What exactly does “AS IS” mean to the home buyer? When a home is being sold “AS IS” it means that the Seller is not making any representations or warranties (in other words, guarantees) about the condition of the property.
Properties might or might not have working appliances; there may be rats nesting in the basement, it could have been a grow op, the electricity might not be to code and there may be mold behind the walls.
The Seller who has decided to sell their home “AS IS” is selling it in the condition it’s in: they are not guaranteeing that anything works or conforms to building codes, and they aren’t prepared to fix any deficiencies. What you see is what you get – and what you don’t see, well you get that too. If a seller is aware of something that is wrong with the property that might not be found in a normal inspection, like an oil tank buried in the back yard, they do need to disclose that fact. Nondisclosure could be considered fraud.
Of course an “AS IS” doesn’t necessarily mean there’s anything wrong with the property. It could simply mean that the property is being sold by a bank or municipality or by a hands-off investor who is not familiar enough with the property to be able to guarantee the condition it is in.
It’s important to point out that “AS IS” refers to the time you take possession and not necessarily when you viewed it. Things can happen in that time frame that you might not expect such as vandalism, graffiti, missing fixtures and appliances.
Just because a property is being sold “As Is” does are not always indicate a bargain. In Canada, under the Canadian Securities Act, banks are mandated by law to protect the property owner’s equity and must attempt to obtain FAIR MARKET VALUE of the property in the current market. Banks must be able to prove this in a court of law by basing their price according to a Comparative Market Analysis from a local agent and by obtaining an independent appraisal. They must also show that they marketed the property and it was showed to many potential buyers to achieve an acceptable offer.
Some advise when considering an “AS IS” property
Get a professional Home Inspection. They can identify problems with the properties major systems, like heating/air conditioning, electrical, roofing, foundation, plumbing, and sewer systems. Consider a clause in the offer subject to your satisfaction with the inspection results. Provided the clause is properly drafted by your real estate representative or lawyer, you will be able to walk away from the deal if the inspection uncovers a major issue you are not willing to address.
Be aware that there may be insurance issues. Aluminum wiring, Galvanized steel plumbing, 60 amp electrical service, knob and tube wiring, gas furnaces older than 20 years, oil tanks and wood burning appliances can all be a potential problem when purchasing insurance and might have to be rectified before a policy is written.
Be prepared for what you might get. Nothing is being guaranteed in the house and you won’t fully know what you have until you have it. The chances of suing the seller for deficiencies is very limiting if at all.
Plan on unexpected expense to arise. Things might need to be rectified quickly to get insurance coverage. Renovations and repairs could be twice as much as you initially thought and might take more time then estimated.
Buying an “AS IS” home can be a risky undertaking, make sure you enter the transaction with your eyes open and be prepared for what you might get.