. The buyer still has the right to do a home inspection. The default period in the CAR contract is 17 days, but we can modify the timeframe in the Purchase Agreement.
  5. The buyer has the right to request repairs based on information obtained or discovered during the inspection period.
  6. The seller does not have the right to cancel the transaction due to a request for repairs by the buyer, but the seller is not obligated to make repairs simply because the request was made.
  7. If the buyer finds the seller’s response unacceptable, the buyer has the right to walk away from the transaction.
  8. If the buyer cancels before their Investigation Contingency is removed, then the buyer’s good-faith deposit would then be returned, and the seller can then sell to someone else.
  9. However, if something was discovered during investigations by the buyer, (previously unknown to the seller) like a failing foundation or broken sewage line, the seller is now obligated to disclose that fact to any new potential buyer.
  10. Both buyer and seller are motivated to work something out and be reasonable.

So why would a seller ever put a counteroffer on a property being sold as-is when it is no different than all other agreements?

Maybe they don’t understand how the contract works. Or it could be a strategy to communicate their intention of not being willing to negotiate any repairs during escrow. This may be reasonable when offers are abundant, or the seller is unable make repairs.

Either way, whether you are a buyer or a seller this is a strategic decision to be further discussed with your agent. At the Mike Dunfee Group, we are always happy to discuss this and other real estate matters.

Dunfee Real Estate Services

DRE # 02026232

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