What to Look For in an "As Is" Addendum: Protecting Yourself in Real Estate
Buying a property "as is" can be a risky proposition, but it's often necessary in certain real estate markets. An "as is" addendum is a crucial document that outlines the specific conditions under which a property is sold without the seller offering warranties or guarantees. Understanding what to look for in this addendum is paramount to protecting your interests. This guide will walk you through the essential elements to scrutinize before signing on the dotted line.
What does "As Is" actually mean?
Before diving into the addendum specifics, let's clarify what "as is" implies. It essentially means the seller isn't responsible for repairing or addressing any existing defects or issues with the property. This includes everything from minor cosmetic flaws to major structural problems. However, this doesn't grant the seller carte blanche to hide significant, undisclosed issues.
Key Elements of an "As Is" Addendum You Should Scrutinize:
1. Explicit Definition of "As Is": The addendum should explicitly state that the property is being sold "as is," clearly defining what this entails. Look for unambiguous language that leaves no room for misinterpretation.
2. Exclusions from the "As Is" Clause: While most aspects are typically covered under "as is," some items might be explicitly excluded. These might include:
- Compliance with building codes and regulations: The seller might agree to ensure the property meets certain building standards.
- Specific systems or appliances: The addendum may specify that certain appliances or systems (e.g., HVAC, plumbing) are functional and will remain in working order for a specified time.
- Disclosures of known defects: The seller may be required to disclose any known material defects. This is crucial; a seller can't claim "as is" as a way to hide significant problems they are aware of.
3. Detailed Inspection Clause: The addendum should clearly outline the inspection period. You need sufficient time to conduct a thorough inspection (and potentially negotiate repairs based on the findings, even if the property is sold "as is"). Be wary of overly short inspection periods.
4. Specific Exclusions or Limitations: Does the addendum contain exclusions? For example, are there specific items or repairs that are not covered under the "as is" clause?
5. Disclaimers of Warranties: The addendum should explicitly state that the seller makes no warranties, express or implied, regarding the property's condition.
6. Seller's Disclosures: Many states require sellers to disclose known material defects, regardless of the "as is" clause. Review the seller's disclosures carefully.
7. Dispute Resolution: The addendum might outline a process for resolving disputes that arise after the sale.
What if I find problems after the inspection?
Even with an "as is" addendum, if the inspection reveals undisclosed material defects, you might have legal recourse. For example, if the seller knowingly concealed a major issue, you might be able to sue for breach of contract or misrepresentation.
Should you buy "as is"?
The decision to purchase a property "as is" is a personal one. It often makes sense when the property price reflects the risk. However, always proceed cautiously, get a thorough inspection, and consult with a real estate attorney before signing any contract.
How can I negotiate an "As Is" Addendum?
While the "as is" clause limits your negotiation power, you can still leverage it to your advantage. Focus on:
- Price: Negotiate a lower purchase price to reflect the risk associated with buying "as is."
- Inspection Period: Negotiate a longer inspection period to allow for a thorough assessment.
- Contingencies: While not always possible, you might be able to negotiate contingencies related to the inspection findings (e.g., the right to walk away if major issues are discovered).
Buying "as is" requires thorough due diligence. Don't rush the process, carefully review the addendum with legal counsel, and understand the implications fully before signing. Protecting yourself is critical when entering such an agreement.
