In real estate, many people use the phrase "as-is" quite often.  It would seem that such a simple phrase would have a very simple meaning.  However, when buying a home, this phrase has quite a different impact in technical terms vs. reality.  This lesson will cover the basics so that you can understand what it means in the home-buying process.

Key Points

  • Home is sold without warranty
  • Sellers don't get to keep secrets
  • Negotiations can always happen
  • At closing - buyer assumes repsonsibility

Lesson Files

  • What Does "As-Is" Really Mean?

    So what does “as-is” mean when it comes to a property sale? On a technical level, it means that the home is being sold without a warranty. You’re not able to – if something breaks later – take it back to the prior owner and expect them to repair it. At the point that property sales closes, that ownership and responsibility transfers from the old owner to the new owner.


    Exceptions to the Rule


    Now if the seller of a property happens to know of something that is wrong with the property or they know there is a problem and they conceal that, there would be some liability for that. You don’t get to keep secrets. So during the escrow process there are a variety of disclosures that need to be made where anything that would concern the marketability or satisfaction of a buyer needs to be expressed.


    A buyer needs to know what is wrong with a property so they can make an informed decision. Then when the ownership changes hands, the buyer of the property has accepted what they know to be the problems and accept responsibility from that point forward for things that may happen with the property.


    The Basics of “As-Is”


    Now the expression “as-is” gets used in a lot of different ways. Some buyers will say “I will take the property ‘as-is’” and what that suggests to a seller is that they will take the property in the condition that it’s in at the point they make the offer. Well in practical terms, that doesn’t really happen. Because there are contingencies including inspection, loan requirements, etc. which creates a lot of reasons that a buyer can cancel a home purchase. Because they have the right to cancel in so many different ways – should a buyer find something that they don’t like and have the right to cancel – they are likely going to approach the seller and say they want this to be corrected. At that point, the seller can simply state that the buyer agreed to purchase the property “as-is”. Then the buyer can respond that they didn’t know there was this problem and so that changes things.


    Therefore, in a practical sense, it can be renegotiated anyhow because the buyer has the right to cancel. They are not bound to buy the property simply because they said they would take it “as-is”. As well the seller, if they want to keep the transaction alive, is going to negotiate in good faith or they could let that buyer go. However, that’s always the case in any contract for the purchase of a home where there comes a time that renegotiations occur. It’s usually around the time of inspections and discovery of property condition.


    The Reality of “As-Is”


    So the use of the language “as-is” between buyer and seller during negotiations, in a practical sense, is rarely truly “as-is”. If a buyer were to make an offer that was truly “as-is” – they would release the inspection contingency upon the signing of the contract. They would say they don’t need the inspection because they are satisfied with the condition and they would take the home “just like that.” That also means they would not be able to cancel the contract because of inspections and/or anything that they might find. That doesn’t happen very much although it can happen. But that’s what that would look like, if, in fact, a buyer was intending to take it “as-is”.


    So from a practical standpoint, the language during the negotiation of “as-is” is generally a little more loose than specific in that it can ultimately be renegotiated as long as there are contingencies in place. But from a more technical standpoint, it means that when you are buying a home and you are preparing to take ownership that at the point you close it’s yours. Of course, assuming you were given all the facts anything that goes wrong from that point forward is something that you would need to protect yourself against with things like insurance etc. However, that is not something that the seller has to be concerned about. The seller gets to move on and not provide a lifetime warranty for that particular property.