The Real Meaning of “As Is” in Real Estate Transactions

Real EstateMay 20, 2020
The Real Meaning of “As Is” in Real Estate Transactions

There has never been a phrase that has more connotations than the phrase “as is.” While many people believe that they understand what it means in the context of real estate transactions, often they are left wondering why their interpretation of the phrase is different than what is actually applied during a residential real estate transaction.

So, what does the phrase “as is” actually mean? Certainly, people have heard the phrase in different contexts such as when they buy used cars or other personal items. As such, many people mistakenly believe that the phrase “as is” means that a buyer will be compelled to purchase the property regardless of the condition. This cannot be furthest from the truth.

The phrase “as is” does not mean that a buyer waives any and all inspection contingency rights, meaning that it does not stand for the idea that a purchaser will buy the property regardless of what they find during inspections. Rather, the phrase “as is” means that either the general condition of the property is already accounted for in the purchase price of the home and the seller will not address the inspection issues that may arise either by way of making actual repairs or offering a reasonable credit for same. Most buyers, unless they are builders who are more interested with purchasing the property for the land, will conduct various inspections, including but not limited to:

  • structural & mechanical home inspection
  • wood-destroying insect & rodent inspection
  • radon test
  • oil tank sweep
  • other inspections such as a chimney or pool inspection

After such inspections, if a buyer uncovers significant issues with the property pertaining to such aforesaid structural, mechanical, and/or environmental conditions, then they are left with simply a “take it or leave it” proposition. As such, in most cases, the phrase “as is” simply means that while the seller will not make any repairs or offer any credit, the purchaser still retains the right to either take the property the way it is or cancel after inspections.

Notably, however, the phrase “as is” does not mean that the purchaser can never make requests regarding the condition of the property. It simply means that the buyer acknowledges that the condition of the property is “baked in” to the purchase price agreed upon in the contract of sale. As such, a buyer knows not to “nitpick” at inspection items and knows that the latitude of any request is very limited. That said, if there is a major item that is discovered during inspections and was not previously obvious to them, then buyers may make a request to a seller to address same whereby the seller has the understanding that the buyer will most likely cancel if the significant item is not addressed by way of a repair or credit.

The primary misunderstanding of the phrase “as is” arises as it never means that the buyer will be compelled to purchase the property and does not have the ability to cancel. It is very important for sellers and purchasers to understand that buyers usually maintain the absolute right to cancel so that when discussions are going back and forth during attorney review or when inspections are subsequently taking place, both parties understand the limitations of their rights and obligations.

Ultimately, the phrase “as is” does not mean that if a major item is revealed during inspections that the purchaser is compelled to move forward with the transaction. It simply means that what the buyer can request for the seller to address is limited to the most major, hidden items that are only uncovered during home inspections and that the buyer is willing to “walk away” and cancel the transaction if the seller fails to do so.

Please contact Abdou Law Offices, LLC at (732) 540-8840 for more information about the contents of this blog or any of our other services.

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