What is an “as is” real estate contract?

Learn more about what the term “as is” means in real estate contracts, as well as the benefits and drawbacks of purchasing a property on those terms.

If you’re in the market for a new home, you may have come across the term “as is” in a real estate listing. There are both benefits and drawbacks to purchasing a property “as is,” so it’s important to understand what an “as is” real estate contract is and what it means before getting the new keys.

What does “as is” mean in a contract?

The legal term “as is” in a written contract means that the buyer must be willing to accept the home in its current condition.

If you are the buyer, this means that you forgo the opportunity to ask the seller to make any repairs or reduce the price based on problems the property may have.

How does an “as is” real estate contract work

An "as is" real estate contract means the property is sold in its current condition without warranties or repairs. Unlike a typical contract where repairs and negotiations are common, in an "as is" contract:

• The property’s condition is as it is.
• Inspections can be done, but the buyer can’t request repairs.
• The price is usually fixed.
• Buyers take on more risk for potential post-purchase issues.
• Legal advice is important for clarity and protection.

An "as is" real estate contract places more responsibility on the buyer to inspect and assess the property’s condition thoroughly. It limits the seller’s liability for repairs and often results in a fixed sale price. Buyers considering such contracts should proceed with caution and may want to budget for potential post-purchase expenses.

What’s typically added in an “as is” contract in real estate?

So what are the essential elements of a real estate contract that’s “as is”? Several key items are typically included:

• Property description. A detailed description of the property for sale.
• Purchase price. The agreed-upon price for the property.
• Closing date. The date when the sale will be finalized.
• Seller’s disclosure. Any known issues or defects that the seller is willing to disclose.
• Inspection contingencies. Provisions regarding the buyer’s option to conduct inspections and the conditions for doing so.
• Title and deed information. Details related to the title search, deed transfer, and title insurance.
• Legal protections. Provisions for dispute resolution and any specific legal protections.

Entire property vs. components of the property.

You may encounter the term “as is” in two common circumstances.

If a property is listed “as is,” this means that the seller will not make any repairs or give any price reduction for problems of the entire property, which includes both the home and the grounds. Some common issues covered by an “as is” description could include leaks, mold or mildew, or major structural problems, to name just a few.

In other cases, a seller may choose to sell their property with one or more “as is” components. This does not guarantee the functionality of the rest of the property, but it does clearly identify certain elements the seller has declared they will not fix. Examples of this scenario might be a broken pool or a fireplace not to code.

Due diligence with an “as is” contract in real estate.

Buying real estate is already a big decision. If you’re contemplating entering into a real estate contract for a property that is being sold “as is,” extra consideration is warranted.

Does the “as is” condition come with a significantly lower price tag? Is the lower price sufficient to compensate for the deficiencies that have been identified? If a property is sold with “as is” components, are you justified in feeling more comfortable since the term only applies to certain aspects of the property?

To navigate this, focus your due diligence on the following common areas where loopholes may exist:

• Property inspection. Conduct a thorough property inspection to identify any issues, even though the seller may not be obligated to address them.
• Title search. Ensure there are no title-related concerns on the property that could lead to future issues.
• Legal review. Seek legal advice to look over the contract for potential gaps, ensuring your interests are protected.
• Local regulations. Verify compliance with local zoning laws, building codes, and regulations to avoid any future legal troubles.
• Repair costs. Estimate potential repair costs for any known issues, so you’re prepared for possible post-purchase expenses.
• Resale value. Consider the potential impact of the property’s condition on its resale value, as some deficiencies may affect its marketability.
• Negotiation. While "as is" contracts may seem fixed, there may still be room for negotiation on certain terms or price adjustments based on inspection findings.

Is there room for negotiation in an “as is” real estate contract?

Yes, there is room for negotiation in an “as is” real estate contract, although it might be more limited compared to a standard contract. For sellers, negotiating points may include the final sale price and potential flexibility on the timeline.

Buyers, on the other hand, can negotiate for critical repairs or credits based on inspections, adjustments to closing costs, specific contingencies, and legal protections. However, it’s important to approach negotiations with a willingness to compromise, as both parties must find mutually agreeable terms.

Whether you’re a buyer or seller, you can upload contract agreements and collect legally binding electronic signatures with Adobe Acrobat.